DeFi
Five key challenges with DeFi solved with the Stellar Smart Contract platform
Find out why builders are using the Stellar network to develop the next generation of DeFi applications
Stellar has taken an important step with the launch of Soroban, a new smart contract platform. As an OG Layer 1 blockchain with a decade in the space, Stellar leverages its unique position to offer new insights and improvements. This late-stage strategic entry enabled a complete overhaul from the ground up, culminating in Soroban, integrated into Stellar Protocol 20 in May 2024. Soroban represents a next-generation platform that capitalizes on deep industry knowledge to provide a cutting-edge solution. user experience.
Speed and security compromise
Many networks face congestion leading to delays in transactions. Fundamental architectural challenges arose when upgrading existing protocols, resulting in many trade-offs.
Solution: Soroban, built with WASM and Rust, offers:
- Reduced computational overhead and storage costs
- Faster transaction processing without compromising security
- Less resource-intensive validation software, making it more accessible
Attack vulnerability
Re-entry attacks, like the one that cost Fei Protocol $80 million, pose a significant threat. Many platforms do not have adequate defenses against such vulnerabilities.
Solution: Soroban contracts prevent reentry by default and provide comprehensive unit testing and fuzzing. In combination with the Soroban SDK, developers can create robust applications capable of handling billions of legitimate transactions.
State Bloat
Ethereum state bloat is a well-known problem. Although solutions such as partitioning exist, they often serve as temporary fixes rather than permanent solutions.
Solution: Stellar introduces state expiration, similar to “billing rent”, to efficiently manage data and maintain a manageable state size. Key features include:
- Time To Live (TTL) for all contract data, which may be periodically extended
- User-defined/expandable TTL
- Archived contract data that can be restored and reused
Transaction costs
High transaction costs can deter user adoption. Stellar offers an average transaction cost of $0.00000392, significantly cheaper than Ethereum, Solana, and most other Layer 1 chains. The efficient and innovative Stellar POA (Proof of Agreement) consensus mechanism and Tunable gas ensures low costs while maintaining strong correlations between computational resources and fees.
Access to real-world payment rails at scale
A lot Challenge the products remain inaccessible to users without traditional banking services. The lack of payment channels in regions with underdeveloped banking infrastructure therefore poses a real challenge.
Solution: Stellar has the second largest network of cash entry and exit ramps, just behind Bitcoin. Unlike Bitcoin, Stellar supports the use of smart contracts and provides the flexibility to create a wider variety of DeFi applications. This extended network allows:
- Distribution for new market access
- Development of real-world DeFi applications connected to traditional financial rails
- Access to popular assets like USDC on Stellar, supported by multiple apps and wallets
Soroban, the smart contract platform live on the Stellar mainnet, is changing the DeFi landscape by solving these fundamental problems, while providing a robust and globally accessible development platform.