Stellar to vote on protocol upgrade

Stellar (XLM) is a payment protocol that aims to connect banks, payment systems, and people. The project was created by Jed McCaleb and Joyce Kim in 2014. The project is analogous to Ripple (XRP) in many ways, where McCaleb previously worked.

The XLM board members and advisory board members include Keith Rabois, Patrick Collison, Matt Mullenweg, Greg Stein, Joi Ito, Sam Altman, Naval Ravikant, and others. The Stellar protocol is supported by a nonprofit, the Stellar Development Foundation.

Like XRP (XRP), Stellar does not use Proof-of-work or Proof-of-Stake but uses its own unique approach to solve the Byzantine generals problem called the Federated Byzantine Agreement (FBA).

The original Stellar whitepaper written by David Mazieres states that “The FBA achieves robustness through quorum slices—individual trust decisions made by each node that together determine system-level quorums. Slices bind the system together much the way individual networks’ peering and transit decisions now unify the Internet.”

As of April 30th, the Protocol 13 changes have been merged and released within an accessible Stellar Core v13.0.0 upgrade. There is also a testnet already running on Protocol 13. In order for the main Stellar public network to upgrade, validators will need to set their nodes to opt for Protocol 13. If enough choose not to, the new Core Advancement protocols will not be added to the new network.

The protocol changes focus on three key Core Advancement Protocols or CAPs, Fee bumps (CAP-15), Fine-grained control of asset authorization (CAP-18), and First-class multiplexed accounts (CAP-27).

Fee bumps will change the way transactions work on the Stellar network. Transactions currently require a source account to pay the fees for a transaction. Each transaction also has a sequence number associated with the source account. Transactions follow a strict ordering rule when it comes to processing transactions per account, in order to prevent double-spending.

Fee bumps will allow a Stellar user to pay the fee for an existing transaction without having to re-sign a transaction or managing a sequence number. This has many ramifications for applications built on top of Stellar.

With the new fine-grained asset control, Stellar users can control how much of a regulated asset another user can hold and under what conditions they may buy or sell more. For example, a non-custodial exchange can now pay transaction fees on behalf of a Stellar user without knowing their sequence number. Rice suggests this will mean non-custodial wallets and exchanges will now be able to charge higher fees for faster and easier transactions that use the fee bump system.

First-class multiplexed accounts introduce a new type of account address to the Stellar protocol, which includes a built-in 64-bit memo. This change will aid exchanges and other custodial services that often maintain a single deposit Stellar address. The in-built memo system can be to route payments to the correct user accounts within their internal databases.

There also two smaller upgrades CAP-28 and CAP-30, however, Rice suggests “Those two optimizations don’t have the same obvious impact on most users as fee bumps, better control of asset authorization, and multiplexed accounts, but they do help Stellar Core, — and therefore the network as a whole — run a little leaner.”

The SDF burned 55 billion lumens in November 2019, previously earmarked for future operations costs, partnerships, and giveaways. SDF CEO Denelle Dixon told attendees at Stellar Meridian conference, “as much as we wanted to use the lumens that we held, it was very hard to get them into the market.” This encouraged existing holders to use their now more scarce Lumens token.

In late 2018 the SDF announced an up-to-500 million XLM distribution, or airdrop, through Blockchain.com, which added wallet support for the asset. The airdrop is ongoing and is touted as encouraging first-time crypto users, and the crypto-curious. Each user can receive US$25 in XLM, after KYC verification in the form of an email address and identity documentation. As of this month, 75% of the allotted airdrop has been distributed.