What is Stellar (XLM)?

Stellar is a blockchain built for low-fee, secure, and high-speed international payments between individuals and organizations. Stellar also provides a developer kit for building network-based products.

Stellar Lumens (XLM) is a native coin of the project. It provides liquidity within the ecosystem and pays intranet transaction fees.

XLM tokens are traded on all main cryptocurrency exchanges. Most multi-currency crypto wallets support XLM storage, and top hardware wallets also support Lumens.

Now let's take a closer look at what XLM is, its origin and features, and how the project works.

The creation and key milestones of Stellar

American programmer and entrepreneur Jed McCaleb founded the Stellar project. He is also known as the co-founder and CTO of Ripple, as well as the co-founder of the cryptocurrency exchange Mt. Gox. 

• In 2013, McCaleb left Ripple due to discord with its leadership.
• In July 2014, Jed McCaleb co-founded the non-profit Stellar Development Foundation (SDF)  with Joyce Kim and David Mazieres, focusing on creating an open-source protocol for cross-border transactions that could include both fiat and digital currencies.
• In 2015, the team behind the project developed its own mechanism of work, the Stellar Consensus Protocol (SCP).
• In September 2018, the launch of the first DEX (decentralized exchange) was announced, which supports fiat and sets 0% commissions.
• In October 2019, the protocol update was completed. An important change is the elimination of the mechanism of artificial inflation.
• In January 2021, the Ministry of Digital Transformation of Ukraine entered into a cooperation agreement with a blockchain project to jointly develop a strategy for the introduction of digital currency by the National Bank of Ukraine.

Stellar continues to evolve and integrate into various financial systems, aiming to become a leading platform for cross-border payments and financial innovation.

How Stellar Works

The basis of the Stellar network is the SCP. Its creator, David Mazieres, called the protocol “the first provably safe consensus mechanism”. It uses the architecture of the Federated Byzantine Agreement (FBA): many peer computing nodes are involved in the process of generating blocks and verifying transactions. Everyone can start their own node to keep the network functioning. This ensures decentralization and network security.

Network validators can be divided into:

• Validator Nodes:

These nodes participate in the consensus process, verifying and validating transactions. 

• Tier 1 Organizations:

These organizations typically run three validators each to ensure redundancy and resilience. 

• Quorum Slices:

Validators form quorum slices by choosing which other validators they trust to validate transactions. This allows for flexibility and decentralization in the validation process. 

• Unique Node List (UNL):

A subset of validators that are considered trustworthy and commonly included in quorum slices.

The XLM network is also theoretically more decentralized as it uses an interesting feature known as “Anchors”. Anchors represent trusted entities (banks, payment systems, and other financial institutions) that can be in charge of people’s deposits and hand out credits into the blockchain. The anchors function as the bridge between different digital assets and the XLM blockchain. 

In addition, Stellar's embedded decentralized exchange (DEX), known as Stellar DEX, facilitates peer-to-peer trading of various currencies and tokens issued online, including XLM, BTC, ETH, USDT, TRX, and others.

Why is Stellar unique?

The Stellar platform offers several attractive, unique traits for investors:

• Support for multiple currencies and asset types

One of the main benefits that is available to everyone is support for multi-currency transactions. It also makes cryptocurrency attractive for micropayments and international money transfers.

When conducting a transaction, you can purchase XLM using fiat currency. Then the tokens are sent to the recipient, who in turn can convert them into the fiat currency of their country.

• Fast transactions, low fees

The ability to cross-currency transactions greatly simplifies and speeds up global payments. In addition to high speed, the Stellar network is also aimed at minimizing transaction costs, which eliminates the need to pay high fees. 

• Ecosystem and innovation

The open access to the protocol allows developers to create new applications and services. This helps stimulate innovation and diversity within the XLM ecosystem of a given cryptocurrency.

• Cooperation with organizations

Stellar crypto actively cooperates with large companies such as IBM, which helps to expand its use and increase the level of trust in the platform. This can further promote the spread and adoption of cryptocurrency.

What is Stellar tokenomics?

Initially, the Stellar developers created 100 billion XLM tokens in honor of the launch of the network and distributed them to a small part of the public. This was done using all kinds of airdrop-type distributions. New XLMs were created taking into account the annual inflation rate of 1%. At the same time, the latter accumulates in accordance with participation in the process of voting on inflation.

It was originally planned that the Stellar Development Foundation would distribute more than 50% of the XLM issue to partners and private users over the next 10 years. To do this, they have developed an extensive program of airdrops for holders of Bitcoin, XRP coins, and users of various blockchain services.

However, the generous distribution of Stellar tokens negatively affected the market quotes of the asset. Therefore, in November 2019 and March 2020, Stellar tokenomics was revised: SDF decided to burn more than 55% of the XLM issued and canceled the inflationary issue of new coins. XLM is, in fact, a deflationary asset.

Stellar mining

There is no mining or staking on the Stellar network, as in Bitcoin or other cryptocurrencies. The XLM network also does not work on the Proof-of-Stake (PoS) algorithm. Instead, Stellar has a monetary policy that resembles the situation at Ripple. That is, we are talking about creating a cryptocurrency without using SCP.

Comprehensive information on the current tokenomics can be found on the official website.

How many Stellar (XLM) coins are in circulation?

At the moment of writing, there are more than 24 billion XLM in circulation, while the maximum token offer is limited to 105 billion.

Other technical data

XLM reached its current all-time high of $0.889 in January 2018. Over the past year, the highest XLM crypto price was fixed at $0.6342, and the lowest XLM price over the past year was $0.07592. At the time of writing, XLM Stellar price is $0.2668, with a current market capitalization of $8.26 billion.

Security of the Stellar Network

Stellar security (XLM) is ensured by its complete decentralization. The project uses SCP, which allows network nodes to reach consensus on the validity of transactions without a centralized authority. This makes the platform less vulnerable to attack than centralized systems.

Stellar also has built-in anti-spam mechanisms that help prevent spam transactions and denial-of-service attacks.

The usage of XLM Stellar

The XLM coin in the Stellar ecosystem has three main functions:

• Payment of fees for transactions in the blockchain: 0.00001 XLM per transaction.
• Account management in the Stellar network: To activate the transfer function, the Stellar wallet must have at least 1 XLM.
• Exchange unit on the Stellar blockchain: An intermediate currency used to provide liquidity to any tokens issued on the Stellar network.

In the outside world, Stellar Lumens has found application in several key areas:

• Cross-border transfers: Stellar provides fast and cheap transfers between different countries.
• Currency exchange: XLM acts as a bridge to exchange various currencies, both cryptocurrencies and fiat money
• Integration into financial systems: Stellar actively cooperates with banks and other financial institutions.
• Charity: Stellar allows low-cost transfers to charities.
• Trading on exchanges: XLM is a traded cryptocurrency available on various exchanges, allowing it to be used for trading and investment.

How to store XLM Stellar 

The protection of XLM crypto, especially for long-term retention or significant amounts, requires a robust storage solution.

Known for enhanced security, hardware wallets are the best choice for protecting crypto assets. These devices store crypto offline in "cold storage," effectively isolating them from online hacking threats. Take a look at some of the best solutions to find.

Another way to store XLM coins is to use web wallets. The Stellar platform offers several useful solutions for this:

• LOBSTR

LOBSTR is a Stellar-native wallet. This app is one of the most mature wallets in the space, offering tested security architecture, multi-device accessibility, and optional multisig support through Lobstr Vault, a separate app that acts as a signing co-pilot. Its smooth interface also allows tracking account balance, managing assets, and swapping tokens.

• Exodus Stellar Wallet

A completely non-custodial wallet featuring on-device transaction signing and recovery via a seed phrase. The wallet provides native support for Stellar Lumens (XLM) and a wide range of digital assets across multiple chains. For an extra layer of security, Exodus can be paired with an optional hardware wallet.

• Decaf

A wallet designed for people and MSMEs across 180+ countries. The mobile app running on Stellar and Solana offers a reliable, low-cost digital payment solution, enabling cross-border transactions with ease and speed. Decaf stands out by offering intuitive fiat-to-crypto ramps globally, including Cash ramps with MoneyGram. 

Conclusion

Stellar Lumens or XRP is a cryptocurrency perceived by most as a cross-border system of fast and secure payments. The decentralized project is convenient and easy to use, with minimal commissions. This makes it particularly attractive to ordinary consumers. A strong team of specialists is behind the project, which inspires confidence and large investors.

However, XLM Stellar is not only about cross-border transfers, but also about use in financial systems. Stellar actively works with banks and financial institutions of different countries and acts as a tool for the creation of CBDC.

FAQ

What is the XLM meaning?

It is a native coin of the Stellar blockchain. It is used for transactions within the XLM ecosystem.

What is Stellar Development Foundation?

The Stellar Development Foundation (SDF) is a non-profit organization established in 2014 to support the development and growth of the Stellar network.

What is the advantage of Stellar? 

One of the main benefits, available to everyone, is support for multi-currency transactions. The ability to cross-currency transactions greatly simplifies and speeds up global payments. 

Stellar (XLM) VS Ripple (XRP)

Stellar was founded by Jed McCaleb, co-founder of Ripple, and originally had the same codebase. However, the project updated the work protocol to its own Stellar Consensus Protocol. The whole point is in one sentence: Ripple is a platform for banks and corporate clients, and Stellar is for creating CBDC and retail clients.

How to buy/sell XLM Stellar?

The Stellar crypto is traded on most centralized cryptocurrency exchanges, and can also be purchased using exchangers, including SwapSpace.