Stellar
The Man Who Built Mt. Gox
Before Stellar, before Ripple, before most people had heard of Bitcoin, Jed McCaleb built Mt. Gox. The exchange that would become the world's dominant Bitcoin trading platform for several years began as a trading card marketplace for the game Magic: The Gathering — Mt. Gox stood for "Magic: The Gathering Online eXchange." When McCaleb decided to pivot the domain into a Bitcoin exchange in 2010, he was working with a technology that had only existed for about a year.
Mt. Gox grew rapidly, far more rapidly than McCaleb had anticipated. By 2011, it was handling the majority of global Bitcoin trading volume. The scale was far beyond what McCaleb had built for, and he made the decision to sell the exchange to Mark Karpeles, a French developer living in Japan who seemed better positioned to run an international financial operation.
The sale happened in March 2011 for approximately $2.25 million. It was a transaction McCaleb would later express mixed feelings about. Under Karpeles's management, Mt. Gox continued to grow — and accumulated the security vulnerabilities and operational failures that would eventually result in its catastrophic collapse in 2014, when it was revealed that approximately 850,000 Bitcoin (worth hundreds of millions at the time) had been stolen over years of accumulated hacking. The Mt. Gox collapse remains the most damaging exchange failure in Bitcoin history.
McCaleb had been gone from the company years before the collapse, having moved on to his next project.
Ripple and a Fundamental Disagreement
The OpenCoin Years
After departing Mt. Gox, McCaleb connected with Arthur Britto and David Schwartz, who had been developing a payment protocol that differed fundamentally from Bitcoin's proof of work model. Rather than mining, their system — which would become Ripple — used a consensus mechanism based on trusted validator lists. The idea was to create a fast, low-cost international settlement network.
McCaleb joined as a co-founder of OpenCoin (later rebranded to Ripple Labs) in 2012. The early team was strong, and XRP — the native token of the Ripple protocol — was designed with specific financial institution use cases in mind, positioning itself as infrastructure for cross-border bank transfers rather than a consumer payment currency.
The relationship deteriorated. McCaleb had philosophical differences with the direction the company was taking — particularly around the distribution of XRP, control over the protocol, and the degree to which Ripple Labs exerted centralized influence over what was supposed to be a decentralized network. In 2013, he announced his departure, and the parting was not entirely amicable. A subsequent legal dispute over the XRP holdings McCaleb retained from his Ripple tenure would drag on for years.
A New Attempt with Joyce Kim
McCaleb did not stay idle long. Together with Joyce Kim, a lawyer turned entrepreneur, he began developing a new protocol that took the core ideas of fast consensus-based payment settlement and redesigned them with a different set of priorities: open access, financial inclusion for the unbanked, and a non-profit governance structure that would be insulated from commercial pressures.
The result was Stellar, launched in July 2014.
The Stellar Consensus Protocol
Why a New Consensus Mechanism
McCaleb and Kim partnered with David Mazières, a Stanford computer science professor and cryptography researcher who became Stellar's chief scientist. Mazières took on the task of designing the consensus protocol that would underpin Stellar's network.
The problem with Ripple's consensus approach — and with many early payment network designs — was that achieving consensus required all participants to agree on a common set of trusted validators. This created centralization risk: whoever controlled the "recommended" trusted validator list effectively controlled the network.
Mazières developed a new approach called the Stellar Consensus Protocol (SCP), published in a formal academic paper in 2015. SCP introduced the concept of Federated Byzantine Agreement (FBA). Rather than requiring global agreement on a single validator set, FBA allows each node to choose its own set of trusted validators — called a "quorum slice." Through a mathematical process involving overlapping quorum slices, the network as a whole can reach consensus even though each node makes its own trust decisions.
The key insight was that global consensus could emerge from local trust decisions, as long as the trust relationships in the network overlapped sufficiently. Nodes did not need to trust the same validators; they just needed their trust sets to share enough common members that a consistent view of the network's state could propagate through.
Practical Implications
SCP's design made Stellar more resistant to capture by any single organization. If the Stellar Development Foundation were to become corrupt or fail, nodes could adjust their trusted validator sets and continue operating. The network had no single point of failure in its consensus mechanism.
This property was important for the financial inclusion mission. Organizations in developing countries or underserved markets could operate Stellar nodes with local validator configurations, participating in global settlement without depending on any institution outside their region to validate their transactions.
The Stellar Development Foundation
Structure and Mission
One of the most distinctive features of Stellar's launch was its explicit non-profit structure. The Stellar Development Foundation (SDF) was incorporated as a nonprofit with a stated mission of "developing inclusive financial services." The foundation received a large portion of the initial XLM (Stellar's native token, originally called stellar, later standardized to lumens/XLM) supply to fund operations and distribution.
The distribution model was also unusual. Rather than selling tokens through an ICO, Stellar committed to distributing most of its supply for free through various programs — including a direct signup giveaway, a Bitcoin holder airdrop (because many Bitcoin holders aligned with Stellar's financial inclusion values), and partnership allocations with fintech companies targeting underserved populations. The logic was that a financial inclusion network needed broad adoption, and broad adoption required getting tokens into the hands of people who would actually use them, not primarily speculators.
Stripe and the Corporate Partnership Model
One of Stellar's early validation moments came from Stripe, the payments company. Stripe made a significant early investment in Stellar and explored integrating Stellar for cross-border payment applications. Although Stripe later pivoted away from its Stellar integration as its own payment infrastructure evolved, the partnership demonstrated that sophisticated payments companies saw genuine potential in Stellar's technical approach.
Stellar went on to form partnerships with IBM, which used Stellar's network for its World Wire cross-border payment product targeting bank corridors in the Asia-Pacific region, and with MoneyGram, which integrated Stellar for certain settlement operations. These institutional partnerships gave Stellar credibility in traditional financial circles that many cryptocurrency projects lacked.
Financial Inclusion as a Design Principle
What consistently distinguished Stellar's positioning from other payment blockchains was the specificity of its inclusion focus. Rather than addressing financial inclusion as a vague aspiration, Stellar designed concrete features to serve it.
The network supports anchors — financial institutions or fintech companies that issue digital representations of fiat currencies on the Stellar network. These anchors allow people in countries like the Philippines, Nigeria, or Argentina to hold dollar-denominated digital assets, earn yield through Stellar's decentralized exchange, and transfer value internationally at near-zero cost.
The account minimum (a base reserve of XLM required to open an account) has been kept intentionally small. Transaction fees on Stellar are measured in fractions of a cent. These design choices reflect a deliberate prioritization of accessibility for users in low-income markets, where the economics of traditional remittance services — which routinely charge 5-10% fees — represent a significant and regressive burden.
McCaleb's journey from Magic: The Gathering card marketplace to global financial inclusion infrastructure is one of the stranger trajectories in technology history. Each step involved building something for one purpose and discovering it had implications far beyond what was originally intended.