Stellar (XLM) is more than just crypto

Paul Sazan
| Editor:
March 25, 2024
9 min read

What is Stellar (XLM) coin?

Stellar is a blockchain-based decentralized protocol for digital currency to fiat money transfers. It allows cross-border transactions between any pair of currencies.

Being an open network for money, Stellar has made it easy for users to create, send and trade digital representation on all forms of money. For instance, Dollars (USD), Euros (EUR), and Bitcoin. The word “Lumen” is explicitly based on the network and comes with the tag XLM.

Emerging from a rift within the cross-border coin executives, Ripple (XRP), Stellar came onto the cryptocurrency ecosystem in mid-2014. The Lumen (XLM) coin was created and made over to the public. Read our comparison of XLM vs XRP.

Meanwhile, with one goal to unlock the world’s economic potential by making money more fluid and people getting empowered, Stellar has a close-knit team of experts within the globe that have different perspectives and visions for expanding the project.

Founding of Stellar

Stellar was founded in 2014, a creation of Jed McCaleb and Joyce Kim. Together, they established the Stellar Development Foundation. This foundation was not an ordinary for-profit company; instead, it was designed to work as a nonprofit organization. The goal was to use technology to help people globally, particularly those in need of financial services. This innovative approach set Stellar apart from its inception and continues to guide its operations today.

Stellar's Mission and Goals

Stellar's mission revolves around creating equitable access to the global financial system. It aims to enable people to become active participants in economic activities regardless of their location or financial status. This vision comes from a desire to help people achieve financial independence, especially those in regions where traditional banking services are inaccessible or inadequate.

Stellar's goal is ambitious, to say the least. It seeks to revolutionize the global financial system, making it more inclusive, efficient, and transparent. This vision is reflected in Stellar's native token, Lumens, or XLM, which is currently the largest cryptocurrency by market cap, with a value of $9.16 billion.

Understanding the origins and mission of Stellar offers a clearer picture of its purpose in the crypto industry. It provides context for its current operations and future goals, and it's a vital part of exploring what Stellar (XLM) is all about.

Exploring Stellar's Network

To fully comprehend what Stellar (XLM) is, it's crucial to delve into the mechanics of its network. Stellar's network is a decentralized payment model, designed to facilitate fast, cross-border transactions between any pair of currencies. It's a robust system that is underpinned by an open network and a unique consensus protocol.

Stellar's Open Network

Stellar operates on an open network, which means that it is accessible to anyone who wishes to participate. This openness fosters inclusivity and promotes a sense of community among its users. In order to transact on Stellar's network, users are required to hold a balance of lumens or have a separate line of credit available in the network. Lumens, or XLM, is Stellar's native token, and it currently stands as the largest cryptocurrency by market cap, valued at $9.16 billion.

This open network model offers many advantages, including transparency, security, and efficiency. It allows for quick validation of transactions, ensuring a smooth and seamless user experience. Furthermore, Stellar's open network is designed to be scalable, meaning it can support a growing number of users and transactions over time.

The Stellar Consensus Protocol

The Stellar Consensus Protocol (SCP) is the backbone of Stellar's network. Unlike the resource-intensive proof-of-work mining used by Bitcoin, Stellar's consensus algorithm relies on a group of trusted nodes. This system, known as the federated Byzantine agreement model, is used to validate transactions on the network.

The SCP's primary goal is to ensure the security and efficiency of the network. It achieves this by creating a system in which nodes can reach consensus without the need for a central authority. This not only reduces the risk of a single point of failure, but also allows for faster transaction validation.

In the SCP, each node in the network chooses a set of other nodes that it trusts. These trusted nodes form what is known as a 'quorum slice'. A quorum is reached when sufficient nodes agree on a transaction. This consensus mechanism ensures that all transactions on the network are agreed upon and validated by a majority of nodes.

By understanding the Stellar open network and the Stellar Consensus Protocol, one can begin to grasp the unique characteristics of Stellar (XLM). It's this combination of openness, security, and efficiency that makes Stellar a powerhouse in the world of cryptocurrency.

Stellar Lumens (XLM)

Understanding Stellar's operation and potential requires understanding its native asset, Lumens (XLM). This section will explore the role of Lumens in the Stellar network and how they are valued.

Role of Lumens in Stellar

Lumens (XLM) serve as the native asset of the Stellar network. They function as a digital currency, facilitating low-cost, high-speed, cross-border payments. Lumens are integral to the operation of the Stellar network, as they serve as a bridge, making it easier to trade assets on the network.

The Stellar network uses its native currency, Lumen (XLM), primarily to facilitate multi-currency transactions and prevent transaction spam. In other words, Lumens make it possible to conduct transactions involving different currencies by serving as an intermediary, thereby reducing the cost and complexity of such transactions. Lumens also help maintain the network's integrity by discouraging spam transactions - a small fee in XLM is required for each transaction, preventing malicious actors from flooding the network with numerous small transactions.

Valuing Lumens

Valuing Lumens involves looking at its market capitalization and its role within the Stellar ecosystem. Currently, Stellar's native token, Lumens, or XLM, is one of the largest cryptocurrencies by market capitalization, boasting a value of $9.16 billion. This significant market capitalization highlights the large-scale adoption and trust in Stellar's technology and its potential for future growth.

However, the value of Lumens is not solely based on its market capitalization. Its value also stems from its role within the Stellar network, a payment technology built on the principles of efficiency, transparency, and financial inclusion. As the native asset, Lumens are integral to Stellar's mission of enabling fast, low-cost international transactions.

In conclusion, when asking 'what is Stellar (XLM)', it's important to understand that Stellar Lumens (XLM) is more than just a cryptocurrency. It's the driving force behind a network designed to make financial transactions more accessible and efficient for everyone.

Stellar's Financial Ecosystem

Stellar's ecosystem is founded on partnerships and a commitment to financial inclusion. These facets work in tandem to drive the mission of Stellar, which revolves around creating equitable access to the global financial system.

Stellar's Partnerships

A significant part of Stellar's strategy to achieve its mission involves forging partnerships with established companies in the financial sector. Stellar has partnered with leading companies such as Deloitte and American Express. These partnerships leverage Stellar's technology to enhance their services and reach a wider audience.

The partnership with Deloitte, for instance, has enabled the firm to develop a blockchain-based solution that dramatically reduces the cost and complexity of bank transactions, particularly in developing countries.

Similarly, the partnership with American Express has opened up new possibilities for the credit card company in the realm of international money transfers and cross-border transactions.

Through these partnerships, Stellar is not only expanding its network but also contributing to the evolution of the financial industry by integrating blockchain technology into traditional financial systems.

Stellar and Financial Inclusion

Stellar's mission is rooted in the belief that everyone should have equitable access to the global financial system, regardless of their location or financial status. To this end, Stellar works with existing financial institutions and regulatory bodies to ensure compliance and provide a seamless experience for users looking to send and receive money globally.

Stellar aims to lower the cost of small transactions, improve mobile technology capabilities for money transfers, and stimulate the growth of small businesses worldwide. By doing so, Stellar is striving to help people achieve financial independence and become active participants in economic activities.

This commitment to financial inclusion is a testament to Stellar's founding vision. Co-founded by Jed McCaleb and Joyce Kim in 2014, the Stellar Development Foundation aimed to use technology to help people globally, particularly those in need of financial services. Through Stellar's network, they are making strides towards this vision by fostering an inclusive financial ecosystem that empowers individuals and businesses alike.

In conclusion, Stellar's financial ecosystem is a dynamic blend of strategic partnerships and a steadfast commitment to financial inclusion. With each partnership and initiative, Stellar is contributing to a more inclusive and equitable financial landscape. This makes Stellar not just a cryptocurrency network, but a platform that is driving meaningful change in the financial world.

Stellar vs Other Networks

In the world of cryptocurrencies, it's crucial to understand how different networks compare to each other. For anyone wondering "what is Stellar (XLM)", it's helpful to see how Stellar compares with platforms like Ethereum and Ripple.

Comparison with Ethereum

Ethereum is a prominent player in the cryptocurrency space, known for its platform that enables decentralized applications (dApps) and smart contracts. In contrast, Stellar is a blockchain network that primarily focuses on cross-border payments and transactions. It aims to make it faster and cheaper to transfer money between countries.

The native currency of Ethereum, Ether (ETH), is used to power the network and execute smart contracts, while Stellar's native currency, Lumen (XLM), acts as a bridge between different currencies, facilitating transactions on the Stellar network.

Stellar uses the Stellar Consensus Protocol (SCP) to confirm transactions and reach consensus on the network. This provides quick settlement times (2-5 seconds) and minimal transaction fees. Ethereum, on the other hand, uses the Proof of Stake consensus mechanism and has variable transaction fees and settlement times.

Comparison with Ripple

Ripple is another significant player in the cryptocurrency industry, with a focus on facilitating real-time, cross-border payments for financial institutions. Interestingly, Jed McCaleb, one of Stellar's founders, was the co-founder of Ripple before leaving to start Stellar in 2014.

Stellar Development Foundation, the organization that supports Stellar, focuses on expanding financial access and literacy for all global citizens. This mission aligns with Stellar's emphasis on offering a more efficient and inclusive financial network for cross-border payments and transactions.

Despite their common lineage, Stellar and Ripple have different target audiences and use cases. Ripple aims to revolutionize the way banks and financial institutions conduct international transactions, while Stellar targets individuals and aims to democratize access to financial services.

By examining the differences and similarities between Stellar, Ethereum, and Ripple, it's clear that each platform offers unique capabilities within the cryptocurrency space. As a potential investor or user, it's vital to understand these distinctions to make informed decisions about which platform aligns best with your needs.

Use Cases for Stellar

Stellar (XLM) is not just a digital currency, but a decentralized payment network that provides various unique use cases. Its mission to foster equitable access to the global financial system has led to the development of services that benefit both individuals and businesses. This section explores two primary applications of Stellar: cross-border transactions and its role in financial services.

Cross-border Transactions

One of the primary use cases for Stellar is facilitating fast, low-cost cross-border transactions. Traditionally, international money transfers have been slow, expensive, and complex. Stellar aims to change this through its open network and the use of its native asset, Lumens (XLM).

Lumens serve as a bridge, making it easier to trade assets on the network and facilitating transactions between any pair of currencies. This makes Stellar an attractive option for individuals and businesses looking to send or receive money across borders.

Stellar's transaction speed and efficiency outshine many traditional methods. Transactions on the Stellar network are completed within 2-5 seconds, significantly faster than the several days it can take through conventional banking systems. Furthermore, transaction fees are minimal, making Stellar an affordable option for international money transfers.

Stellar's Role in Financial Services

Beyond individual transactions, Stellar plays an influential role in the broader financial services sector. By providing a decentralized payment network, Stellar supports the growth of small businesses worldwide, stimulates mobile technology capabilities for money transfers, and lowers the cost of small transactions.

Stellar's open network allows for the transfer of various types of assets, including cryptocurrencies, fiat, and other digital assets. This flexibility makes it a versatile tool for businesses and financial institutions. Stellar has already partnered with significant companies such as Deloitte and American Express, further cementing its role in the financial services sector.

Moreover, Stellar's commitment to compliance with international law adds an additional layer of trust and security for its users. Its decentralized global financial system aims to help develop more inclusive financial services, helping to drive financial independence for people worldwide.

In summary, Stellar's use in cross-border transactions and its role in financial services are key examples of how this cryptocurrency network is working towards its mission. Through its open network and the use of Lumens, Stellar provides a fast, affordable, and efficient solution for international money transfers and financial services. Its focus on financial inclusion demonstrates the potential for cryptocurrencies to play a significant role in the future of global finance.

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