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Despite the many technological advances, sending payments to a person or entity from another country can be a particularly frustrating process. In addition to the paperwork, you have to pay exorbitant fees that cost as much as 10% of total funds transferred. More importantly, the transfer is not instantaneous. Even if you send money online through a third-party service provider such as PayPal, the payment deadline for funds on the recipient's bank account can take up to 4 days. Needless to say, the cross-border payments sector is extremely inefficient.
It is there that Stellar intends to have a considerable impact.
Stellar was created to provide a decentralized network where individuals and banks can effectively cross-border between crypto-currencies and fiduciary currencies. It relies on a large shared, distributed and public book to keep track of all transactions on the network. Using the Stellar protocol, transactions are done in seconds. In addition to this, transaction fees are extremely cheap. The network charges a flat rate of 0.00001 XLM for each transaction.
Stellar offers a unique value proposition that can disrupt a multi-billion dollar industry. This is our investment case for the altcoin.
Stellar Value Metrics
- Current price: $ 0.099152
- Top of all time: $ 0.938144
- Lowest of all time: $ 0.001227
- YTD Performance: -12.4%
- Market capitalization: $ 1.89 billion
- Market capitalization ranking: 9th
- ROI since launch: 3.232,05%
- Primary markets: Bitfinex, Kraken, Coinbase, Binance
Investment case
There are approximately 2 billion people who do not have a bank account or have access to a financial institution. Stellar wants to change the lives of these people by providing them with a platform to send or receive money almost instantly at almost zero cost.
To carry out this herculean task, the team behind Stellar has forged partnerships with the technology giant IBM and the Wirex borderless payment platform.
IBM World Wire
On March 18, 2019, IBM launched World's thread, an international payment solution based on Stellar's decentralized general led technology. It is available in 72 countries and 47 different currencies.
The blockchain-based platform offers an elegant solution that simplifies international settlements. Prior to World Wire, cross-border transactions had to go through messaging, clearing and settlement before funds could appear on the recipient's account. It is a long and complicated affair that requires several middlemen, which adds time and money to the whole process. World Wire eliminates these intermediaries by relying on the Stellar protocol.
The solution to this elegant solution lies in the use of a stable currency based on a fiduciary currency. For example, if Bank A in Brazil wants to send money to Bank B in the Philippines, both banks commit to offer a new stablecoin (BPCrypto for example). The Brazilian bank will buy BPCrypto using the Brazilian real and then send it to the Stellar network. Stellar will send BPCrypto to Bank A in the Philippines. Bank A will then convert BPCrypto into Filipino peso.
Payments without Borders via IBM World Wire
Source: IBM
Since World Wire uses the Stellar network, the transaction takes place in a matter of seconds with no loss of value other than 0.00001 XLM network charges. With this solution, six international banks have already provided letters of intent for the issuance of stable notes on World Wire.
In addition, although this is not explicitly stated, it is safe to badume that you do not need a bank account to use World Wire. Partner banks can simply access the global platform by connecting to a set of provided APIs. This is an additional service that does not require users to have accounts at the participating banks.
With this development, Stellar's path to mbad adoption seems to be free. IBM's World Wire is just the beginning.
Wirex Partnership
Using the same ingenious system mentioned above, Wirex, in collaboration with Stellar, plans to launch 26 coins denominated in foreign currency. Some of these stable currencies are pegged to strong currencies such as the US dollar, the euro, the pound sterling, the Hong Kong dollar and the Singapore dollar. Through this partnership, Stellar is well positioned to conquer the international remittances market. If this is the case, the demand for XLM will increase considerably.
Analyst's take
It is expected that the cross-border retail payments sector will grow to a $ 3.56 billion in 2022. With the current configuration of international payments, it is not hard to imagine that people are frustrated with paying high fees and waiting several days to receive funds. Many are probably waiting for the next big deal that could disrupt the multibillion dollar industry.
An investment in Stellar is a bet on the fact that it will eventually become a dominant player in the cross-border payments sector. By partnering with IBM and Wirex, it is putting in place the necessary infrastructure to achieve this goal. Imagine a future where a large part of the 2 billion unbanked people use XLM to process financial transactions. In addition to this, banks and financial institutions hoard XLM as protection against cryptocurrency, as well as for trading against stablecoins.
This is our investment idea for Stellar.
Disclaimer: The author owns Stellar. He holds investment positions in coins, but does not engage in short-term or day trading.
The selected image is a courtesy of Shutterstock.
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