HOW CAN STELLAR BLOCKCHAIN SIMPLIFY CROSS-BORDER PAYMENTS?


The globalization of business has revolutionized business standards. With the increasing number of businesses and individuals tapping into overseas suppliers, it has also led to a significant shift in the way people do business. This has fueled the rise in cross-border payment. Cross-border payments demand will continue to rise exponentially with the advent of international trade and e-commerce. According to a Forrester study, cross-border eCommerce is expected to span at least 29 countries in Europe, Asia Pacific and Africa by 2022. It is more expensive, more time-consuming, less convenient, cumbersome, and more difficult to send money abroad to relatives, friends, or to pay for goods and/or services. This could be because cross-border payments are more complicated and have more rules and risks than domestic ones. Blockchain has been developed to address these issues. It is a one-stop solution that improves the efficiency of cross-border payment. Stellar, a blockchain platform that allows cross-border payments, can make it possible for financial services to reach those who have limited or no access to banking services. These include interconnections among domestic payment infrastructures, the expansion of closed-loop proprietary system across borders and peer-to–peer payment systems based upon blockchain.



What are the problems with traditional cross-border payments systems?


Cross-border payments refer to transactions where funds are transferred from one country into another. Cross-border payments are made by multiple entities, such as banks, financial institutions and scheme providers.

The funds are moved through various financial institutions after the payments have been initiated. The fees are increased by a percentage each time the fund custody is changed. This causes an increase in the cost for the sender. Based on the amount of the transfer and the destination country, the total charges are considered. This process can be costly and time-consuming. The transaction is handled by multiple intermediaries because the sender/receiver do not have a single ledger. Cross-border payments are required when sourcing goods or services from another country.


What can blockchain do to overcome the traditional problems of cross-border payments?


Blockchain technology is a distributed ledger technology that can solve many of the problems associated with traditional cross-border payments. Blockchain allows for direct transactions between the sender (or receiver) and the receiver, despite the completion of several steps. All transaction details are securely stored in a distributed ledger. Once a transaction has been recorded, the recipient party can directly access the payment. There are no middlemen, delays, or unnecessary fees.


Basics of Stellar


Stellar, an open-source blockchain platform that can execute reliable cross-border cross-border payments, is available. It is a blockchain-powered distributed network ledger and can be referred to in three ways: Stellar, Lumens and XLM. Lumen is its native digital currency that is used to initiate accounts and execute transactions in a stellar network. XLM, however, is the coin symbol.


Stellar Core


It is an open-source program that allows participants to form a consensus. It is also used to identify a network node or network with stellar cores. It uses the Stellar consensus protocol for transactions validation and stores the most recent copy of the ledger, which contains detailed transaction history starting at the beginning.


Stellar Consensus Protocol


Transactions are added to the Stellar network's shared, distributed public ledger. In a process known as consensus, transactions are validated by a decentralized network of participants. Stellar uses a consensus algorithm that is based on the Federated Byzantine Agreement, also known as the "Stellar Consensus Protocol (SCP). Stellar consensus protocol does not require approval from the entire network. Instead, the Federated Byzantine Agreement algorithm (FBA), speeds up transactions.


Horizon API (Application Programming Interface)


It allows users to interact and share their experiences with a vast network. It can be used with online trading or payment technologies, such as mobile wallets and exchanges. It is based on its functionality.


Conclusion

The transformative effects of cross-border payments require that financial ecosystems implement stellar-based blockchain solutions in order to improve and enhance the payment infrastructure. Due to the substantial debate over cross-border payments security, risks and stability, it is imperative that the economic ecosystem adopts blockchain technology. The stellar-based approach to international payments is the best way to reap the full benefits of blockchain. It allows for secure, real-time, and low-cost transfers.

Our Stellar blockchain experts will help you get closer to your goals for blockchain development.

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