Can Stellar Become the Next Major ICO Platform?

07:00 07/12/2017

If you’ve been paying attention to ICOs, you’ve probably noticed a consistent trend: the vast majority of token raises are built on Ethereum. The protocol has quickly emerged as one of the blockchain community’s undisputed leaders. And just like that, of cryptocurrencies were born.

Although there’s little evidence to suggest that startups are thinking about abandoning the ether platform, a new kid on the block is proving just as worthy of consideration.

Stellar Payment Network

Stellar actually isn’t all that new. It was founded in 2014 as an open platform for developing financial products. Though largely flying under the radar amid the latest crypto boom, Stellar has earned a market cap of nearly $3 billion. That’s enough for 11th spot on the CoinMarketCap chart of leading cryptocurrencies.

Stellar made headlines last month after Smartlands became the first company to launch a token on the payment platform. Smartlands, which markets itself as the platform for agriculture, touted Stellar’s superior transaction protocol and massive reach. Proceeds from the ICO will fund the development of the company’s Asset Based Tokens, which are offered on the Smartlands platform.

With Smartlands latching on to Stellar, market participants are curious to see whether more ICOs will follow suite. As it turns out, Stellar has a number of unique advantages that could make it the ideal platform for future token raises.

Stellar for ICOs: The Rationale

ICOs have raised $3.5 billion and counting this year. Although most token raises continue to be delivered through Ethereum, there is a strong case to be made for Stellar.

1. Cheaper and faster

One of Stellar’s most defining attributes is its ability to avoid the gas problem facing Ethereum and other cryptocurrencies. As ether prices march toward $500, transactions are becoming more expensive. Stellar does not need gas to execute programs and has a miniscule transaction fee (i.e., fraction of a penny). The Stellar network is also able to process 1,000 transactions per second, making it ideal for token raises with a strong transaction component.

2. Customizable

As we’ve mentioned before, there’s no shortage of industries represented in the ICO market. Projects are diverse in scale and nature, making customization an essential feature of the underlying infrastructure. Stellar allows token issuers to customize their accounts, payments, tokens and special offers.

3. Decentralized Exchange

As the number of cryptocurrencies continues to rise, a platform that enables efficient trading will be viewed more favorably by the investing public. As Lindsay Lin describes on the Stellar blog, any token created on the platform can be bought and sold via Stellar’s decentralized exchange. Companies that launch their ICOs on the Stellar network do not need a third-party cryptocurrency exchange to make their token available. This is an extremely attractive value proposition at a time when crypto-market liquidity is going through the roof.

4. Security Features

The Stellar system doesn’t offer the same breadth of features as Ethereum. This was done on purpose to limit risk and keep the bad actors from exploiting the program. As an added layer of security, token issuers can choose which nodes are allowed to validate their transactions. Security often comes at a cost, but Stellar has taken a reasonable approach to protecting its infrastructure.

5. The Team

Stellar is backed by one of the strongest teams in the industry, with co-founder Jed McCaleb already building two cryptocurrency companies. For those who are unfamiliar with McCaleb, he created Mt Gox, the now defunct exchange that at one point handled nearly three-quarters of global bitcoin transactions. After the Mt Gox debacle, he went on to found what would eventually become Ripple. The Stellar team currently consists of 12 employees, four board members and eight advisers. It’s advisory group is, shall we say, stellar. It includes the founders of Y Combinator, AngelList, WordPress and Apache Software. The chief scientist of White Ops is also involved in the project.

Of course, none of these attributes diminishes Ethereum’s capabilities as a superior programming platform. Its smart contract applications continue to be a major draw for prospective token raises. As the ICO Ratings page clearly shows, Ethereum remains very much in the driver’s seat.

That being said, keep your eye on the Stellar network. We wouldn’t be surprised if more ICOs are launched on this platform in 2018.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.