Cross-currency transactions in the XLMwallet

Apart from scaling, arguably the key issue of the crypto industry is mass adoption. Stellar has solved the first issue, being one of the fastest blockchains out there. But what is it that makes Stellar one of the most promising blockchains in terms of adoption?

In today’s post, we’ll explain how you can store just about any asset in your XLM wallet — from euros to commodities like gold. Anything that can be digitalized can become a Stellar asset. How is this possible?

Stellar was designed as a platform to transfer fiat currencies across borders almost instantly and as cheaply as possible. In other words, Stellar is not a cryptocurrency for cryptocurrency’s sake. It has a purpose: to serve as a link between the world of crypto and the traditional financial markets. It’s great to talk about a future decentralized economy where every person becomes their own bank and even people in the poorest countries can use crypto. But this is a far-fetched vision. In the next decades, fiat currencies remain the basis of the global economy. Dollar, euro and yuan aren’t going anywhere. Hundreds of millions of migrant workers will still need to send money home — and their families will need that money in their local fiat currency. Crypto enthusiasts often forget that most of the world’s population still lives in cash economies.

Here’s where Stellar can make all the difference. You can take any fiat asset and turn it into a digital token. It doesn’t even have to be a currency — you can tokenize grain, gold, oil, mineral ore, coffee, anything. No complicated coding is needed to issue new assets. You can also customize the settings to limit access to your token. For instance, you can implement an obligatory KYC or exclude nationals of certain countries from trading your tokens.

How is your underlying real-world asset converted into tokens? This is done by a network of anchors — entities that accept fiat assets and issue credits instead. Any licensed financial institution can be an anchor. So for example, imagine that your an expat worker from South Asia living in Dubai. You earn UAE dirhams, but your family back in India should receive rupiahs. You bring your fiat AED to a Stellar anchor institution — for instance, a bank. They take the money and add credits to your blockchain wallet — tokenized AED. You enter your xlm wallet, enter your recipient’s blockchain address and the amount. Stellar automatically converts tokenized AED into tokenized rupiahs, and in a few seconds your wife receives the transfer. She visits her local anchor institution and receives fiat rupiahs, while the tokenized credits are removed from her account.

What does this mean for the users of XLMwallet? That you can potentially transact with any currencies, fiat or crypto. Of course, so far there aren’t many tokenized fiat currencies in the Stellar network, but their number is growing. It’s not for nothing that IBM is building its new global money transfer system based on Stellar.

Next time, we’ll look at how Stellar’s consensus protocol works — this will help you understand how the transactions in your XLM wallet can be processed so fast.

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