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How Stellar Works

Well done for making it this far! Now that you are aware of the issue Stellar is attempting to address, it’s time to explore the technology that powers Stella.


That’s accurate. There are two parts of Stellar that you must study from beginning to end before continuing to read this syllabus. The official How the Stellar Network Operates and Stellar Basics Explained, not Reddit or news headlines.

Take the 10 minutes (I know! It’s natural to want to jump to the chatter of news articles and subreddits! It was simple, right?) to learn about Stellar. Take use of the excellent documentation they produced.

The Basics

Great! We can proceed now that you have read the introductory documentation (and a bit more quickly).

Stellar is a decentralised network, much to Bitcoin. In the Stellar Network, data is dispersed among connected nodes (servers) as opposed to being gathered at a single centralised source (like a bank).

With Stellar Core, the foundation of the Stellar Network that does the actual verification using the Stellar Consensus Protocol, anyone can set up a verification node (server) (SCP). Consider SCP to be the Stellar transaction verification algorithm. Compared to Bitcoin, which verifies transactions via proof of work (page 3), this is very different.

Together, Bitcoin miners verify transactions. The trusted Stellar nodes, often referred to as verification nodes (servers), will be confirming the transactions. Consider Stellar Core to be the verification-enabling software.

As a result, the Stellar Network is nothing more than a collection of Stellar Cores that cooperate to confirm transactions and keep everything current. A transaction will be recorded on the public ledger after it has been confirmed.


Transactions come with a small fee to help protect the Stellar Network from harmful assaults. The Base Fee for each surgery is 100 stroops (0.0000100 XLM). Stroops are simpler to discuss than such minute portions of lumen.

When compared to Visa, which charges 1.51% plus 10 cents (USD) for each transaction, it is incredibly affordable.

Case Study

As previously stated, banks or microfinancial organisations can use Stellar (MFIs). A village in Nigeria, the largest nation in Africa, lacks access to adequate financial resources.

Many MFIs use the banking platform Instafin, and shortly, Stellar will be integrated into that platform.

Therefore, individuals in Nigeria can transfer funds to another MFI in a far-off hamlet via an MFI. The transactions will be more cheaper and enter the Stellar network. The transaction will be sent immediately at the cost of the base fee, avoiding the need to go through numerous central authorities (0.0000100 XLM).

Multi-Currency Transactions

The best thing about the Stellar Network is that you may send and receive many types of money, including fiat (USD, TRY, JPY, EUR, GBP, KPW), digital money like Bitcoin, and even your own form of asset, like miles or points from hotels or airlines. With Bitcoin and many other cryptocurrencies, this is not possible.

A built-in market mechanism that allows people to make offers to buy and sell various currencies allows for these multi-currency transactions.

The name of this system is Distributed Exchange. For the user, Stellar will automatically determine the optimum exchange rates. More resources on this are available in the section of this syllabus titled “Stellar Lumen.”

Stellar’s Technical White Paper

The White Paper, a document that outlines the protocol’s exact nature and operation, is the ideal place to start with any cryptocurrency.

The fact that Stellar’s white paper is so technical is an issue. Although you may have a rudimentary understanding of the Stellar Network, the white paper provides a detailed explanation of the Stellar Protocol. In essence, it explains in a technically sound manner how all Stellar Cores reach consensus to verify transactions.

I had problems fully comprehending computer science even after three years of university study. Therefore, in this area, we’ve included resources that are simpler to understand, like the endearing “Adventures in Galactic Consensus” comic that they created.


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