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Stellar Stripe Relationship

Stripe was the first organization to back Stellar, and its reasons for doing so are interesting to examine.

Stripe considered working with Jed McCaleb when Stripe attempted to buy Ripple Labs. After that deal fell through and McCaleb left Ripple, Stripe gave $3M to the Stellar Development Foundation (SDF) in exchange for 2 billion lumens. Any net profits from the sale of Stripe’s lumens would be returned to SDF.

Ten days before they announced that they provided SDF with funding, Stripe laid out their DLT philosophy in a blog post, and it very much sounded like what Stellar has become and is becoming - quick cross border payments, anchors, federated addresses, and an open, global network.

Stripe stepped into DLT and backed Stellar because Stellar was:

  • Open: Stellar creates an open financial network - an “IP layer for money”. Rather than having to invest heavily in tens of different complex finance protocols across different countries, Stripe and other financial service providers would only have to integrate with one or a few protocols. This means it’s easier for smaller players to enter the market and compete.
  • Unbundled: Because it’s open rather than one single entity like PayPal running the network, there’s a chaotic, capitalistic mess of many companies competing to provide the best services, causing the ecosystem to improve much faster than a closed system.
  • Global: Anyone in any country can plug into the network, start an anchor, and connect their peers to a global payment network, giving the unbanked financial access.

If Stripe still holds their lumens, those lumens are currently worth ~$700MM. This deal technically meant that SDF allotted close to 7% of lumens to the foundation to fund operations, but 5% was allotted directly and ~2% was allotted indirectly through Stripe’s promise to give any net profits back to SDF.

When Stripe discontinued their support for Bitcoin, they suggested they “may add support for Stellar (to which [they] provided seed funding) if substantive use continues to grow.”

Originally published