DeFi
Stellar Network Brings DeFi to the Unbanked with Smart Contract Platform
Banking the unbanked has been touted as one of the primary use cases for cryptocurrency since its inception, but the sector has faced challenges in the form of high transaction fees and a lack of dedicated infrastructure.
The launch of the Soroban The smart contracts platform on Stellar aims to change that.
Spear earlier this year with the Protocol Update 20Stellar Network Upgrade Introduced smart contracts in the Stellar ecosystem — and aims to bring the industry closer to its goal of becoming the digital financial rails for those without access to banks or other financial services.
“Stellar is celebrating its tenth anniversary this year,” said Nick Gilbert, chief product officer at the Stellar Development Foundation. Decrypt“The first eight years were about building cross-border payments, on-ramps, and off-ramps, to really build a complete ecosystem on Stellar. The next step was smart contract functionality.”
Why Smart Contracts on Stellar are Important
Soroban is a Rust-based smart contract platform designed for “scalability and responsiveness,” leveraging the vast Stellar ecosystem.
This ecosystem means that when developers build products or applications on Stellar, they are not doing it for a potential future customer who is not there yet because the infrastructure does not exist yet. Instead, they are doing it for real customers who can access their products right now and can afford the transaction fees needed to play.
“Existing DeFi-based services are not widely accessible, especially to the underbanked, unbanked, and people living in developing countries,” Gilbert said, adding that transaction costs like Ethereum and CEX fees are “not economically sustainable for these users.”
The Stellar Development Foundation believes that the ease of access with which people can join the Stellar ecosystem through its on-ramp network, combined with low transaction fees and the launch of the Soroban smart contract platform, make Stellar a more attractive destination for developers looking to build their next project.
Building DeFi on Stellar
“One area that has great potential is decentralized finance (Challenge), Gilbert said. “If our goal is to serve the unbanked market, the on-ramp network that we have allows the entire unbanked community to actually interact with DeFi,” she explained. “That opens up a pretty large addressable market of people who didn’t even have access to DeFi before,” he added.
According to Gilbert, developers need assurance that they are working with an established chain. “Building DeFi products on a ‘new’ chain comes with risks,” he said. “Will there be users? Will there be enough liquidity?”
While smart contracts are new to Stellar, it is a well-established ecosystem, boasting over eight million accounts, as well as a range of applications, wallets, developer tools, users, and volumes.
Experienced developers who choose to rely on Stellar also benefit from not having to learn a new or unique programming language to get started. Soroban uses Rust as the language and WASM as the runtime environment.
“Soroban is not trying to reinvent the wheel like some alternatives,” Gilbert said of the decision to use Rust, adding that the goal was to “make it as easy as possible for developers to go from idea to deployment. Developers can build more, faster.”
“The launch of Soroban smart contracts,” Gilbert explained, “means that developers will be able to build products like AMMs and lending/borrowing marketplaces for the unbanked, with the peace of mind of knowing that they will be able to access and afford them.” And, he added, what developers build on Soroban “actually has a path to connect to real-world payment rails.”