We are excited to announce that we have received a research and development grant from Stellar Development Foundation to start development of the Pendulum network — a new second-layer blockchain that connects Stellar to the wider DeFi ecosystem by adding smart contract support and bridges to Ethereum and Polkadot.
Connecting Stellar to Decentralized Finance Ecosystem
Stellar is an open-source network for currencies and payments, which makes it possible to easily create, send and trade digital representations of all forms of crypto and fiat currencies. Launched in 2015, the Stellar network now processes over 6 million operations daily and is widely used in the payments space and for asset tokenization. On the Stellar network, businesses and developers benefit from near-instant settlement within 5 seconds and transaction fees that are fractions of a cent.
Decentralized Finance (DeFi) has emerged in the past year and is positioned to profoundly disrupt traditional financial services like trading, credit/lending and yield-generating accounts. The industry has grown over twentyfold in 2020 alone, and reached more than USD 60 billion in Total Value Locked in smart contracts as of May 2021.
From decentralized exchanges and crypto lending to yield farming and insurance platforms, the DeFi economy unlocks a new financial system that is setting new standards for access, resilience, and transparency.
With its unique focus on fiat token payments, Stellar is perfectly suited to serve as the missing link between traditional finance and the flourishing DeFi industry. To achieve this, the Stellar network needs to support custom smart contract capabilities — a premise for advanced DeFi applications — and to establish bridges that connect it to other relevant blockchains in the ecosystem. This is precisely what SatoshiPay’s new project Pendulum aims to accomplish.
Stellar Development Foundation Grant for Pendulum
In order to bring more complex features to the Stellar network without sacrificing the network’s efficiency, SatoshiPay proposes Pendulum, a suite of open, decentralized protocols on which smart contracts can be developed and executed. The Pendulum chain acts as a second layer on top of Stellar, with additional bridges to two of the most popular smart contract platforms, Ethereum and Polkadot.
Justin Rice, VP of Ecosystem at Stellar Development Foundation says:
“SatoshiPay has a proven track record as a key Stellar network and ecosystem participant, and we couldn’t be more excited that they are exploring an opportunity to connect Stellar to the thriving DeFi ecosystem. With its unique tools for compliant connections to traditional banking networks, the Stellar network is well positioned to connect traditional finance with the innovative DeFi space. Pendulum has the potential to build bridges that increase Stellar’s interoperability with other networks, which could enable new use cases and help unlock the world’s economic potential by making money more fluid, markets more open, and people more empowered.”
Stellar Development Foundation has granted SatoshiPay initial funding to kickstart the project and develop a proof of concept implementation of Pendulum. After completing the initial proof of concept, Pendulum will be further developed into a full-fledged decentralized layer 2 blockchain that will be accessible for everyone.
Meinhard Benn, CEO at SatoshiPay comments:
“With Pendulum, SatoshiPay is entering the protocol space, which is an exciting opportunity for us to drive forward permissionless innovation and to increase our impact on the blockchain ecosystem. We’ve been discussing options to execute arbitrary smart contracts with the Stellar team for quite some time and we are delighted to receive their technical input and financial support for this. We aim to bring together the best of two worlds — DeFi applications as we know them from Ethereum with Stellar’s compliant fiat tokens. It will be exciting to see liquidity enclosed in Stellar’s $9 billion market cap and the $7 trillion foreign exchange market interact with the booming DeFi economy via Pendulum.”
Unlimited Opportunities for Stellar Users
The combination of the existing Stellar ecosystem around compliant payments, remittance and asset tokenization with new smart contract capabilities opens a multitude of new opportunities.
Leveraging Pendulum, Stellar-based services will be able to utilize all the different types of DeFi protocols with a focus on fiat tokens, including automated market makers (AMMs) that enable foreign exchange without middlemen, or lending protocols for instant on-demand liquidity in different currencies. All of these services can be connected to the traditional banking system via regulated, and in many cases instant, local onramps and offramps on Stellar in a large and growing number of countries.
Fiat token holders on Stellar, such as individuals, institutions as well as services, will be able to put their funds to work, for example by depositing them into lending pools or by providing liquidity to AMMs.
The proposed bridges to the Ethereum and Polkadot ecosystems will further foster the integration of traditional financial services with the booming DeFi ecosystem on these blockchain networks, allowing fiat tokens and liquidity to freely circulate between Stellar, Pendulum and the wider DeFi economy.
Pendulum and DTransfer
Our B2B cross-border money transfer DTransfer relies heavily on efficient foreign currency exchange, as source currency will be transparently exchanged to destination currency during the transfer process. While this is technically possible via Stellar’s built-in decentralized exchange order book protocol SDEX, it requires active involvement of currency traders for each transfer as market makers, which can cause friction such as delays and outdated exchange rates.
The arrival of fully automated market-making via decentralized smart contracts solves this issue and Pendulum is being developed with services like DTransfer in mind. Once Pendulum is up and running, and AMM smart contracts deployed on Pendulum can exchange fiat tokens, DTransfer will benefit from instant currency exchange at optimal rates — enabling efficient money transfer between businesses from every corner of the world.
We’ve just finalized the Pendulum litepaper, a node prototype went into testing and we have other important news coming up shortly. Follow Pendulum’s social media channels to be up-to-date on all latest developments: