On Stellar, you can create a redeemable, tradable representation of any form of value. Such representations are called tokens. Tokens are most useful when tied to currencies, such as digital dollars, pesos, or euros since they make payments borderless and instant. However, Stellar allows you to also issue a token for real estate or gold or shares of a REIT or an hour of your time as a consultant.
In other words, Stellar offers a generalized toolkit for anyone to do what Circle is doing with USD Coin. Stellar lets you digitize value and then issue and redeem claims on it; the platform was designed for stablecoins before stablecoin was even a word.
By default, Stellar tokens can be seen, held, and traded by any user. They are also highly configurable. If you have specific compliance needs, you can:
This functionality is built in at the protocol level; tokenization is a fundamental part of the network, so the supporting code is tested and fast.
The ability to issue and redeem assets is one of Stellar’s most powerful features. All asset types can take advantage of Stellar’s global reach, near-instant transaction times, and ultra-low costs. You can get started in just a few simple steps. Please read the docs for complete technical details.
Every token on Stellar is exchangeable with any other token on the network, and the protocol itself connects buyers and sellers. Users can submit their bids or asks to the public network via a single, simple operation, and compatible trades will automatically resolve every few seconds. No intermediary arranges settlement, and no entity acts as an intermediate custodian all due to the decentralized exchange (a.k.a. a DEX) built into Stellar.
Among blockchains, Stellar is unique in this regard. Its protocol not only tracks balances (as Bitcoin or Ethereum do), but also tracks and settles trades between balances in a decentralized, ownerless way.
For example, open orders for an NGN token versus XLM would look like this:
As you can see, Stellar looks and acts like traditional trading platforms where you can view open orders, trade history, and market depth. But all these offers tie back directly to on-chain Stellar accounts, and the network guarantees settlement. You’re not trusting an exchange to hold your assets or relying on them to settle your trades. You hold your own assets.
Like any payments system, Stellar allows one user to send currency to another. But the network also allows a user to send one currency and have the recipient receive another. Essentially, you can send and exchange money in a single atomic transaction.
This is called a path payment. It’s a powerful innovation for international payments; for example, a company in the Philippines can send a payment to Kenya by sending U.S. dollar tokens, which the recipient receives as shilling tokens. Neither side incurs exchange risk or delays. Both sides get only the currency they want.
Here’s how it works:
Above, the sender in the Philippines doesn’t have to hold shillings to make their payments to Kenya. The recipient in Kenya doesn't receive dollars they then have to sell for shillings. Neither side has to manually convert; Stellar automatically finds the best conversion rate. Path payments fulfill Stellar’s promise of interoperability: where value flows seamlessly from account to account, in whatever form is most useful.