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HomeCrypto GuideWhat is Stellar Lumens (XLM)? Here's the Summary

What is Stellar Lumens (XLM)? Here’s the Summary

Have you ever had to wait many days for a cross-border payment? Have you ever paid high transaction fees to send money to a friend in another country? If this describes you, you are not alone. The current banking system may be slow, expensive, and inefficient, especially when it comes to overseas payments. But what if there was a method to make cross-border transactions more efficient, dependable, and affordable? That’s where Stellar comes in.

Stellar is a decentralized, open-source payment method that uses blockchain technology to make cross-border payments swift and secure. Its platform connects financial institutions, payment systems, and individuals simply and efficiently. But how does it work, and what distinguishes it from other cryptocurrencies? In this article, we’ll look at Stellar and its groundbreaking approach to global finance. If you’re a cryptocurrency enthusiast or simply interested in the future of payments, you won’t want to miss this overview of one of the most exciting blockchain-based technologies available out there.

What is Stellar and How Does it Work?

Stellar is an open-source, peer-to-peer digital or virtual currency. It is managed by the Stellar Development Foundation (SDF). Stellar has its native token which is called the lumen, traded under the symbol XLM on different currency exchanges. The lumen has a unique role in the network. By default,  Stellar requires that at all times, a small number of lumen must be in each account to prevent bad actors from filling the Stellar ledger with spam. Stellar imposed a minimum balance of 1 XLM in every account. It tracks the ownership of all the accounts and crypto tokens on its network by a ledger and also maintains the ledger and processes transactions with its unique algorithm, the Stellar Consensus Protocol.

Stellar was created in 2014 by business partners Joyce Kim and Jed McCaleb, who was also the co-founder of Ripple cryptocurrency. The founder of Stellar (McCaleb) left Ripple in 2013 due to internal conflicts over vision, Jed McCaleb, along with partner Joyce Kim, launched the Stellar project in 2014. With the creation of the not-for-profit Stellar Development Foundation (SDF).

Stellar and XLM were created in 2015 with the idea behind Stellar being to create a cryptocurrency that can lessen transaction costs and serve as a bridge between fiat, digital, or other currencies.

Transactions on the Stellar network, like those on any other blockchain platform, are added to a shared and distributed public ledger. Stellar uses the “Stellar Consensus Protocol,” a consensus mechanism based on the Federated Byzantine Agreement (FBA).

The Stellar Consensus Protocol allows users to perform faster transactions at cheaper costs, with everyone on the network agreeing on the legitimacy of a transaction within a few seconds. Each participant (referred to as a node) that contributes to the global ledger chooses their mini-network (otherwise called Quorum Slices) of other trustworthy participants. As long as Quorum Slices overlap, the vast Stellar network can swiftly achieve a consensus on acceptable transactions and add them to the ledger.

Stellar (XLM) is considered one of the major competitors of XRP. However,  Stellar is different from Ripple in that it’s aimed at facilitating financial transactions among users whereas Ripple mostly focused on providing banking solutions.

What is XLM? 

Lumen is Stellar’s native currency and is used to pay transaction fees. It is not, however, the sole cryptocurrency on the Stellar blockchain, which can be used to transfer tokens representing everything from commodities to fiat currencies.

Lumens aren’t awarded or mined by the protocol over time. However,  when the Stellar network went live, 100 billion lumens were created,  and for over five years that Stellar has been in existence, the supply of lumens only increased by 1% annually, by design.

In October 2019 a community vote took place and it put an end to the inflation mechanism. So in November 2019, the overall lumen supply drastically reduced.  And currently, there are about 50 billion lumens in existence, and no more lumens will be created.   Currently, there are nearly 20 billion lumens in circulation, while the Stellar Development Foundation retains the other 30 billion or so, this was done to develop and promote the growth of Stellar, per its mandate. The 30 billion lumens held by the Stellar Development Foundation will enter the public markets over the next few years.

The price of Stellar (XLM) varies from time to time as it is dictated by the balance of buyers and sellers on exchanges, which is in constant flux. The price of Stellar can change by a large amount within a very short instant. The market cap of Stellar can be calculated by multiplying Stellar price by the number of XLM in circulation.

Currently Stellar has a market cap of $2.83B. While the circulating supply of Stellar is 26.68B. This is the total amount of XLM that is currently available. Based on the market cap, Stellar (XLM) currently ranks 27th among all known cryptocurrency assets.

Uses of Stellar

One use case of Stellar is that it is intended to be a low-cost platform for cross-border transactions, with transaction fees as low as a penny. This makes it an appealing alternative for people and businesses that need to move money across borders regularly. Stellar also supports smart contracts, which are self-executing contracts with the terms of the deal written directly into code. This enables developers to construct decentralized apps on the Stellar platform. (dApps).

Stellar allows users to convert currencies in real time, making it simple to transfer money between nations and currencies. The blockchain protocol employs a network of trustworthy entities known as anchors, which serve as entry points into the traditional financial system. This enables users to deposit and withdraw funds in their local currency, allowing the Stellar network to accommodate a wide range of fiat currencies.

How to Buy XLM

Lumens are available for sale on many exchanges and can also be traded directly on the Stellar network as well.  However, you need lumens to use the Stellar platform. You can only buy lumen and not Stellar itself.


To buy Stellar, register for an account with one of those exchanges that lists it. Once your account is ready, you can make the purchase. After your purchase, you will see your Stellar balance. You may then decide whether to keep your XLM or sell it on the exchange.


Stellar is a game-changing payment system that can alter our perceptions of cross-border transactions. Because of its emphasis on connecting financial institutions, payment systems, and individuals, it has become a popular choice for anybody looking for a speedier, more dependable, and less costly alternative to traditional banking methods. By employing blockchain technology, Stellar has created a scalable and secure platform that is both transparent and accessible to anyone.

Looking ahead, it’s clear that Stellar has a bright future. Stellar is well-positioned to become a key player in the realm of global banking, due to ties with major financial institutions and an ever-expanding user base. Stellar is on the verge of becoming a major participant in the realm of global finance. Its novel payment technique can bridge the gap between established financial systems and the world of cryptocurrencies, making it a viable payment option for the future.

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Tobi Loba
Tobi Loba
Tobi Loba is a passionate writer with a vast interest in the stock market. She joined the crypto ecosystem about three years ago and has written lots of ebooks and articles in relation to cryptocurrency and blockchain projects. Tobi Loba earned her degree at the University of Ibadan.

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