Stellar enhances DeFi accessibility for underbanked communities by supplying a vast ramp network augmented with smart contracts via Soroban.
Decentralized finance (DeFi) has emerged as a transformative force in the financial sector, promising greater inclusivity and accessibility. However, the reality often falls short of these aspirations, particularly for the underbanked and unbanked populations and those in developing regions.
High transaction costs associated with chains like Ethereum and various centralized exchanges (CEXs) place a significant burden on these users, making DeFi services economically unfeasible for them. While more economical alternatives exist, they lack the necessary distribution channels for on and off-ramp services, crucial for reaching underbanked and unbanked communities. On and off-ramps are services that facilitate the transition between fiat currencies and cryptocurrencies.
Bridging the gap in global finance
Amid these challenges, Stellar — an open-source blockchain designed for payments and asset tokenization — presents a promising solution. Stellar supports a broad spectrum of in-demand assets, such as USD Coin (USDC), on its platform, enabling these assets to be utilized in smart contracts.
Stellar’s features emphasize efficiency, sustainability, scalability and affordability. Source: Stellar Development Foundation
The smart contract integration allows users to engage in more complex financial activities like staking, borrowing, lending and yield. The network’s smart contracts platform, Soroban, further enhances these capabilities by leveraging its robust features.
Soroban gains from an established network of ramps, assets and market services. The network’s benefits include partnerships with entities like MGI and its agent network, new and existing ramps, a variety of fiat-denominated assets and innovative products like the Anchor Platform that offer compatibility benefits through Stellar Ecosystem Proposals (SEPs).
Expanding access with on- and off-ramp services
The on and off-ramp facilities provide advantages such as immediate accessibility to existing infrastructure, thus eliminating the need to build new systems from scratch. They also enable expansion into new geographical markets, especially reaching underserved individuals in developing countries who may not have access to traditional banking services. This report shows that Stellar ranks second only to Bitcoin in physical on-ramp locations globally.
Source: Stellar
Stellar’s infrastructure is critical for reaching new users and filling a vast array of unmet needs within the global financial ecosystem. Soroban democratizes access to DeFi, enabling users to engage with DeFi services and applications globally without the necessity of a bank account. This opportunity is particularly beneficial for individuals in regions where financial services are either too expensive or physically inaccessible.
Innovation and reliability in DeFi
From a development standpoint, Stellar offers an opportunity for builders and entrepreneurs to access these underserved markets. The network’s coverage allows for targeted solutions, such as providing affordable financing options to small business owners in countries with excessive borrowing costs. Moreover, the reliability and absence of downtime of the Stellar network ensure that services remain uninterrupted, preserving user trust and retention.
Furthermore, Soroban’s scalability ensures that the ledger can handle increased activity as transaction volumes grow without compromising service quality. The scalability aspect is crucial for developers and businesses contemplating substantial investments in blockchain integration, ensuring their efforts will be sustainable in the long term.
Stellar has helped to bootstrap the ecosystem with over $15 million of Soroban projects funded through the Stellar Community Fund. Additionally, the Stellar Development Foundation has allocated a $100 million adoption fund to support and accelerate the growth of the Soroban platform. This substantial investment aims to foster innovation and development, encouraging a wide range of decentralized applications (DApps) to leverage Stellar’s smart contract capabilities, promoting greater financial inclusivity and accessibility.
Stellar hosts 7.5 million accounts and processed 12 billion transactions since its launch. Source: Stellar
Currently, 249 projects are actively developing on Soroban. Of these, 21 have already launched on the mainnet, including the lending and borrowing protocol Blend, the automated market maker Phoenix and the oracle service Band Protocol. This growing ecosystem highlights the robust development and adoption within the Stellar network, showcasing a variety of innovative financial applications.
Platforms like the Stellar network, bolstered by Soroban, offer robust, scalable and inclusive pathways to DeFi, capable of reaching global audiences and fulfilling the diverse needs of various user groups. Stellar’s infrastructure enhances financial inclusivity while supporting the development of a more equitable and efficient global financial ecosystem. Such strategies underscore the transformative potential of blockchain technology to bridge financial divides and empower economic participation worldwide.
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