One historic day in January 2022, the Stellar Development Foundation (SDF) announced a proposal to build a new smart contracts platform, later dubbed Soroban. SDF's goal since the inception of Stellar in 2014 has been to create equitable access to the global financial system, and although Soroban is separate from Stellar, it is being designed to function on top of the network and advance and uphold this mission.
A ton of progress has been made since Soroban’s announcement, and we’ve shared seven preview releases on a testnet for developers to experiment with. The community has been encouraged throughout these iterations to use the platform, contribute to design discussions, and provide feedback through the Stellar Developer Discord or programs such as Sorobanathon. Public input has greatly impacted Soroban’s design — it’s helped to define the terms used in the development, design how auth works, and determine the use of single balance instead of dual balances. And community response will continue to shape the platform’s future development. After all, it’s tough to have a developer-friendly platform without proactively seeking developer feedback.
But why Soroban? Smart contracts were initially deemed unnecessary for the Stellar network; however, this decision was reconsidered as the technology advanced and real-world use cases became apparent. In a previous blog, we discussed why the time is right for Soroban now, summarized below.
Alright. So, Soroban will allow developers and entrepreneurs to build even more innovative projects on Stellar, furthering the potential to serve global communities that lack access to the traditional financial system. Sounds like a no-brainer.
But I’d like to dig a little deeper into why exactly Stellar and Soroban make such a compelling pair and how smart contracts on the network will open up unparalleled financial opportunities.
Let’s get to it.
The Stellar network is a great blockchain. It’s reliable, affordable, mature — I could go on. But what truly makes it special is the reach and access of its anchor network. Couple that with smart contract capabilities, and you get a one-of-a-kind path from cash to DeFi that has never been possible before.
No conversation about reach is complete without talking about the anchor network. An “anchor” is a Stellar-specific term for the on and off-ramps that connect the Stellar network to traditional banking rails. Anchors are typically high-quality financial institutions or fintech companies, and Stellar’s reach is vast, with over 60 anchor services operating worldwide. Check out a comprehensive list of Stellar anchors in the SDF-maintained Anchor Directory.
Anchors allow for interoperation between the blockchain and existing financial rails. Stellar isn’t meant to replace the traditional financial system but to work with and enhance it. And anchors are key in this endeavor. They can accept deposits of fiat currencies via existing rails, such as bank deposits or cash-in points, then send the user the equivalent digital tokens representing those deposits on the Stellar network.
Alternatively, anchors allow token holders to redeem their tokens for the real-world assets they represent. Developers can integrate anchor services into their Stellar-based applications or projects, and doing so immediately opens up cash-in and out access to their users. Anchors have huge potential to ease the friction felt in traditional finance with remittance payments, currency conversion, and more.
And some of the most impactful Stellar on- and off-ramps are provided by MoneyGram International (MGI).
In October 2021, MoneyGram International and SDF announced their partnership to integrate the Stellar blockchain into MGI’s network, enabling cash funding and payout in local currency with Stellar USDC. The following summer, this became a reality with MoneyGram Access, helping to connect 1.4 billion people living in cash economies to digital assets via cash-to-crypto on- and off-ramps.
Since the announcement and launch, MGI and SDF have worked tirelessly to improve the user experience and enable access in more countries. Check out this spreadsheet to see a full list of countries served with MoneyGram Access — it’s a lot!
The anchor network and MoneyGram Access present huge opportunities to connect underserved communities to financial infrastructure and solve real-world problems. And this potential increases even further when you introduce smart contracts into the mix.
Smart contracts can be used for all sorts of use cases, from NFTs to gaming to DAOs. However, probably the most pertinent to Stellar is what smart contracts can do for decentralized finance (DeFi).
DeFi opens up financial opportunities to underserved markets with increased accessibility (users can access DeFi protocols from anywhere in the world as long as they have internet), lower transaction costs (users don’t have to pay the fees that banks and other financial companies charge), and new and innovative financial instruments (users can access financial services that are income generating and don’t depend on a middleman).
With Soroban’s capabilities, developers can build decentralized financial protocols on the Stellar network that let users do things with their money they couldn’t do before, all without having to rely on an intermediary or institution. Before Soroban, there wasn't an easy way for the ecosystem to build innovative liquidity mechanisms such as lending and borrowing tools or AMMs on Stellar. With Soroban, developers can construct these types of DeFi services that cater to the people traditional finance has left out.
So let’s put it all together. Let’s say Julia doesn’t have a bank account. She goes to her local MoneyGram location and deposits cash into the kiosk in return for the equivalent USD Coin (USDC) on the Stellar network. She then uses a mobile app to access that USDC and store it in an income-generating DeFi protocol built with Soroban on Stellar, where she now receives a portion of transaction fees for providing liquidity. The collaboration between Stellar’s anchor network and services like MoneyGram Access allow users such as Julia to move cash straight from their physical wallet to a DeFi protocol — something that hasn’t been seen on any other blockchain network.
There’s no denying it, smart contracts bring a lot more excitement to Stellar. Soroban’s introduction is an opportunity to bridge the disconnect between developers and people on the fringes of financial inclusion. Soroban’s tech is interesting, easy to use, and fun to play with — and there are several chances to learn, tinker, build, and earn rewards with the Soroban Adoption Fund programs. However, the hope is that this experimentation leads to building real businesses and projects with Soroban that further the mission of promoting financial inclusion.
If all this talk about smart contracts being used for real-world use cases excites you, fantastic! You can start experimenting with Soroban now. However, we’re still in preview release, and Soroban is only live on Futurenet, a shared test network. The plan is to have Soroban live on Mainnet later this year. Be sure to keep up to date on news by joining the Stellar Developer Discord and following the Soroban-related channels.
We can’t wait to see how Soroban + Stellar will contribute to a more financially inclusive future!