What is Stellar?
Stellar is a new open-source digital platform that uses decentralized currency and financial trading systems to connect banks, payment networks and people. The program was started by Stellar Development Foundation (SDF) as a way of promoting international financial access, literacy and inclusion. Through Stellar, SDF hopes to provide an affordable fiscal system in which individuals of all income categories can have access to secure and cost effective financial services.

Unlike other digital currency networks, Stellar operates on a nonprofit infrastructure and is designed to securely, flawlessly and affordably support virtual transactions between different individuals and with multiple currencies. It also allows developers to create payment solutions that can be used in various types of applications. New currencies can be developed by application providers and exchanged for real world denominations at Stellar gateways.

How It Works:

Stellar operates as a network of decentralized servers that power a shared ledger which records transactions within the ecosystem. The ledger records your cash as credit that’s issued by special gateways. For instance, gateways can change dollar currencies to credits on the Stellar network.

Typically, credit is issued to your virtual account which functions as a digital wallet in exchange for the deposit. The account operators should be trusted to hold your cash and honor withdrawals. Moreover, Stellar holders are allowed to send credit to other individuals on the network through various currencies. The network will instantly exchange value credits at the lowest possible charge.

When making transactions, the servers communicate mutually with each other to validate exchanges and synchronize the ledger after every 2 to 5 seconds, a mechanism known as consensus. Through the payment network, people can easily send and exchange different gateway credits among each other. Something that allows for not only buying and selling currencies in a similar way as foreign exchange, but also conversion of currencies easily during transactions.