16/06/2024
Five Key Challenges with DeFi Solved with the Stellar Smart Contract Platform
Learn why builders are using the Stellar network to develop the next generation of DeFi applications
Stellar has made a significant move 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 fresh insights and enhancements. This strategic, late-stage entry has allowed for a complete redesign from the ground up, resulting in Soroban, integrated into Stellar’s Protocol 20 in May 2024. Soroban represents a next-gen platform that capitalizes on extensive industry knowledge to provide a cutting-edge user experience.
A. Compromises of Speed & Security
Many networks face congestion leading to transaction delays. Fundamental architectural challenges have emerged in retrofitting existing protocols, resulting in numerous compromises.
Solution: Soroban, built with WASM and Rust, offers:
Reduced computational overhead and storage costs
Faster transaction processing without compromising security
Less resource-intensive validator software, making it more accessible
B. Attack Vulnerability
Re-entry attacks, like the one that cost Fei Protocol $80M, are a significant threat. Many platforms lack adequate defenses against such vulnerabilities.
Solution: Soroban contracts prevent re-entry by default and offer comprehensive unit testing and fuzzing. Combined with the Soroban SDK, developers can create robust applications capable of handling billions of legitimate transactions.
C. State Bloat
Ethereum’s state bloat is a well-known issue. While solutions like sharding exist, they often serve as temporary fixes rather than permanent solutions.
Solution: Stellar introduces state expiration, akin to "charging rent," to efficiently manage data and maintain a manageable state size. Key features include:
Time To Live (TTL) for all contract data, which can be periodically extended
User-set/extendable TTLs
Archived contract data that can be restored and reused
D. Transaction Costs
High transaction costs can deter user adoption.Stellar offers an average transaction cost of USD $0.00000392, significantly cheaper than Ethereum, Solana, and most other Layer 1 chains. Theefficient and novel POA (Proof of Agreement) Stellar Consensus Mechanism and tunable gas model ensure low costs while maintaining strong correlations between compute resources and fees.
E. Access to Real-World Payment Rails at Scale
Many DeFi products remain inaccessible to users without traditional banking services. Lack of payment rails in regions with underdeveloped banking infrastructure is therefore a very real challenge.
Solution: Stellar boasts the second-largest network of cash on/off ramps, second only to Bitcoin. Unlike Bitcoin, Stellar supports the use of smart contracts and the flexibility to create a greater variety ofDeFi applications. This extensive network enables:
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 applications and wallets
Soroban, the smart contracts platform live on Stellar mainnet, is changing the DeFi landscape by addressing these fundamental issues, while providing a robust, accessible platform for development worldwide.
