What Is Soroban?

Combining access to financial infrastructure with flexible smart contracts is the holy grail of blockchain. While the Stellar network has been working on the former for the past eight years, Soroban aims to address the latter.

By introducing smart contract interoperability, Soroban aims to bring a more frictionless DeFi experience to the Stellar ecosystem.

What Is Soroban?

Soroban is a smart contract platform that boosts Stellar’s capabilities as a borderless payments network. Since its launch in 2015, the Stellar network has been laser-focused on worldwide access to cheap and near-instant payments. It makes it easy to issue stablecoins, connect them to traditional financial infrastructure, and convert them using built-in markets that allow for seamless, universal asset exchange.

The introduction of Soroban creates a new surface area for innovation that allows developers to create novel financial products and services, specifically decentralized applications (dApps), that take advantage of Stellar's global access to do something that other networks like Avalanche and Solana can't: allow users to cash into DeFi.

Unlike Polygon for Ethereum or Lightning Network for Bitcoin, Soroban is not a sidechain or a Layer 2 blockchain network. Instead, Soroban is a smart contract platform that will fully integrate into the existing Stellar blockchain without disrupting any of its features.

Like Stellar itself, Soroban is open-source, with many important benefits for developers. Open-source culture makes developers’ networking easier, as they have no barriers to delving into the inner workings of the project’s code. This also fosters trust in the wider community, as the code can be independently verified by many parties.

What Powers Soroban?

Soroban’s main programming language is Rust, known for its efficiency, speed, and security, all of which make it a perfect fit for smart contracts. Rust’s low-level control over system resources allows developers to build high-performance and reliable applications, which is why it’s used by several other blockchains, including Solana, Polkadot, and NEAR.

With Rust’s thread safety, memory safety, and a strong type system, Soroban’s smart contracts offer a fortified bulwark against vulnerabilities and programming errors.

Additionally, Soroban’s smart contracts run in a WebAssembly (WASM) runtime environment, which is similar to Ethereum’s EVM but faster and more general-purpose. By combining WASM with Rust, Soroban is aiming for a new generation of applications that have fewer vulnerabilities than dApps built on other established blockchains like Ethereum.

Given that $3.8B in funds has been lost to DeFi exploits in 2022, Soroban’s usage of Rust may prove to be the winning horse. After all, Rust’s focus on memory safety and formal verification makes it less likely to spawn exploits.

What Does Soroban Bring to the Smart Contract Table?

For decentralized finance (DeFi) to truly take off, there needs to be minimum friction in application development so that builders can focus on innovating rather than troubleshooting.

To achieve this, Soroban offers a batteries-included developer experience with access to built-in contracts, a local sandbox for easy setup and iterative development, plug-and-play SDKs, a CLI, and an RPC server. Soroban is also built with scalability in mind and is able to handle the current traffic on the Stellar network and grow with it.

Soroban’s Next-Level Optimization

In addition to using the Rust-WebAssembly combination, Soroban offers a number of performance-enhancing features such as multi-core scaling, an optimized fee model, and a ledger compaction solution to prevent state bloat.

First, Soroban’s smart contracts can take advantage of multi-core CPUs by distributing their processing workload across multiple cores. This is great because it allows the network to scale more effectively as it can handle more transactions per second.

Second, the Soroban fee model is built to scale, just like the Stellar network itself. Instead of being optimized for pure incentives, it is optimized for fairness, as the protocol charges fees based on resource consumption.

Finally, Soroban looks to address the issue of state bloat by implementing a plan for state expiration. State bloat is a challenge faced by all blockchains and refers to how a blockchain ledger continually becomes larger as the network processes more transactions, requiring validators to have more storage space and causing a critical scalability hurdle. Soroban developers are working to address this by implementing state expiration.

Soroban Adoption Fund

To attract and support tinkerers, developers, and builders to the Soroban ecosystem, the Stellar Development Foundation (SDF), a non-profit organization that supports the development and growth of the Stellar network, launched several initiatives as part of the $100M Soroban Adoption Fund.

These initiatives incentivize tinkerers and developers to experiment and build on a shared test network dubbed Futurenet, provide feedback on the platform, and create the building blocks for a new DeFi ecosystem.

Programs include Sorobanathons, which are small content bounties, Hacka-Soroban-athons, which are short-lived hackathons designed to kickstart new projects, and the ongoing Stellar Community Fund (SCF), which offers rewards up to $150k in XLM to support 2-3 months of development costs for projects that are ready to build a Futurenet proof-of-concept.

With Soroban’s Mainnet launch fast approaching, the Soroban Adoption Fund aims to provide the structure and incentives for developers to build Soroban’s minimum viable ecosystem of dApps, tools, and educational resources. Some of these building blocks include:

• Block explorers
• Index products
• Peer-to-Peer lending
• Collateral-backed tokens
• DAO tooling
• Smart wallets
• Streaming payments
• Security tools
• Oracles
• Contract-controlled treasury
• Educational tutorials

Thanks to Soroban’s batteries-included developer experience and the Soroban Adoption Fund programs, developers can easily tinker and build applications, learning from others’ experiences on the official Stellar Developer Discord, where the SDF also holds weekly design discussions that are open to the public.

Stellar and Soroban: Cash to DeFi

The Stellar network has been running for eight years and has proven to be a trustworthy payments network. In payments alone, the network processed over 17B transactions.

The network has absolute transaction finality, which means that once a transaction is added to a block, it cannot be reversed. Typically, the transaction cost is a fraction of a penny.

With Soroban added to the Stellar mix, a new DeFi landscape is on the horizon — one that borrows from Stellar’s reach and access made possible through “anchors.”

An anchor is a Stellar-specific term for the on and off-ramps that connect the Stellar network to traditional financial rails, such as financial institutions or fintech companies — essentially a bridge from fiat to blockchain and vice versa. Let’s take a look at how such a system works using Moneygram — one of the biggest international payments companies in the world that also happens to be a Stellar anchor — as an example.

• Matías in Colombia doesn’t have a bank account, but he can go to his nearest MoneyGram location to deposit cash.
• In exchange for his local currency, Matías receives USDC stablecoins equivalent to his deposit.
• Using his smartphone, Matías deposits USDC to become a liquidity provider in an open-source automated market maker (AMM) or decentralized exchange (DEX) built by independent developers within the Soroban ecosystem.
• In exchange for providing USDC liquidity, Matías receives a portion of the transaction fees whenever someone exchanges USDC for a particular currency.

No other blockchain network has such a clear-cut vision for global and equitable financial access, where people without a bank account have the opportunity to participate in DeFi protocols.

Stellar’s list of anchors is significant and still growing, and it includes not only Moneygram but also major centralized exchanges like Coinbase and Kraken, along with regional fintechs that focus on local currency access.

Soroban: Future-Proofing DeFi

Soroban’s design and developer-friendly experience, coupled with the Stellar network’s maturity, reach, and accessibility, have great implications for the future of the financial system. You can experiment and build on Soroban now on the test network, Futurenet, and prepare for the platform’s mainnet launch later this year!

For those interested in learning about Soroban and developing in Rust, Soroban Quest or Fast, Cheap & Out of Control are great starting points.

Note: This explainer was sponsored by Soroban

Series Disclaimer:

This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article are not to be construed as legal, business, investment, or tax advice. You should consult with your advisors for all legal, business, investment, and tax implications and advice. The Defiant is not responsible for any lost funds. Please use your best judgment and practice due diligence before interacting with smart contracts.