What is Stellar (XLM)?

What is Stellar?

Stellar is a blockchain network developed by the Stellar Development Foundation. The organization’s currency, called the lumen (XLM), is traded under the symbol XLM on various cryptocurrency exchanges. Lumens are designed to be used on the Stellar network to pay transaction and account initialization fees. The network was created to connect banks, payment systems, and people to facilitate low-cost, cross-border, cross-asset financial transactions.

How it Works

Stellar’s basic operation is similar to that of most decentralized payment technologies. It runs a network of decentralized servers with a distributed ledger that is updated every two to five seconds among all nodes. The most prominent distinguishing factor between Stellar and bitcoin is its consensus protocol. Stellar’s consensus protocol does not rely on the entire miner network to approve transactions. Instead, it uses the Federated Byzantine Agreement (FBA) algorithm, which enables faster processing of transactions.

Brief History of the Project and Team

Stellar was launched in 2014 by Jed McCaleb, who also founded Mt. Gox and co-founded Ripple. The Stellar project received initial funding from payments startup Stripe and other organizations’ donations. In 2018, Stellar signed a deal with TransferTo for cross-border payments to more than 70 nations.

Project’s Features

Stellar focuses on cross-border transactions and remittances, aiming to revolutionize money transfers for global accessibility. It supports a distributed exchange mode, which allows users to send payments in specific currencies even though they may hold credits in another, while the network automatically performs the forex conversion.

Project’s Risks

There are roughly 27.3 billion coins in circulation, with a maximum supply of 50 billion. The Stellar Foundation originally had over 100 billion lumens in existence but burned roughly half of its outstanding coins in November 2019. Coin burns are controversial because they imply the kind of manipulation that decentralized systems are supposed to protect against.

What Makes this Project Unique?

Stellar’s key distinguishing feature is its consensus protocol. The present-day Stellar is a result of a 2014 fork that created the Stellar Consensus Protocol (SCP), following which Stellar became an open-source system.

Project’s Governance

The governance of Stellar is centralized around the Stellar Development Foundation, which controls a large share of the Lumens tokens.

Outlook

Stellar’s primary focus is on developing economies in the areas of remittances and bank loans to those who are outside of the scope of banking services. As a cross-border transfer and payment system connecting financial entities, Stellar aims to reduce transaction costs and time lags significantly.

Conclusion

Stellar stands as a beacon in the cryptocurrency space with its unique features and strong potential for future growth. Its focus on developing economies and commitment to reducing transaction costs make it an attractive option for investors.

Stellar Fact sheet