Stellar and Stellar Lumens (XLM) – Explanations

Stellar, a blockchain network to transfer currencies

Stellar is an open-source protocol and decentralized blockchain network. It allows the transfer of fiat currency or value either locally or across borders. It allows people to send currencies anywhere in the world at no cost. It uses the Byzantine algorithm for its consensus which is different from other crypto platforms. Byzantine is fast and nodes can reach a consensus of a value even with the existence of unresponsive or malicious nodes in the system.

Byzantine algorithm adapted Federal Byzantine Agreement (FDA) which is hard to alter and which leads to centralization of the platform. FDA has all the advantages of allowing new nodes without checking their trustworthiness but without altering the security of the system.

Photo pour Stellar XLM symbol. Trade with cryptocurrency, digital and virtual money, banking with mobile phone concept. Business workspace, banner, table top view - image libre de droit

Stellar was co-founded in 2014 by Jed McCaleb who is also the co-founder of Ripple and Joyce Kim and was officially launched in 2015. It was founded under Stellar Development Foundation which is a non-profit making organisation. It runs its operations through tax-deductible donations. Furthermore, it allows the transfer not only of fiat currencies but practically anything including gold.

Tokenization and Anchors

On Stellar, people don’t send an actual currency but a token of that currency. For example if you need to send dollars you don’t send actual dollars but rather Dollar tokens. These currency tokens live on the Stellar network and have the same value as the currency. They are backed on a ratio of one to one on a bank account that is dedicated to the purpose. This tokenization of any currency is well integrated into the protocol. Therefore, any fintech company can offer fiat back tokens. This network doesn’t only allow tokenization of currencies but other assets like gold, shares and many more.

The Stellar network uses Anchors. They act as the bridge between the Stellar blockchain and the traditional financial systems. Anchors work as token issuers or provide fiat on/off ramping or both. This means that Anchors are local businesses that offer currencies in a particular country or region. Anchors charge a small fee for the services they provide.

Lumen, the currency of Stellar

Lumen with a ticker sign XLM is the native currency on the Stellar network. It is used for fee payment for the transaction on the network. Lumen is ideal for very fast micropayments. Indeed, it has up to 5 seconds transactions completion period and a minimum fee of 0.00001 XLM.

It cannot be mined. The initial mining of 100 billion Lumens with a 1% yearly inflation rate is what was in circulation until 2019. Then, the number of Lumens was reduced to half and no more are to be added. 20 billion Lumens were in circulation and the rest held by Stellar foundation for development and advertising.

It costs lower to run a node on Stellar. In addition to the no-mining policy, users only get incentives for securing the network. Companies that have built their products on top of Stellar who use nodes to verify their transactions help to secure the network. These companies include IBM and Satoshi Pay.

We hope you have loved to learn about Stellar, one of the most famous cryptocurrency. To go further, you can learn about the other cryptocurrencies.

You can invest in Stellar but you should understand that cryptocurrencies are volatile and work on speculation. Therefore you should only put the money you can comfortably lose.

This article is not investment advice. Do your own research before investing in the cryptocurrency market.

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