diff --git a/apps/backend/.env.example b/apps/backend/.env.example
index ef35335..4843c7b 100644
--- a/apps/backend/.env.example
+++ b/apps/backend/.env.example
@@ -10,3 +10,10 @@ NODE_ENV=development
 
 # Server Configuration
 PORT=3000
+
+# Stellar Configuration
+STELLAR_NETWORK=testnet
+WALLET_SECRET="your-stellar-wallet-secret"
+STELLAR_TIMEOUT=60000
+STELLAR_MAX_RETRIES=3
+STELLAR_RETRY_DELAY=1000
diff --git a/apps/backend/STELLAR_SERVICE.md b/apps/backend/STELLAR_SERVICE.md
new file mode 100644
index 0000000..a85490f
--- /dev/null
+++ b/apps/backend/STELLAR_SERVICE.md
@@ -0,0 +1,115 @@
+# Stellar Service Integration
+
+This document describes the Stellar blockchain integration implemented in the Vaultix backend.
+
+## Overview
+
+The Stellar service provides a bridge between the off-chain escrow system and the Stellar blockchain, enabling secure on-chain transactions for escrow operations.
+
+## Components
+
+### 1. Configuration (`src/config/stellar.config.ts`)
+
+Manages Stellar network configuration including:
+- Network selection (testnet/mainnet)
+- Horizon URL
+- Network passphrase
+- Wallet secrets
+- Timeout and retry settings
+
+### 2. Core Service (`src/services/stellar.service.ts`)
+
+Provides core Stellar functionality:
+- Account information retrieval
+- Transaction building for escrow operations
+- Transaction submission with retry logic
+- Transaction status monitoring
+- Key validation and generation
+
+### 3. Escrow Operations (`src/services/stellar/escrow-operations.ts`)
+
+Specialized operations for escrow functionality:
+- Escrow initialization
+- Funding operations
+- Milestone releases
+- Confirmation operations
+- Cancel and completion operations
+
+### 4. Retry Utility (`src/utils/retry.util.ts`)
+
+Implements exponential backoff retry logic for network resilience.
+
+### 5. Module Integration (`src/modules/stellar/stellar.module.ts`)
+
+NestJS module that bundles Stellar services for dependency injection.
+
+### 6. Escrow Integration (`src/modules/escrow/services/escrow-stellar-integration.service.ts`)
+
+Bridges the escrow business logic with Stellar blockchain operations:
+- Creating on-chain escrows
+- Funding escrows
+- Releasing milestone payments
+- Confirming deliveries
+- Canceling and completing escrows
+- Monitoring on-chain state
+
+## Environment Variables
+
+Add the following to your `.env` file:
+
+```bash
+# Stellar Configuration
+STELLAR_NETWORK=testnet                    # testnet or mainnet
+WALLET_SECRET="your-stellar-wallet-secret" # Secret key for signing transactions
+STELLAR_TIMEOUT=60000                      # Request timeout in ms
+STELLAR_MAX_RETRIES=3                      # Max retry attempts for failed requests
+STELLAR_RETRY_DELAY=1000                   # Base delay between retries in ms
+```
+
+## Usage Examples
+
+### Creating an On-Chain Escrow
+
+```typescript
+// In your controller/service
+const txHash = await this.escrowStellarIntegrationService.createOnChainEscrow(escrowId);
+```
+
+### Funding an Escrow
+
+```typescript
+const txHash = await this.escrowStellarIntegrationService.fundOnChainEscrow(
+  escrowId,
+  funderPublicKey,
+  amount,
+  assetCode
+);
+```
+
+### Releasing a Milestone Payment
+
+```typescript
+const txHash = await this.escrowStellarIntegrationService.releaseMilestonePayment(
+  escrowId,
+  milestoneId,
+  releaserPublicKey,
+  recipientPublicKey,
+  amount,
+  assetCode
+);
+```
+
+## Error Handling
+
+The service includes comprehensive error handling with:
+- Stellar-specific error mapping
+- Network failure retries
+- Detailed logging
+- Validation checks
+
+## Security Considerations
+
+- Private keys are handled securely via environment variables
+- Transaction validation occurs before submission
+- Rate limiting prevents abuse
+- Proper access controls on escrow operations
\ No newline at end of file
diff --git a/apps/backend/data/vaultix.db b/apps/backend/data/vaultix.db
index b831ab2..1055683 100644
Binary files a/apps/backend/data/vaultix.db and b/apps/backend/data/vaultix.db differ
diff --git a/apps/backend/package-lock.json b/apps/backend/package-lock.json
index 607f158..4846774 100644
--- a/apps/backend/package-lock.json
+++ b/apps/backend/package-lock.json
@@ -17,6 +17,7 @@
         "@nestjs/platform-express": "^11.0.1",
         "@nestjs/throttler": "^6.5.0",
         "@nestjs/typeorm": "^11.0.0",
+        "@stellar/stellar-sdk": "^14.5.0",
         "@types/bcrypt": "^6.0.0",
         "@types/passport-jwt": "^4.0.1",
         "bcrypt": "^6.0.0",
@@ -231,6 +232,7 @@
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       "dev": true,
       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "@babel/code-frame": "^7.28.6",
         "@babel/generator": "^7.28.6",
@@ -2143,6 +2145,7 @@
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       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "file-type": "21.3.0",
         "iterare": "1.2.1",
@@ -2196,6 +2199,7 @@
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       "hasInstallScript": true,
       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "@nuxt/opencollective": "0.4.1",
         "fast-safe-stringify": "2.1.1",
@@ -2259,6 +2263,7 @@
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       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "cors": "2.8.5",
         "express": "5.2.1",
@@ -2425,11 +2430,25 @@
         "typeorm": "^0.3.0"
       }
     },
+    "node_modules/@noble/curves": {
+      "version": "1.9.7",
+      "resolved": "https://registry.npmjs.org/@noble/curves/-/curves-1.9.7.tgz",
+      "integrity": "sha512-gbKGcRUYIjA3/zCCNaWDciTMFI0dCkvou3TL8Zmy5Nc7sJ47a0jtOeZoTaMxkuqRo9cRhjOdZJXegxYE5FN/xw==",
+      "license": "MIT",
+      "dependencies": {
+        "@noble/hashes": "1.8.0"
+      },
+      "engines": {
+        "node": "^14.21.3 || >=16"
+      },
+      "funding": {
+        "url": "https://paulmillr.com/funding/"
+      }
+    },
     "node_modules/@noble/hashes": {
       "version": "1.8.0",
       "resolved": "https://registry.npmjs.org/@noble/hashes/-/hashes-1.8.0.tgz",
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-      "dev": true,
       "license": "MIT",
       "engines": {
         "node": "^14.21.3 || >=16"
@@ -2609,6 +2628,79 @@
         "ieee754": "^1.2.1"
       }
     },
+    "node_modules/@stellar/stellar-sdk": {
+      "version": "14.5.0",
+      "resolved": "https://registry.npmjs.org/@stellar/stellar-sdk/-/stellar-sdk-14.5.0.tgz",
+      "integrity": "sha512-Uzjq+An/hUA+Q5ERAYPtT0+MMiwWnYYWMwozmZMjxjdL2MmSjucBDF8Q04db6K/ekU4B5cHuOfsdlrfaxQYblw==",
+      "license": "Apache-2.0",
+      "dependencies": {
+        "@stellar/stellar-base": "^14.0.4",
+        "axios": "^1.13.3",
+        "bignumber.js": "^9.3.1",
+        "commander": "^14.0.2",
+        "eventsource": "^2.0.2",
+        "feaxios": "^0.0.23",
+        "randombytes": "^2.1.0",
+        "toml": "^3.0.0",
+        "urijs": "^1.19.1"
+      },
+      "bin": {
+        "stellar-js": "bin/stellar-js"
+      },
+      "engines": {
+        "node": ">=20.0.0"
+      }
+    },
+    "node_modules/@stellar/stellar-sdk/node_modules/@stellar/stellar-base": {
+      "version": "14.0.4",
+      "resolved": "https://registry.npmjs.org/@stellar/stellar-base/-/stellar-base-14.0.4.tgz",
+      "integrity": "sha512-UbNW6zbdOBXJwLAV2mMak0bIC9nw3IZVlQXkv2w2dk1jgCbJjy3oRVC943zeGE5JAm0Z9PHxrIjmkpGhayY7kw==",
+      "license": "Apache-2.0",
+      "dependencies": {
+        "@noble/curves": "^1.9.6",
+        "@stellar/js-xdr": "^3.1.2",
+        "base32.js": "^0.1.0",
+        "bignumber.js": "^9.3.1",
+        "buffer": "^6.0.3",
+        "sha.js": "^2.4.12"
+      },
+      "engines": {
+        "node": ">=20.0.0"
+      }
+    },
+    "node_modules/@stellar/stellar-sdk/node_modules/buffer": {
+      "version": "6.0.3",
+      "resolved": "https://registry.npmjs.org/buffer/-/buffer-6.0.3.tgz",
+      "integrity": "sha512-FTiCpNxtwiZZHEZbcbTIcZjERVICn9yq/pDFkTl95/AxzD1naBctN7YO68riM/gLSDY7sdrMby8hofADYuuqOA==",
+      "funding": [
+        {
+          "type": "github",
+          "url": "https://github.com/sponsors/feross"
+        },
+        {
+          "type": "patreon",
+          "url": "https://www.patreon.com/feross"
+        },
+        {
+          "type": "consulting",
+          "url": "https://feross.org/support"
+        }
+      ],
+      "license": "MIT",
+      "dependencies": {
+        "base64-js": "^1.3.1",
+        "ieee754": "^1.2.1"
+      }
+    },
+    "node_modules/@stellar/stellar-sdk/node_modules/commander": {
+      "version": "14.0.2",
+      "resolved": "https://registry.npmjs.org/commander/-/commander-14.0.2.tgz",
+      "integrity": "sha512-TywoWNNRbhoD0BXs1P3ZEScW8W5iKrnbithIl0YH+uCmBd0QpPOA8yc82DS3BIE5Ma6FnBVUsJ7wVUDz4dvOWQ==",
+      "license": "MIT",
+      "engines": {
+        "node": ">=20"
+      }
+    },
     "node_modules/@tokenizer/inflate": {
       "version": "0.4.1",
       "resolved": "https://registry.npmjs.org/@tokenizer/inflate/-/inflate-0.4.1.tgz",
@@ -2767,6 +2859,7 @@
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       "dev": true,
       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "@types/estree": "*",
         "@types/json-schema": "*"
@@ -2892,6 +2985,7 @@
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       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "undici-types": "~6.21.0"
       }
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       "license": "MIT",
+      "peer": true,
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       "devOptional": true,
       "license": "MIT",
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       "bin": {
         "acorn": "bin/acorn"
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       "license": "MIT",
+      "peer": true,
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         "fast-deep-equal": "^3.1.1",
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@@ -4068,9 +4165,9 @@
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-      "resolved": "https://registry.npmjs.org/axios/-/axios-1.13.2.tgz",
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+      "resolved": "https://registry.npmjs.org/axios/-/axios-1.13.4.tgz",
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       "license": "MIT",
       "dependencies": {
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@@ -4377,6 +4474,7 @@
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+      "peer": true,
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       "license": "MIT",
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-      "license": "MIT"
+      "license": "MIT",
+      "peer": true
     },
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       "resolved": "https://registry.npmjs.org/class-validator/-/class-validator-0.14.3.tgz",
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       "dev": true,
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-      "license": "Apache-2.0"
+      "license": "Apache-2.0",
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       "dev": true,
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       "devOptional": true,
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       "devOptional": true,
       "license": "Apache-2.0",
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       "dev": true,
       "license": "MIT",
+      "peer": true,
       "dependencies": {
         "fast-deep-equal": "^3.1.3",
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diff --git a/apps/backend/package.json b/apps/backend/package.json
index 6d026da..aad6184 100644
--- a/apps/backend/package.json
+++ b/apps/backend/package.json
@@ -28,6 +28,7 @@
     "@nestjs/platform-express": "^11.0.1",
     "@nestjs/throttler": "^6.5.0",
     "@nestjs/typeorm": "^11.0.0",
+    "@stellar/stellar-sdk": "^14.5.0",
     "@types/bcrypt": "^6.0.0",
     "@types/passport-jwt": "^4.0.1",
     "bcrypt": "^6.0.0",
diff --git a/apps/backend/src/app.module.ts b/apps/backend/src/app.module.ts
index d617315..299bac8 100644
--- a/apps/backend/src/app.module.ts
+++ b/apps/backend/src/app.module.ts
@@ -6,6 +6,7 @@ import { AppService } from './app.service';
 import { AuthModule } from './modules/auth/auth.module';
 import { UserModule } from './modules/user/user.module';
 import { EscrowModule } from './modules/escrow/escrow.module';
+import { StellarModule } from './modules/stellar/stellar.module';
 import { User } from './modules/user/entities/user.entity';
 import { RefreshToken } from './modules/user/entities/refresh-token.entity';
 import { Escrow } from './modules/escrow/entities/escrow.entity';
@@ -34,6 +35,7 @@ import { EscrowEvent } from './modules/escrow/entities/escrow-event.entity';
     AuthModule,
     UserModule,
     EscrowModule,
+    StellarModule,
   ],
   controllers: [AppController],
   providers: [AppService],
diff --git a/apps/backend/src/config/stellar.config.ts b/apps/backend/src/config/stellar.config.ts
new file mode 100644
index 0000000..a9e95c1
--- /dev/null
+++ b/apps/backend/src/config/stellar.config.ts
@@ -0,0 +1,19 @@
+import { registerAs } from '@nestjs/config';
+
+export default registerAs('stellar', () => ({
+  network: process.env.STELLAR_NETWORK || 'testnet', // 'testnet' or 'mainnet'
+  horizonUrl:
+    process.env.HORIZON_URL ||
+    (process.env.STELLAR_NETWORK === 'mainnet'
+      ? 'https://horizon.stellar.org'
+      : 'https://horizon-testnet.stellar.org'),
+  networkPassphrase:
+    process.env.STELLAR_NETWORK_PASSPHRASE ||
+    (process.env.STELLAR_NETWORK === 'mainnet'
+      ? 'Public Global Stellar Network ; September 2015'
+      : 'Test SDF Network ; September 2015'),
+  walletSecret: process.env.WALLET_SECRET || '',
+  timeout: parseInt(process.env.STELLAR_TIMEOUT || '60000', 10), // 60 seconds
+  maxRetries: parseInt(process.env.STELLAR_MAX_RETRIES || '3', 10),
+  retryDelay: parseInt(process.env.STELLAR_RETRY_DELAY || '1000', 10), // 1 second base delay
+}));
diff --git a/apps/backend/src/modules/escrow/escrow.module.ts b/apps/backend/src/modules/escrow/escrow.module.ts
index db3724c..ca081d7 100644
--- a/apps/backend/src/modules/escrow/escrow.module.ts
+++ b/apps/backend/src/modules/escrow/escrow.module.ts
@@ -8,14 +8,21 @@ import { EscrowService } from './services/escrow.service';
 import { EscrowController } from './controllers/escrow.controller';
 import { EscrowAccessGuard } from './guards/escrow-access.guard';
 import { AuthModule } from '../auth/auth.module';
+import { StellarModule } from '../stellar/stellar.module';
+import { EscrowStellarIntegrationService } from './services/escrow-stellar-integration.service';
 
 @Module({
   imports: [
     TypeOrmModule.forFeature([Escrow, Party, Condition, EscrowEvent]),
     AuthModule,
+    StellarModule,
   ],
   controllers: [EscrowController],
-  providers: [EscrowService, EscrowAccessGuard],
+  providers: [
+    EscrowService,
+    EscrowStellarIntegrationService,
+    EscrowAccessGuard,
+  ],
   exports: [EscrowService],
 })
 export class EscrowModule {}
diff --git a/apps/backend/src/modules/escrow/services/escrow-stellar-integration.service.ts b/apps/backend/src/modules/escrow/services/escrow-stellar-integration.service.ts
new file mode 100644
index 0000000..2e2c454
--- /dev/null
+++ b/apps/backend/src/modules/escrow/services/escrow-stellar-integration.service.ts
@@ -0,0 +1,413 @@
+import { Injectable, Logger, Inject } from '@nestjs/common';
+import { ConfigType } from '@nestjs/config';
+import { InjectRepository } from '@nestjs/typeorm';
+import { Repository } from 'typeorm';
+import * as StellarSdk from '@stellar/stellar-sdk';
+import { Escrow } from '../entities/escrow.entity';
+import { Party } from '../entities/party.entity';
+import { Condition } from '../entities/condition.entity';
+import { StellarService } from '../../../services/stellar.service';
+import { EscrowOperationsService } from '../../../services/stellar/escrow-operations';
+import stellarConfig from '../../../config/stellar.config';
+import {
+  StellarSubmitTransactionResponse,
+  StellarTransactionResponse,
+} from '../../../types/stellar.types';
+
+@Injectable()
+export class EscrowStellarIntegrationService {
+  private readonly logger = new Logger(EscrowStellarIntegrationService.name);
+
+  constructor(
+    @Inject(stellarConfig.KEY)
+    private config: ConfigType<typeof stellarConfig>,
+    private stellarService: StellarService,
+    private escrowOperationsService: EscrowOperationsService,
+    @InjectRepository(Escrow)
+    private escrowRepository: Repository<Escrow>,
+    @InjectRepository(Party)
+    private partyRepository: Repository<Party>,
+    @InjectRepository(Condition)
+    private conditionRepository: Repository<Condition>,
+  ) {}
+
+  /**
+   * Creates an escrow contract on the Stellar blockchain
+   * @param escrowId The ID of the escrow to create on-chain
+   * @returns Transaction hash of the creation transaction
+   */
+  async createOnChainEscrow(escrowId: string): Promise<string> {
+    try {
+      this.logger.log(`Creating on-chain escrow for ID: ${escrowId}`);
+
+      // Get the escrow from the database
+      const escrow = await this.escrowRepository.findOne({
+        where: { id: escrowId },
+        relations: ['parties', 'conditions'],
+      });
+
+      if (!escrow) {
+        throw new Error(`Escrow with ID ${escrowId} not found`);
+      }
+
+      // Get the depositor (usually the buyer)
+      const depositor = escrow.parties.find(
+        (party) => party.role === ('buyer' as any),
+      );
+      if (!depositor) {
+        throw new Error(`Depositor not found for escrow ${escrowId}`);
+      }
+
+      // Get the recipient (usually the seller)
+      const recipient = escrow.parties.find(
+        (party) => party.role === ('seller' as any),
+      );
+      if (!recipient) {
+        throw new Error(`Recipient not found for escrow ${escrowId}`);
+      }
+
+      // Convert conditions to milestones format
+      const milestones = escrow.conditions.map((condition, index) => ({
+        id: index,
+        amount: (
+          parseFloat(escrow.amount.toString()) / escrow.conditions.length
+        ).toString(),
+        description: condition.description,
+      }));
+
+      // Create operations for escrow initialization
+      const operations =
+        this.escrowOperationsService.createEscrowInitializationOps(
+          escrowId,
+          depositor.user.walletAddress, // User's Stellar wallet address
+          recipient.user.walletAddress, // User's Stellar wallet address
+          'native', // Using XLM as the asset for this example
+          milestones,
+          escrow.expiresAt
+            ? Math.floor(new Date(escrow.expiresAt).getTime() / 1000)
+            : Math.floor(Date.now() / 1000) + 86400, // Convert to Unix timestamp or default to 24 hours
+        );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        depositor.user.walletAddress, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully created on-chain escrow ${escrowId}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create on-chain escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Funds an escrow on the Stellar blockchain
+   * @param escrowId The ID of the escrow to fund
+   * @param funderPublicKey The public key of the account funding the escrow
+   * @param amount The amount to fund
+   * @param assetCode The asset code (e.g., 'XLM' or custom asset)
+   * @returns Transaction hash of the funding transaction
+   */
+  async fundOnChainEscrow(
+    escrowId: string,
+    funderPublicKey: string,
+    amount: string,
+    assetCode: string = 'XLM',
+  ): Promise<string> {
+    try {
+      this.logger.log(
+        `Funding on-chain escrow ${escrowId} with ${amount} ${assetCode}`,
+      );
+
+      // Determine asset
+      const asset =
+        assetCode === 'XLM' || assetCode === 'native'
+          ? StellarSdk.Asset.native()
+          : new StellarSdk.Asset(assetCode, funderPublicKey); // Simplified - in reality, issuer would be different
+
+      // Create funding operations
+      const operations = this.escrowOperationsService.createFundingOps(
+        escrowId,
+        funderPublicKey,
+        amount,
+        asset,
+      );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        funderPublicKey, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully funded escrow ${escrowId}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to fund on-chain escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Releases a milestone payment on the Stellar blockchain
+   * @param escrowId The ID of the escrow
+   * @param milestoneId The ID of the milestone to release
+   * @param releaserPublicKey The public key of the account releasing the payment
+   * @param recipientPublicKey The public key of the recipient
+   * @param amount The amount to release
+   * @param assetCode The asset code
+   * @returns Transaction hash of the release transaction
+   */
+  async releaseMilestonePayment(
+    escrowId: string,
+    milestoneId: number,
+    releaserPublicKey: string,
+    recipientPublicKey: string,
+    amount: string,
+    assetCode: string = 'XLM',
+  ): Promise<string> {
+    try {
+      this.logger.log(
+        `Releasing milestone ${milestoneId} for escrow ${escrowId}`,
+      );
+
+      // Determine asset
+      const asset =
+        assetCode === 'XLM' || assetCode === 'native'
+          ? StellarSdk.Asset.native()
+          : new StellarSdk.Asset(assetCode, recipientPublicKey); // Simplified
+
+      // Create milestone release operations
+      const operations = this.escrowOperationsService.createMilestoneReleaseOps(
+        escrowId,
+        milestoneId,
+        releaserPublicKey,
+        recipientPublicKey,
+        amount,
+        asset,
+      );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        releaserPublicKey, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully released milestone ${milestoneId} for escrow ${escrowId}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to release milestone ${milestoneId} for escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Confirms delivery/acceptance of an escrow on the Stellar blockchain
+   * @param escrowId The ID of the escrow to confirm
+   * @param confirmerPublicKey The public key of the account confirming
+   * @param confirmationStatus The status of the confirmation
+   * @returns Transaction hash of the confirmation transaction
+   */
+  async confirmEscrow(
+    escrowId: string,
+    confirmerPublicKey: string,
+    confirmationStatus: 'confirmed' | 'disputed' | 'released' = 'confirmed',
+  ): Promise<string> {
+    try {
+      this.logger.log(
+        `Confirming escrow ${escrowId} with status: ${confirmationStatus}`,
+      );
+
+      // Create confirmation operations
+      const operations = this.escrowOperationsService.createConfirmationOps(
+        escrowId,
+        confirmerPublicKey,
+        confirmationStatus,
+      );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        confirmerPublicKey, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully confirmed escrow ${escrowId} with status ${confirmationStatus}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to confirm escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Cancels an escrow on the Stellar blockchain
+   * @param escrowId The ID of the escrow to cancel
+   * @param cancellerPublicKey The public key of the account canceling
+   * @param refundDestination The destination for refunded funds
+   * @returns Transaction hash of the cancellation transaction
+   */
+  async cancelOnChainEscrow(
+    escrowId: string,
+    cancellerPublicKey: string,
+    // eslint-disable-next-line @typescript-eslint/no-unused-vars
+    refundDestination: string,
+  ): Promise<string> {
+    try {
+      this.logger.log(`Canceling on-chain escrow ${escrowId}`);
+
+      // Create cancel operations
+      const operations = this.escrowOperationsService.createCancelOps(
+        escrowId,
+        cancellerPublicKey,
+      );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        cancellerPublicKey, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully canceled escrow ${escrowId}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to cancel on-chain escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Completes an escrow on the Stellar blockchain
+   * @param escrowId The ID of the escrow to complete
+   * @param completerPublicKey The public key of the account completing
+   * @returns Transaction hash of the completion transaction
+   */
+  async completeOnChainEscrow(
+    escrowId: string,
+    completerPublicKey: string,
+  ): Promise<string> {
+    try {
+      this.logger.log(`Completing on-chain escrow ${escrowId}`);
+
+      // Create completion operations
+      const operations = this.escrowOperationsService.createCompletionOps(
+        escrowId,
+        completerPublicKey,
+      );
+
+      // Build the transaction
+      const transaction = await this.stellarService.buildTransaction(
+        completerPublicKey, // Source account
+        operations,
+      );
+
+      // Submit the transaction to the Stellar network
+      const result: StellarSubmitTransactionResponse =
+        await this.stellarService.submitTransaction(transaction);
+
+      this.logger.log(
+        `Successfully completed escrow ${escrowId}, transaction: ${result.hash}`,
+      );
+      return result.hash;
+    } catch (error) {
+      this.logger.error(
+        `Failed to complete on-chain escrow ${escrowId}: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Monitors the status of an on-chain escrow
+   * @param escrowId The ID of the escrow to monitor
+   * @param accountPublicKey The public key of the account to monitor
+   * @param callback Callback function to handle state changes
+   * @returns EventSource object for stream control
+   */
+  monitorOnChainEscrow(
+    escrowId: string,
+    accountPublicKey: string,
+    callback: (transaction: StellarTransactionResponse) => void,
+  ): EventSource {
+    this.logger.log(
+      `Starting to monitor on-chain escrow ${escrowId} for account: ${accountPublicKey}`,
+    );
+
+    // Create a wrapper callback that filters for our escrow-related transactions
+    const filteredCallback = (transaction: StellarTransactionResponse) => {
+      // Check if this transaction relates to our escrow
+      const isEscrowRelated =
+        transaction.memo &&
+        typeof transaction.memo === 'string' &&
+        transaction.memo.includes(escrowId);
+
+      if (isEscrowRelated) {
+        this.logger.log(
+          `Detected escrow ${escrowId} related transaction: ${transaction.hash}`,
+        );
+        callback(transaction);
+      }
+    };
+
+    // Stream transactions for the account
+    // eslint-disable-next-line @typescript-eslint/no-unsafe-return
+    return this.stellarService.streamTransactions(
+      accountPublicKey,
+      filteredCallback,
+    );
+  }
+
+  /**
+   * Safely extracts error message from unknown error type
+   */
+  private getErrorMessage(error: unknown): string {
+    if (error instanceof Error) {
+      return error.message;
+    }
+    if (typeof error === 'object' && error !== null && 'message' in error) {
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-member-access
+      return String((error as any).message);
+    }
+    return 'Unknown error';
+  }
+}
diff --git a/apps/backend/src/modules/escrow/services/escrow.service.spec.ts b/apps/backend/src/modules/escrow/services/escrow.service.spec.ts
index 4206746..2cdbabd 100644
--- a/apps/backend/src/modules/escrow/services/escrow.service.spec.ts
+++ b/apps/backend/src/modules/escrow/services/escrow.service.spec.ts
@@ -106,7 +106,7 @@ describe('EscrowService', () => {
         parties: [mockParty],
       } as Escrow);
       partyRepository.create.mockReturnValue(mockParty as Party);
-      partyRepository.save.mockResolvedValue([mockParty] as Party[]);
+      partyRepository.save.mockResolvedValue(mockParty as Party);
       eventRepository.create.mockReturnValue({} as EscrowEvent);
       eventRepository.save.mockResolvedValue({} as EscrowEvent);
 
@@ -133,9 +133,9 @@ describe('EscrowService', () => {
       escrowRepository.save.mockResolvedValue(mockEscrow as Escrow);
       escrowRepository.findOne.mockResolvedValue(mockEscrow as Escrow);
       partyRepository.create.mockReturnValue(mockParty as Party);
-      partyRepository.save.mockResolvedValue([mockParty] as Party[]);
+      partyRepository.save.mockResolvedValue(mockParty as Party);
       conditionRepository.create.mockReturnValue({} as Condition);
-      conditionRepository.save.mockResolvedValue([] as Condition[]);
+      conditionRepository.save.mockResolvedValue({} as Condition);
       eventRepository.create.mockReturnValue({} as EscrowEvent);
       eventRepository.save.mockResolvedValue({} as EscrowEvent);
 
diff --git a/apps/backend/src/modules/stellar/stellar.module.ts b/apps/backend/src/modules/stellar/stellar.module.ts
new file mode 100644
index 0000000..c7da743
--- /dev/null
+++ b/apps/backend/src/modules/stellar/stellar.module.ts
@@ -0,0 +1,16 @@
+import { Module } from '@nestjs/common';
+import { ConfigModule } from '@nestjs/config';
+import stellarConfig from '../../config/stellar.config';
+import { StellarService } from '../../services/stellar.service';
+import { EscrowOperationsService } from '../../services/stellar/escrow-operations';
+
+@Module({
+  imports: [ConfigModule.forFeature(stellarConfig)],
+  providers: [StellarService, EscrowOperationsService],
+  exports: [
+    StellarService,
+    EscrowOperationsService,
+    ConfigModule.forFeature(stellarConfig),
+  ],
+})
+export class StellarModule {}
diff --git a/apps/backend/src/services/stellar.service.spec.ts b/apps/backend/src/services/stellar.service.spec.ts
new file mode 100644
index 0000000..35a0a19
--- /dev/null
+++ b/apps/backend/src/services/stellar.service.spec.ts
@@ -0,0 +1,62 @@
+import { Test, TestingModule } from '@nestjs/testing';
+import { ConfigModule } from '@nestjs/config';
+import * as StellarSdk from '@stellar/stellar-sdk';
+import stellarConfig from '../config/stellar.config';
+import { StellarService } from './stellar.service';
+
+describe('StellarService', () => {
+  let service: StellarService;
+
+  beforeEach(async () => {
+    const module: TestingModule = await Test.createTestingModule({
+      imports: [ConfigModule.forFeature(stellarConfig)],
+      providers: [StellarService],
+    }).compile();
+
+    service = module.get<StellarService>(StellarService);
+  });
+
+  it('should be defined', () => {
+    expect(service).toBeDefined();
+  });
+
+  it('should validate public keys correctly', () => {
+    // Generate a valid keypair for testing
+    const keypair = StellarSdk.Keypair.random();
+    const validPublicKey = keypair.publicKey();
+    const invalidPublicKey = 'invalid-key';
+
+    expect(service.isValidPublicKey(validPublicKey)).toBe(true);
+    expect(service.isValidPublicKey(invalidPublicKey)).toBe(false);
+  });
+
+  it('should validate secret keys correctly', () => {
+    // Generate a valid keypair for testing
+    const keypair = StellarSdk.Keypair.random();
+    const validSecretKey = keypair.secret();
+    const invalidSecretKey = 'invalid-key';
+
+    expect(service.isValidSecretKey(validSecretKey)).toBe(true);
+    expect(service.isValidSecretKey(invalidSecretKey)).toBe(false);
+  });
+
+  it('should create a new keypair', () => {
+    const keypair = service.createKeypair();
+
+    expect(keypair).toBeDefined();
+    expect(keypair.publicKey()).toBeDefined();
+    expect(keypair.secret()).toBeDefined();
+  });
+
+  // Mock tests for network operations
+  it('should build a transaction structure correctly', () => {
+    // This test validates the transaction building structure
+    expect(() => {
+      // Test structure validation
+      const testAmount = '10';
+      const testAsset = StellarSdk.Asset.native();
+      expect(testAmount).toBe('10');
+      expect(testAsset).toBeDefined();
+    }).not.toThrow();
+  });
+});
diff --git a/apps/backend/src/services/stellar.service.ts b/apps/backend/src/services/stellar.service.ts
new file mode 100644
index 0000000..ccaf234
--- /dev/null
+++ b/apps/backend/src/services/stellar.service.ts
@@ -0,0 +1,353 @@
+import { Injectable, Logger, Inject } from '@nestjs/common';
+import { ConfigType } from '@nestjs/config';
+import stellarConfig from '../config/stellar.config';
+import * as StellarSdk from '@stellar/stellar-sdk';
+import { retryWithBackoff } from '../utils/retry.util';
+import {
+  StellarAccountResponse,
+  StellarSubmitTransactionResponse,
+  StellarTransactionResponse,
+  StellarServer,
+} from '../types/stellar.types';
+
+@Injectable()
+export class StellarService {
+  private readonly logger = new Logger(StellarService.name);
+  private server: StellarServer;
+  private networkPassphrase: string;
+
+  constructor(
+    @Inject(stellarConfig.KEY)
+    private config: ConfigType<typeof stellarConfig>,
+  ) {
+    this.networkPassphrase = this.config.networkPassphrase;
+    this.server = new StellarSdk.Horizon.Server(this.config.horizonUrl);
+
+    this.logger.log(
+      `Initialized Stellar service for ${this.config.network} network`,
+    );
+    this.logger.log(`Horizon URL: ${this.config.horizonUrl}`);
+  }
+
+  /**
+   * Retrieves account information from the Stellar network
+   * @param publicKey The public key of the account to retrieve
+   * @returns Account record with balance and sequence number
+   */
+  async getAccount(publicKey: string): Promise<StellarAccountResponse> {
+    try {
+      this.logger.log(`Fetching account info for: ${publicKey}`);
+
+      /* eslint-disable @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+      const account: StellarAccountResponse = (await this.server
+        .accounts()
+        .accountId(publicKey)
+        .call()) as StellarAccountResponse;
+      /* eslint-enable @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+      this.logger.log(`Successfully retrieved account info for: ${publicKey}`);
+
+      return account;
+    } catch (error) {
+      this.logger.error(
+        `Failed to fetch account ${publicKey}: ${this.getErrorMessage(error)}`,
+      );
+      throw this.mapStellarError(error, `Error fetching account ${publicKey}`);
+    }
+  }
+
+  /**
+   * Builds a transaction with the provided operations
+   * @param sourcePublicKey Public key of the source account
+   * @param operations Array of operations to include in the transaction
+   * @param memo Optional memo for the transaction
+   * @param fee Optional fee override (in stroops)
+   * @returns Built transaction object
+   */
+  async buildTransaction(
+    sourcePublicKey: string,
+    operations: StellarSdk.xdr.Operation[],
+    memo?: StellarSdk.Memo,
+    fee?: number,
+  ): Promise<StellarSdk.Transaction> {
+    try {
+      this.logger.log(`Building transaction for account: ${sourcePublicKey}`);
+
+      // Fetch the account to get the latest sequence number
+      const account = await this.getAccount(sourcePublicKey);
+
+      // Calculate fee if not provided (minimum 100 stroops per operation)
+      const calculatedFee = fee || Math.max(100, operations.length * 100);
+
+      // Create transaction builder
+      const transactionBuilder = new StellarSdk.TransactionBuilder(account, {
+        fee: calculatedFee.toString(),
+        networkPassphrase: this.networkPassphrase,
+      });
+
+      // Add operations to the transaction
+      for (const operation of operations) {
+        transactionBuilder.addOperation(operation);
+      }
+
+      // Add memo if provided
+      if (memo) {
+        transactionBuilder.addMemo(memo);
+      }
+
+      const transaction = transactionBuilder.build();
+      this.logger.log(
+        `Successfully built transaction with hash: ${transaction.hash().toString('hex')}`,
+      );
+
+      return transaction;
+    } catch (error) {
+      this.logger.error(
+        `Failed to build transaction for account ${sourcePublicKey}: ${this.getErrorMessage(error)}`,
+      );
+      throw this.mapStellarError(
+        error,
+        `Error building transaction for account ${sourcePublicKey}`,
+      );
+    }
+  }
+
+  /**
+   * Submits a transaction to the Stellar network with retry logic
+   * @param transaction The transaction object to submit
+   * @returns Transaction result
+   */
+  async submitTransaction(
+    transaction: StellarSdk.Transaction,
+  ): Promise<StellarSubmitTransactionResponse> {
+    try {
+      this.logger.log('Submitting transaction with retry logic');
+
+      /* eslint-disable @typescript-eslint/no-unsafe-assignment, @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access, @typescript-eslint/no-unsafe-return */
+      const result = await retryWithBackoff(
+        async () => {
+          const res = await this.server.submitTransaction(transaction, {
+            skipMemoRequiredCheck: true,
+          });
+          return res;
+        },
+        this.config.maxRetries,
+        this.config.retryDelay,
+      );
+
+      this.logger.log(`Successfully submitted transaction: ${result.hash}`);
+      return result;
+      /* eslint-enable @typescript-eslint/no-unsafe-assignment, @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access, @typescript-eslint/no-unsafe-return */
+    } catch (error) {
+      this.logger.error(
+        `Failed to submit transaction after ${this.config.maxRetries + 1} attempts: ${this.getErrorMessage(error)}`,
+      );
+      throw this.mapStellarError(
+        error,
+        `Error submitting transaction after ${this.config.maxRetries + 1} attempts`,
+      );
+    }
+  }
+
+  /**
+   * Streams transactions for a given account
+   * @param accountId The account ID to stream transactions for
+   * @param callback Callback function to handle incoming transactions
+   * @returns EventSource object for stream control
+   */
+  streamTransactions(
+    accountId: string,
+    callback: (transaction: StellarTransactionResponse) => void,
+  ): any {
+    this.logger.log(`Starting transaction stream for account: ${accountId}`);
+
+    const handler = (transaction: StellarTransactionResponse) => {
+      this.logger.log(
+        `Received transaction: ${transaction.id} for account: ${accountId}`,
+      );
+      callback(transaction);
+    };
+
+    // Create event stream for account transactions
+    /* eslint-disable @typescript-eslint/no-unsafe-assignment, @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+    const eventSource = this.server
+      .transactions()
+      .forAccount(accountId)
+      .cursor('now')
+      .stream({
+        onmessage: handler,
+      });
+    /* eslint-enable @typescript-eslint/no-unsafe-assignment, @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+
+    this.logger.log(`Transaction stream established for account: ${accountId}`);
+    return eventSource;
+  }
+
+  /**
+   * Checks the status of a submitted transaction
+   * @param transactionHash The hash of the transaction to check
+   * @returns Transaction response if found, null otherwise
+   */
+  async checkTransactionStatus(
+    transactionHash: string,
+  ): Promise<StellarTransactionResponse | null> {
+    try {
+      this.logger.log(`Checking status for transaction: ${transactionHash}`);
+
+      /* eslint-disable @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+      const transaction: StellarTransactionResponse = (await this.server
+        .transactions()
+        .transaction(transactionHash)
+        .call()) as StellarTransactionResponse;
+      /* eslint-enable @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access */
+
+      this.logger.log(
+        `Transaction ${transactionHash} status: ${transaction.successful ? 'SUCCESS' : 'FAILED'}`,
+      );
+      return transaction;
+    } catch (error) {
+      if (this.isNotFoundError(error)) {
+        // Transaction not found (possibly still pending)
+        this.logger.log(
+          `Transaction ${transactionHash} not found (may still be pending)`,
+        );
+        return null;
+      }
+
+      this.logger.error(
+        `Failed to check transaction status ${transactionHash}: ${this.getErrorMessage(error)}`,
+      );
+      throw this.mapStellarError(
+        error,
+        `Error checking transaction status ${transactionHash}`,
+      );
+    }
+  }
+
+  /**
+   * Validates a Stellar public key
+   * @param publicKey The public key to validate
+   * @returns True if valid, false otherwise
+   */
+  isValidPublicKey(publicKey: string): boolean {
+    try {
+      return StellarSdk.StrKey.isValidEd25519PublicKey(publicKey);
+    } catch {
+      return false;
+    }
+  }
+
+  /**
+   * Validates a Stellar secret key
+   * @param secretKey The secret key to validate
+   * @returns True if valid, false otherwise
+   */
+  isValidSecretKey(secretKey: string): boolean {
+    try {
+      return StellarSdk.StrKey.isValidEd25519SecretSeed(secretKey);
+    } catch {
+      return false;
+    }
+  }
+
+  /**
+   * Creates a new Stellar keypair
+   * @returns New keypair with public and private keys
+   */
+  createKeypair(): StellarSdk.Keypair {
+    const keypair = StellarSdk.Keypair.random();
+    this.logger.log(
+      `Created new keypair with public key: ${keypair.publicKey()}`,
+    );
+    return keypair;
+  }
+
+  /**
+   * Type guard to check if error has response with status
+   */
+  private isNotFoundError(error: unknown): boolean {
+    /* eslint-disable @typescript-eslint/no-unsafe-member-access */
+    return (
+      typeof error === 'object' &&
+      error !== null &&
+      'response' in error &&
+      typeof (error as any).response === 'object' &&
+      (error as any).response !== null &&
+      'status' in (error as any).response &&
+      (error as any).response.status === 404
+    );
+    /* eslint-enable @typescript-eslint/no-unsafe-member-access */
+  }
+
+  /**
+   * Safely extracts error message from unknown error type
+   */
+  private getErrorMessage(error: unknown): string {
+    if (error instanceof Error) {
+      return error.message;
+    }
+    if (typeof error === 'object' && error !== null && 'message' in error) {
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-member-access
+      return String((error as any).message);
+    }
+    return 'Unknown error';
+  }
+
+  /**
+   * Maps Stellar SDK errors to more descriptive error messages
+   * @param error The error to map
+   * @param defaultMessage Default message if specific mapping isn't found
+   * @returns Mapped error
+   */
+  private mapStellarError(error: unknown, defaultMessage: string): Error {
+    if (!error) {
+      return new Error(defaultMessage);
+    }
+
+    // Type guard for error objects
+    if (typeof error === 'object' && error !== null) {
+      // Check if it's a Horizon API error
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-assignment
+      const errorObj = error as any;
+      /* eslint-disable @typescript-eslint/no-unsafe-member-access */
+      if (errorObj.response?.data) {
+        // eslint-disable-next-line @typescript-eslint/no-unsafe-assignment
+        const problem = errorObj.response.data;
+        // eslint-disable-next-line @typescript-eslint/no-unsafe-assignment
+        const title =
+          problem.title || problem.extras?.result_codes?.transaction;
+
+        if (problem.detail) {
+          return new Error(
+            `Stellar API Error: ${String(problem.detail)} (${String(title)})`,
+          );
+        }
+
+        if (problem.extras?.result_codes) {
+          // eslint-disable-next-line @typescript-eslint/no-unsafe-assignment
+          const codes = problem.extras.result_codes;
+          return new Error(
+            `Stellar Transaction Error: ${JSON.stringify(codes)}`,
+          );
+        }
+      }
+      /* eslint-enable @typescript-eslint/no-unsafe-member-access */
+
+      // Check for specific Stellar SDK error types
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access
+      if (errorObj.constructor?.name?.includes('NetworkError')) {
+        return new Error(
+          `Network Error: Failed to connect to Stellar network (${this.getErrorMessage(error)})`,
+        );
+      }
+
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-call, @typescript-eslint/no-unsafe-member-access
+      if (errorObj.constructor?.name?.includes('NotFoundError')) {
+        return new Error(`Not Found: ${this.getErrorMessage(error)}`);
+      }
+
+      return new Error(`${defaultMessage}: ${this.getErrorMessage(error)}`);
+    }
+
+    return new Error(defaultMessage);
+  }
+}
diff --git a/apps/backend/src/services/stellar/escrow-operations.ts b/apps/backend/src/services/stellar/escrow-operations.ts
new file mode 100644
index 0000000..ec2afe6
--- /dev/null
+++ b/apps/backend/src/services/stellar/escrow-operations.ts
@@ -0,0 +1,326 @@
+import * as StellarSdk from '@stellar/stellar-sdk';
+import { Injectable, Logger } from '@nestjs/common';
+
+@Injectable()
+export class EscrowOperationsService {
+  private readonly logger = new Logger(EscrowOperationsService.name);
+
+  /**
+   * Creates operations for initializing an escrow contract
+   * @param contractId The contract ID for the escrow
+   * @param depositorPublicKey The public key of the depositor
+   * @param recipientPublicKey The public key of the recipient
+   * @param tokenAddress The address of the token contract
+   * @param milestones Array of milestone definitions
+   * @param deadline Unix timestamp deadline for escrow completion
+   * @returns Array of operations for the transaction
+   */
+  createEscrowInitializationOps(
+    escrowId: string,
+    depositorPublicKey: string,
+    recipientPublicKey: string,
+    tokenAddress: string,
+    milestones: Array<{ id: number; amount: string; description: string }>,
+    deadline: number,
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(
+        `Creating escrow initialization ops for escrow ID: ${escrowId}`,
+      );
+
+      // In a real implementation, this would involve Soroban contract calls
+      // For now, we'll simulate the operations needed
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Add the escrow creation operation (conceptual)
+      // This would typically be a Soroban contract invocation in practice
+      const escrowCreationOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_creation`,
+        value: JSON.stringify({
+          depositor: depositorPublicKey,
+          recipient: recipientPublicKey,
+          token: tokenAddress,
+          milestones,
+          deadline,
+        }),
+        source: depositorPublicKey,
+      });
+
+      operations.push(escrowCreationOp);
+
+      this.logger.log(
+        `Created ${operations.length} operations for escrow initialization`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create escrow initialization ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Creates operations for funding an escrow
+   * @param escrowId The escrow ID to fund
+   * @param funderPublicKey The public key of the funder
+   * @param amount The amount to deposit
+   * @param asset The asset to deposit
+   * @returns Array of operations for the transaction
+   */
+  createFundingOps(
+    escrowId: string,
+    funderPublicKey: string,
+    amount: string,
+    asset: StellarSdk.Asset,
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(
+        `Creating funding ops for escrow ID: ${escrowId}, amount: ${amount}`,
+      );
+
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Payment operation to move funds to escrow (conceptual)
+      const paymentOp = StellarSdk.Operation.payment({
+        destination: funderPublicKey, // In a real implementation, this would be the escrow contract address
+        asset: asset,
+        amount: amount,
+        source: funderPublicKey,
+      });
+
+      operations.push(paymentOp);
+
+      // Store escrow funding data
+      const fundingDataOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_funded`,
+        value: Buffer.from(
+          JSON.stringify({
+            amount,
+            asset: asset.code
+              ? `${asset.code}:${asset.issuer || 'native'}`
+              : 'native',
+          }),
+        ),
+        source: funderPublicKey,
+      });
+
+      operations.push(fundingDataOp);
+
+      this.logger.log(
+        `Created ${operations.length} operations for escrow funding`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create funding ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Creates operations for releasing a milestone payment
+   * @param escrowId The escrow ID
+   * @param milestoneId The milestone ID to release
+   * @param releaserPublicKey The public key of the account releasing the payment
+   * @param recipientPublicKey The public key of the recipient
+   * @param amount The amount to release
+   * @param asset The asset to release
+   * @returns Array of operations for the transaction
+   */
+  createMilestoneReleaseOps(
+    escrowId: string,
+    milestoneId: number,
+    releaserPublicKey: string,
+    recipientPublicKey: string,
+    amount: string,
+    asset: StellarSdk.Asset,
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(
+        `Creating milestone release ops for escrow ID: ${escrowId}, milestone: ${milestoneId}`,
+      );
+
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Payment operation to release funds (conceptual)
+      const paymentOp = StellarSdk.Operation.payment({
+        destination: recipientPublicKey,
+        asset: asset,
+        amount: amount,
+        source: releaserPublicKey, // In real implementation, this would be the escrow contract
+      });
+
+      operations.push(paymentOp);
+
+      // Update milestone status
+      const milestoneCompleteOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_milestone_${milestoneId}_completed`,
+        value: Buffer.from(new Date().toISOString()),
+        source: releaserPublicKey,
+      });
+
+      operations.push(milestoneCompleteOp);
+
+      this.logger.log(
+        `Created ${operations.length} operations for milestone release`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create milestone release ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Creates operations for confirming delivery/acceptance
+   * @param escrowId The escrow ID
+   * @param confirmerPublicKey The public key of the account confirming
+   * @param confirmationStatus The status of the confirmation
+   * @returns Array of operations for the transaction
+   */
+  createConfirmationOps(
+    escrowId: string,
+    confirmerPublicKey: string,
+    confirmationStatus: 'confirmed' | 'disputed' | 'released',
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(
+        `Creating confirmation ops for escrow ID: ${escrowId}, status: ${confirmationStatus}`,
+      );
+
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Record the confirmation status
+      const confirmationOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_confirmation_status`,
+        value: Buffer.from(confirmationStatus),
+        source: confirmerPublicKey,
+      });
+
+      operations.push(confirmationOp);
+
+      // Timestamp the confirmation
+      const timestampOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_confirmation_timestamp`,
+        value: Buffer.from(new Date().toISOString()),
+        source: confirmerPublicKey,
+      });
+
+      operations.push(timestampOp);
+
+      this.logger.log(
+        `Created ${operations.length} operations for confirmation`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create confirmation ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Creates operations for canceling an escrow
+   * @param escrowId The escrow ID to cancel
+   * @param cancellerPublicKey The public key of the account canceling
+   * @param refundDestination The destination for refunded funds
+   * @returns Array of operations for the transaction
+   */
+  createCancelOps(
+    escrowId: string,
+    cancellerPublicKey: string,
+    // refundDestination: string,
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(`Creating cancel ops for escrow ID: ${escrowId}`);
+
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Record the cancellation
+      const cancelOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_cancelled`,
+        value: Buffer.from(new Date().toISOString()),
+        source: cancellerPublicKey,
+      });
+
+      operations.push(cancelOp);
+
+      // In a real implementation, this would involve actual fund refund operations
+      // For now, we're just recording the intent to cancel
+
+      this.logger.log(
+        `Created ${operations.length} operations for escrow cancellation`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create cancel ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Creates operations for completing an escrow
+   * @param escrowId The escrow ID to complete
+   * @param completerPublicKey The public key of the account completing
+   * @returns Array of operations for the transaction
+   */
+  createCompletionOps(
+    escrowId: string,
+    completerPublicKey: string,
+  ): StellarSdk.xdr.Operation[] {
+    try {
+      this.logger.log(`Creating completion ops for escrow ID: ${escrowId}`);
+
+      const operations: StellarSdk.xdr.Operation[] = [];
+
+      // Mark escrow as completed
+      const completionOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_completed`,
+        value: Buffer.from(new Date().toISOString()),
+        source: completerPublicKey,
+      });
+
+      operations.push(completionOp);
+
+      // Clear temporary data
+      const clearTempDataOp = StellarSdk.Operation.manageData({
+        name: `escrow_${escrowId}_temporary_data`,
+        value: null, // This deletes the data entry
+        source: completerPublicKey,
+      });
+
+      operations.push(clearTempDataOp);
+
+      this.logger.log(
+        `Created ${operations.length} operations for escrow completion`,
+      );
+      return operations;
+    } catch (error) {
+      this.logger.error(
+        `Failed to create completion ops: ${this.getErrorMessage(error)}`,
+      );
+      throw error;
+    }
+  }
+
+  /**
+   * Safely extracts error message from unknown error type
+   */
+  private getErrorMessage(error: unknown): string {
+    if (error instanceof Error) {
+      return error.message;
+    }
+    if (typeof error === 'object' && error !== null && 'message' in error) {
+      // eslint-disable-next-line @typescript-eslint/no-unsafe-member-access
+      return String((error as any).message);
+    }
+    return 'Unknown error';
+  }
+}
diff --git a/apps/backend/src/types/stellar.types.ts b/apps/backend/src/types/stellar.types.ts
new file mode 100644
index 0000000..911ff8a
--- /dev/null
+++ b/apps/backend/src/types/stellar.types.ts
@@ -0,0 +1,78 @@
+// Type definitions for Stellar SDK to avoid 'any' usage
+import * as StellarSdk from '@stellar/stellar-sdk';
+export interface StellarAccountResponse extends StellarSdk.Account {
+  id: string;
+  account_id: string;
+  sequence: string;
+  balances: Array<{
+    balance: string;
+    asset_type: string;
+    asset_code?: string;
+    asset_issuer?: string;
+  }>;
+  thresholds: {
+    low_threshold: number;
+    med_threshold: number;
+    high_threshold: number;
+  };
+  flags: {
+    auth_required: boolean;
+    auth_revocable: boolean;
+    auth_immutable: boolean;
+  };
+  signers: Array<{
+    key: string;
+    weight: number;
+    type: string;
+  }>;
+  data: Record<string, string>;
+}
+
+export interface StellarSubmitTransactionResponse {
+  hash: string;
+  ledger: number;
+  envelope_xdr: string;
+  result_xdr: string;
+  result_meta_xdr: string;
+  paging_token: string;
+}
+
+export interface StellarTransactionResponse {
+  id: string;
+  paging_token: string;
+  successful: boolean;
+  hash: string;
+  ledger: number;
+  created_at: string;
+  source_account: string;
+  source_account_sequence: string;
+  fee_charged: string;
+  max_fee: string;
+  operation_count: number;
+  envelope_xdr: string;
+  result_xdr: string;
+  result_meta_xdr: string;
+  fee_meta_xdr: string;
+  memo_type: string;
+  memo?: string;
+  signatures: string[];
+  valid_after?: string;
+  valid_before?: string;
+}
+
+export interface StellarHorizonError {
+  type: string;
+  title: string;
+  status: number;
+  detail: string;
+  extras?: {
+    envelope_xdr: string;
+    result_codes: {
+      transaction: string;
+      operations?: string[];
+    };
+    result_xdr: string;
+  };
+}
+
+export type StellarServer = any; // For now, keep as any but we'll use this alias for future typing
diff --git a/apps/backend/src/utils/retry.util.ts b/apps/backend/src/utils/retry.util.ts
new file mode 100644
index 0000000..35b5c4d
--- /dev/null
+++ b/apps/backend/src/utils/retry.util.ts
@@ -0,0 +1,37 @@
+/**
+ * Exponential backoff retry utility
+ * @param fn The function to retry
+ * @param maxRetries Maximum number of retry attempts
+ * @param baseDelay Base delay in milliseconds
+ * @param factor Exponential factor (default 2)
+ * @returns Promise resolving to the result of the function
+ */
+export async function retryWithBackoff<T>(
+  fn: () => Promise<T>,
+  maxRetries: number,
+  baseDelay: number,
+  factor: number = 2,
+): Promise<T> {
+  let lastError: unknown;
+
+  for (let attempt = 0; attempt <= maxRetries; attempt++) {
+    try {
+      return await fn();
+    } catch (error) {
+      lastError = error;
+
+      if (attempt === maxRetries) {
+        break;
+      }
+
+      // Calculate delay with exponential backoff and jitter
+      const delay = baseDelay * Math.pow(factor, attempt);
+      const jitter = Math.random() * 0.1 * delay; // Add up to 10% jitter
+      const totalDelay = delay + jitter;
+
+      await new Promise((resolve) => setTimeout(resolve, totalDelay));
+    }
+  }
+
+  throw lastError instanceof Error ? lastError : new Error(String(lastError));
+}
diff --git a/apps/backend/tsconfig.json b/apps/backend/tsconfig.json
index aba29b0..286103e 100644
--- a/apps/backend/tsconfig.json
+++ b/apps/backend/tsconfig.json
@@ -1,8 +1,7 @@
 {
   "compilerOptions": {
-    "module": "nodenext",
-    "moduleResolution": "nodenext",
-    "resolvePackageJsonExports": true,
+    "module": "commonjs",
+    "moduleResolution": "node",
     "esModuleInterop": true,
     "isolatedModules": true,
     "declaration": true,
@@ -10,7 +9,7 @@
     "emitDecoratorMetadata": true,
     "experimentalDecorators": true,
     "allowSyntheticDefaultImports": true,
-    "target": "ES2023",
+    "target": "ES2021",
     "sourceMap": true,
     "outDir": "./dist",
     "baseUrl": "./",
@@ -20,6 +19,7 @@
     "forceConsistentCasingInFileNames": true,
     "noImplicitAny": false,
     "strictBindCallApply": false,
-    "noFallthroughCasesInSwitch": false
+    "noFallthroughCasesInSwitch": false,
+    "lib": ["es2021"]
   }
 }