Stellar (XLM)
Stellar is an open-source, distributed network designed to facilitate cross-asset transfers of value efficiently and cost-effectively. It seeks to establish an open financial system that provides people of all income levels with access to low-cost financial services. Stellar is capable of handling exchanges between fiat currencies as well as between cryptocurrencies, utilizing its native digital currency, Lumens (XLM), to facilitate transactions.
History of Stellar
Stellar was founded in 2014 by Jed McCaleb and Joyce Kim. Jed McCaleb, who also founded Mt. Gox and co-founded Ripple, launched Stellar with the vision of connecting financial institutions and reducing the cost and time associated with cross-border transfers. Initially, Stellar and Ripple shared the same protocol, but Stellar has since evolved to distinguish itself with unique features and a non-profit organizational structure.
| Ticker | XLM |
| Category | Cryptocurrency |
| Website | https://www.stellar.org/ |
| @stellarorg | |
| https://www.reddit.com/r/stellar |
How Stellar works
Cross-asset transfer of value
The Stellar network enables users to send and receive different types of currencies through cross-asset transactions. This is achieved through the use of its native currency, Lumens (XLM), which acts as an intermediary in multi-currency exchanges. For example, if a user wants to send USD to someone who prefers to receive EUR, the Stellar network facilitates this conversion via its distributed exchange.
Distributed exchange
The distributed exchange on the Stellar network allows users to trade assets, such as fiat currencies and cryptocurrencies, seamlessly. When a user submits an offer to exchange one currency for another, it creates an order book. The network then identifies the best exchange rate available to minimize transaction fees. This efficient exchange process is made possible by entities known as "Anchors."
Anchors
Anchors are trusted entities within the Stellar network that hold users' deposits and issue corresponding credits. They function as bridges between different currencies and the Stellar network, enabling seamless multi-currency transactions. Anchors play a crucial role in maintaining the integrity and reliability of the network's exchange process.
Lumens (XLM)
Lumens (XLM) are the native digital asset of the Stellar network. They serve as an essential component in facilitating transactions and preventing network spam.
Facilitating transactions
Lumens act as a bridge in multi-currency transactions, allowing users to convert different currencies at a low cost. This capability enhances the network's utility for cross-border payments and financial inclusion.
Preventing spam
To mitigate the risk of spam or denial-of-service (DoS) attacks on the network, Stellar imposes a small transaction fee of 0.00001 XLM. This fee is strategically set to be minimal so as not to burden legitimate users while discouraging malicious activities.
Protocol changes and inflation mechanism
Stellar's network has undergone significant changes since its inception, including the deprecation of its inflation mechanism.
Inflation mechanism
Initially, Stellar had a built-in inflation mechanism that generated new Lumens, allowing account holders to direct them toward projects on the network. However, this feature did not function as intended, leading to a decision to disable it. Users either did not specify an inflation destination or joined pools to claim the inflation themselves, and the associated operational costs increased.
Protocol 12 change
With the introduction of Protocol 12, the inflation operation was deprecated. This change was proposed, implemented, and adopted through a validator vote as part of a network upgrade, reflecting Stellar's commitment to evolving and optimizing its network operations.