blockster.com
Stellar is a blockchain network that facilitates cross-border transactions. The network was launched in 2014 with the aim of easing transactions between any pair of currencies by introducing affordable rates so that the network can reach the unbanked. The success and adoption of the crypto have however been slower than the foundation anticipated.
One of the most unique features of Stellar is its low transaction costs. One Stellar Lumens transaction costs 0.00001 XLM, an equivalent of 0.000038 cents per transaction. This is cheaper than any international money transfer cost, which typically costs 1% of the cost or even more.
As a result, XLM has been gaining gradual popularity and is currently trading at $ 0.37 with a market cap of $9 billion.
Additionally, Stellar has also attracted influential partners over the years including IBM and Stripe, who have highly influenced its position in the financial industry.
Stellar employs a different governance and validation system compared to other proof-of-work blockchains. PoW blockchains are older than the new blockchains that have incorporated governance and staking to offer more value to their users. Stellar uses a federated system that encourages mutual trust among quorums and scales this trust across the network to achieve consensus. This, therefore, sets the network apart from blockchains of its generation.
The partnership will allow MoneyGram’s network to integrate with Stellar blockchain to allow cash funding and pay out in different currencies such as USD or Japanese Yen using USD Coin (USDC). USDC is a stablecoin governed by Coinbase and Circle through the Central consortium. USDC was initially developed on the Ethereum blockchain but went live on Stellar in February.
Consequently, MoneyGram will leverage the native version of Circle’s USDC on the Stellar blockchain to move funds internationally much more quickly. Users will be able to convert cash into and from USDC for instant pickup at MoneyGram locations.
According to the partnership announcement, United Texas Bank will serve as a settlement bank to fill the missing link. The use of Stellar in this process ensures very low fees for consumers as well as access to physical locations to convert USDC to cash and vice versa.
It is the mission of any organization to make successful partnerships with other organisations in the same industry. Blockchain networks especially thrive on such partnerships which introduce new clients as well as open new markets.
This partnership will introduce Stellar, a blockchain network, to MoneyGram users across the globe, and highlight the advantages that are associated with using an open-source network for cross-border transactions. With the huge cost benefits, more users will be open to using the Stellar network, which will also affect the position of XLM ranking.
The success of this deal can also result in other global remittance companies using the Stellar network. If these remittance companies use XLM as a base platform for stablecoin transfers, the price of the coin can go higher over a period of time.
Many MoneyGram users might not be in a position to fully understand the workings and benefits of using crypto and crypto related platforms to transfer money. However, this partnership introduces Stellar to a new market, who will be curious to understand the platform and also use it to save time and costs. Once Stellar is seen by a bigger population as a successful low-cost money transfer system, it can compete with other platforms both decentralized and centralized, to offer better value to users. The result will be an increase in popularity, users as well as value of the coin.
MoneyGram is allied to a chief competitor to Stellar, Ripple, which offers a similar product for international payments. MoneyGram had previously partnered with Ripple in 2019 and adopted it’s On-Demand Liquidity (ODL) solution for foreign exchange using the XRP cryptocurrency as an intermediate coin. The deal however fell through within a few months on grounds of uncertainty after a lawsuit against Ripple was filed by the U.S. Securities and Exchange Commission. The deal with Stellar, although having different parameters appears as a nod to the blockchain, which is sure to positively affect the reputation of Stellar.
The MoneyGram and Stellar partnership will not only reduce time and costs of cross-border remittances but will also allow a whole segment of cash users access to cryptocurrency services that might have previously been out of reach. Users can bring in their cash into a MoneyGram location and bring it onto the blockchain without the need for a bank account. The partnership is expected to propel the price of XLM especially once the rollout has started.