Stellar is an open source, distributed protocol for the conversion and transfer of money. The code is based on the Ripple protocol, but with some differences in implementation. A description of how Stellar is going to work can be found in a blog post on the Stellar website.
The network is being built, and the software being tested, so it’s not quite ready for real use yet. There is an internal currency, the stellar, which is used to pay transaction fees, and which also serves as an intermediate step between the currency that is being sent and the one that is being received at the other end.
Stellars are to be distributed to users and to charities. They might in time serve as digital money that people use directly, without having to go through any national currency.
Gateways are being set up that will become trusted super users. Their function will be to accept money and issue credit, as well as maintain the consensus-based record of accounts and payments.
A more detailed description is on the Stellar website … “Introducing Stellar”.
Why did the Stellar team fork the Ripple code to set up its own transfer network?
Some background to that question is discussed in an article by Michael Casey and Paul Vigna, published as a Wall Street Journal blog post:
While Stellar is billed as a money transfer utility that takes some of the red tape out of international money transfers, it could also hold some surprises.
What if, for instance, people started using stellar as a currency in its own right – paying and receiving without converting.
Or what if Stellar turned out to become a link not only between fiat currencies and different countries, but but also between alternative and “official” currencies or between local currencies in different places.
The possibilities are many.