Our innumerable payment networks - Venmo, SWIFT, ACH, Mpesa, Bitcoin - don’t work together, and, when they do, they experience significant friction - friction in the form of long transfer times, high transaction fees, multiple currency swaps, swap failures, currency volatility, and middlemen.

Money moves today as if the Internet doesn’t exist.

The nonprofit Stellar Development Foundation provides a base layer protocol that can make every financial institution interoperable. Stellar is similar to SMTP - an internet protocol that allows many different email clients (Gmail, Outlook, Yahoo) to send emails between each other.

A protocol is open source software that serves as the foundation on which many services can be built and interoperate.

Just as you give a bank cash and see it show up in your account in digital IOU form, you give Stellar “anchors” (banks, remittance companies, exchanges, etc) assets (USD, Bitcoin, etc) and they represent those assets on the Stellar network. They promise to exchange the assets you hold on the Stellar network for the real version of those assets, and anyone who trusts that anchor (like anyone who trusts Chase Bank or their local credit union) can receive those digital IOUs to their own Stellar account.

Anchors are simply entities that people trust to hold their deposits and issue credits into the Stellar network for those deposits. They act as a bridge between different currencies and the Stellar network. - SDF

Rather than representing your assets in their own locked up internal system, anchors represent your assets on the open Stellar network. This means that instead of it taking several days and/or high fees to transfer your money from your bank to another destination, it can take 3-5 seconds and cost just $0.000005.

Send money across borders quickly, for a fraction of a cent. Facilitate low-cost payments between different currencies. - SDF

Your and everyone’s transactions and balances are represented on the Stellar ledger, stored in a distributed manner across many different nodes, or servers. Anyone can run a Stellar node.

These servers form a decentralized Stellar network, allowing the ledger to be distributed as widely as possible. - SDF

Offers to trade one currency for another at a specific price (like buy and sell orders on GDAX or Binance) are represented on the Stellar ledger globally. This distributed exchange allows for a more secure method of buying and selling both fiat and cryptocurrencies and makes international remittances and commerce more efficient, affordable, and fast.

All these offers form what is called an orderbook. There is an orderbook for each currency/issuer pair. - SDF

All of this is powered by the underlying Stellar Consensus Protocol - an alternative to Bitcoin’s proof-of-work consensus method. Here's our explainer video on the consensus protocol. See also: explain it to me like I’m five, explain it to me like I’m a college grad, and explain it to me like I’m a grad student.

The Stellar Consensus Protocol (SCP) provides a way to reach consensus without relying on a closed system to accurately record financial transactions. - SDF