Stellar Network brings DeFi to the Unbanked With Smart Contract platform

Banking the unbanked has been touted as one of the key uses of crypto 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 smart contract platform on Stellar aims to change that.

Launched earlier this year with the Protocol 20 update, it introduces the upgrade to the Stellar network smart contracts in the Stellar ecosystem – and aims to bring the sector closer to its goal of becoming the digital financial rails for those without access to banks or other financial services.

“Stellar has been around for ten years this year,” says Nick Gilbert, product director at the Stellar Development Foundation Declutter. “The first eight years were spent setting up cross-border payments, on-ramps and off-ramps, to really build a fully developed ecosystem on Stellar. The next step was the smart contract functionality.”

Why smart contracts on Stellar matter

Soroban is a Rust-based smart contract platform designed for “scale and sensitivity,” leveraging the broad Stellar ecosystem.

That ecosystem means that when developers build products or applications on Stellar, they aren’t building for a potential future customer that isn’t there yet because the infrastructure isn’t there yet. Instead, they build for real customers who can now access their products and pay the transaction fees required to play.

“Existing services built on DeFi are not widely accessible – especially for the under- or unbanked, and those living in the developing world,” Gilbert said, adding that transaction fees such as Ethereum and CEX fees “are not economically feasible for these users.”

The Stellar Development Foundation believes that the ease with which people can join the Stellar ecosystem through its on-ramp network – coupled with low transaction fees and the launch of the Soroban smart contracts platform – makes Stellar a more attractive destination for developers to build their next project.

Building DeFi on Stellar

“One area with great potential is decentralized finance (DeFi),’ said Gilbert. “If our focus is on serving the unbanked market, the platform network we have allows the entire unbanked community to actually interact with DeFi,” she explained. “It opens up a fairly large, addressable market of people who previously didn’t even have access to DeFi,” he added.

According to Gilbert, developers need the reassurance of working with an established chain. “Building DeFi products on a ‘new’ chain comes with risks,” he said. “Will there be users? Is there sufficient liquidity?”

While smart contracts may be new to Stellar, it is a well-established ecosystem that has grown to more than eight million accounts, plus a range of applications, wallets, developer tools, users and volume.

Seasoned developers who choose to build 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 execution environment.

“Soroban isn’t 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 implementation. Developers can create more and faster.”

“The launch of Soroban smart contracts,” Gilbert explained, “means developers can build products like AMMs and lending/borrowing markets for the unbanked population – with the peace of mind that they will be able to access and afford them. .” And, he added, what developers are building on Soroban “actually has a path to connect to payment rails in the real world.”