Stellar: Good Points And Some Glitches

A new crypto currency and decentralized exchange platform STELLAR has been launched on 31 July 2014.

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It is run as a non-profit. It was created by Stripe CEO Collison and Ripple co-founder McCaleb. It has received $3 million in initial funding from Stripe.

Some good points about Stellar:

  • Non-profit: some people say that Stellar is expected to be “Ripple with the Evil taken out”.
    • They promote donations to charities in a variety of ways.
  • Stellar is a major innovation with distinct characteristics and is very far from being yet another altcoin.
    • It is based on bitcoin and Ripple source code which is expected to be well understood (in fact it is now clear that it inhered some serious problems).
  • It is luring subscribers and users in many different ways mostly through small monetary incentives.
    • 95% of all coins will be given away (but not exactly for free, see below).
    • Stellars will be also given to ANYONE who has bitcoins (10%) or Ripple (1%), based on the data in the blockchain at a certain moment. This is very clever: it will get Stellar a lot of new users.
  • They promise to release a paper showing that Stellar is secure.
    • Unlike bitcoin they DO CARE about cryptographic security. Very recently in July 2014 they decided to go for an elliptic curve Curve25519 which is currently not suspected of having a backdoor.
  • They seem to be focused on fast transactions (not like bitcoin). They say: “Every few seconds, the servers tally up the most recent batch of transactions and verify that their ledgers are in sync”. Their consensus algorithm is called Firmeza.
  • They support accounts in ANY currency, fiat or crypto.
    • This is achieved through multiple Gateway companies which hold these assets for you (like existing bitcoin exchanges or small independent banks).
      Later people exchange cryptographic IOU underwritten by these parties.
    • In fact this is super dangerous and could be potentially illegal. Not only because this could be hacked. There is a major question of regulation and banking licence. Both Stellar and individual users are now facing an enormous challenge to know which Gateway companies can be trusted. For example criminals could set up these companies. Then they will run with our money (recall MtGox).
  • There is no mining in Stellar, it is purely based on trusting Stellar and independent Gateway companies.

Actually we have some objections:

  • It is a mistake  not to have any mining. Bitcoin is in trouble, because of lack of Proof of Stake.  Stellar is in bad trouble because of lack of Proof of Work! Probablya decent crypto currency should combine both POW and POS.
  • Stellar distribution has been so far quite messy, NOT FAIR and not transparent.
    • First they gave 6,000 Stellars to each new account, now it is less, and they do NOT even say how much.
  • It is NOT given for free. In exchange you must connect with a genuine active Facebook account.
    • Then you will be asked  to share your “public profile, friend list and Photos” with Stellar.
  • So Stellar is STEALING personal data from users in exchange of a promise of an unspecified monetary reward worth a few dollars.
    • Bruce Schneier have once said: “If McDonalds offered a free Big Mac in exchange for a DNA sample, there’d be lines around the block”. Stellar are doing just that with our personal data.
    • This is done in a rather deceptive way: many people think they will get 6,000 stellars as promised.
  • They do NOT encourage running network nodes? They claim that “anyone is free to set up their own server on the network”, however the reality is different:
    • they do NOT even have an easy to download full peer network client for Windows.
    • so it is difficult to trust this network. Probably extremely few people run peer nodes.
    • most people probably access their stellars through a web interface (centralized).
  • There are YET extremely few Gateway servers (like 1).
  • According to some sources Stellar is now the second largest crypto currency by market cap. However this is an ENTIRELY FAKE valuation (this web page has more accurate market caps).
    • Some people have promised NOT to sell their stellars for a long time.
    • Most stellars have not been given away, only some 1.3% have been.
    • As soon as people get their stellars they will sell them and the market price is likely to collapse.

 

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