Stellar seems like the anti-cryptocurrency
Stripe recently announced their support of the Stellar project. Unfortunately the introduction page is the only non-source technical insight anyone has into the inner workings of the Stellar system. But after reading the introduction it’s clear that Stellar lacks the decentralization and trustlessness that the Bitcoin protocol readily boasts. It attempts to solve the seemingly important problem of converting any currency into any other, while being as decentralized as possible. But what can it accomplish that Bitcoin can’t?
Stellar is, essentially, a universal credit system. If you have 10 USD, you can bring that USD to a computer in the Stellar network and give the USD to that computer. The computer will give James a
10 USD. The network agrees that you gave 10 USD to that computer, let’s call it computer
A. The full certificate would be more like
10 USD, A.
If James tells Steve he wants to trade his 10 USD for Steve’s 10 BTC from computer
B, they would trade certificates. James would end up with
10 BTC, B, and Steve would end up with James’s.
A few things to note: Computers
B are both responsible for holding this money, and staying true to it. Not only does James have to trust that computer
A will hold his 10 USD, but he has to trust the computer Steve initially trusted. Because if James decides to cash out his BTC, and it turns out
B was a malicious computer, James is screwed.
Cashing out of the network requires invoking the promise represented by a gateway’s credits. You return those credits to the issuing gateway, and the gateway sends you the corresponding currency. Because the currency return is external to the network, you need to trust the gateway to follow through on their commitment (just as you trust your bank to return your deposit upon request).
Sure, people will say, but people will only use computers that can be trusted. Those that are tried and true.
This is the antithesis of decentralized. You are now building a system in which a few nodes gain power because those with a good reputation will continue to do well. Those with no reputation will have no chance. Bitcoin demands NO trust of any one node in the network, rather of the system as a whole.
The actual exchange of the credits is decentralized, but the network attempts to back these credits with actual money. Which means that money has to be stored somewhere. Which means you have to trust one organization.
Although Bitcoin is beginning to suffer from something seemingly similar, it has nothing to do with trusting 3rd parties to hold money for you - its problem is simply a possible monopoly on mining power. (Stellar would suffer from the same thing, plus more!)
Stellar is an attempt to solve currency-exchange by decentralizing it. However, it is more like tying a bunch of large organizations and nodes together with string.
The goal is to give the world a medium to transfer monetary value without the use of large organizations.
Wait a second… isn’t that what Bitcoin accomplishes? By giving Bitcoin its own value, anyone can use Bitcoin without storing money with a 3rd party. They can spend it anywhere, and there is absolute certainty that the “credit” they are transferring exists.
I hope my initial impression is staggeringly incorrect. Hopefully the upcoming whitepaper will prove me wrong.