Stellar is a blockchain network designed to make financial transactions faster, cheaper, and more accessible. At the heart of this decentralized system is its native digital currency, XLM, or Stellar Lumens. Together, they enable efficient cross-border and cross-asset transfers, connecting financial systems and users around the world.
This innovative combination addresses many limitations of traditional financial infrastructures, offering a streamlined, inclusive alternative for global payments. Whether for individual remittances or institutional settlements, Stellar provides the tools needed for seamless monetary operations.
How the Stellar Network Operates
Stellar is an open-source, public blockchain optimized for high-speed, low-cost transactions. It acts as a bridge between different currencies and payment systems, fostering global financial interoperability.
A key innovation behind Stellar’s efficiency is the Stellar Consensus Protocol (SCP), a unique mechanism that allows the network to validate transactions quickly and with minimal energy consumption. Unlike proof-of-work systems, SCP uses a federated Byzantine agreement model, making it both scalable and sustainable.
XLM, the network’s native token, serves multiple essential functions. It acts as a bridge currency for trades, helps prevent spam through minimal transaction fees, and facilitates multi-currency conversions. This utility makes the network both functional and secure.
By linking financial institutions, payment processors, and individuals, Stellar supports a more inclusive financial ecosystem. Its design emphasizes accessibility, making it possible for people in underserved regions to participate in the global economy.
Understanding XLM (Stellar Lumens)
XLM, commonly referred to as Lumens, is the digital asset that powers the Stellar network. It is required for basic operations, such as maintaining account balances and processing transactions.
Every Stellar account must hold a small minimum balance of XLM—currently set at 1 lumen. This measure helps maintain network integrity by discouraging malicious activity and spam. Each transaction also incurs a negligible fee of 0.00001 XLM, further enhancing security without burdening users.
These requirements ensure that Stellar remains efficient and reliable. With over 7.5 million accounts actively using XLM, the token has proven essential for smooth and secure operations.
XLM has a fixed supply of 50 billion tokens, with approximately 20 billion in circulation. The remaining Lumens are managed by the Stellar Development Foundation to support ecosystem growth and development.
The Relationship Between Stellar and XLM
XLM and the Stellar blockchain are deeply interconnected. The token is not merely a medium of exchange—it is a fundamental component of the network’s utility and security.
XLM is used to execute transactions and smart contracts on Stellar. It also serves as an intermediary asset in cross-currency transactions, reducing the need for multiple bilateral currency pairs.
For developers building decentralized applications (DApps) on Stellar, XLM is necessary for deploying and interacting with smart contracts. Its low transaction costs make it ideal for microtransactions and high-frequency applications.
This synergy enhances Stellar’s performance, enabling high throughput and near-instant settlement times. It also positions the network as a practical choice for enterprises and fintech solutions.
Real-World Applications of Stellar and XLM
Stellar’s blockchain and XLM are increasingly adopted across industries for their efficiency and cost-effectiveness. Below are some notable use cases.
Cross-Border Payments
Businesses and financial institutions use Stellar to simplify international transfers. The network supports conversions between fiat currencies and digital assets, reducing reliance on correspondent banking and minimizing fees.
Micropayments and Remittances
XLM’s low transaction cost makes it suitable for small-value transactions and remittances. This is particularly valuable in regions where traditional banking fees are prohibitively high.
Financial Inclusion Projects
Stellar is often used in initiatives aimed at providing financial services to unbanked populations. Its accessibility and low entry barriers enable users with minimal resources to participate in digital economies.
Case Example: MoneyGram
MoneyGram integrated Stellar to offer cash-to-crypto services through its MoneyGram Access platform. This allows users to convert cash into digital assets like USDC at physical locations, improving financial access without requiring a bank account.
Case Example: Decaf
Decaf leverages Stellar to offer decentralized payment solutions and cross-border remittances. Its platform enables users and merchants to send, receive, and store value using digital assets, bypassing traditional financial bottlenecks.
Case Example: Arf
Arf uses Stellar’s blockchain and USDC to provide liquidity solutions for cross-border payments. Its platform allows financial institutions to settle transactions rapidly without pre-funding, reducing operational costs and risks.
These examples illustrate how Stellar and XLM are being used to solve real-world financial challenges, from liquidity management to inclusive payment systems.
Development on the Stellar Network
Developers can build a wide range of applications on Stellar, including DApps, smart contracts, and financial tools.
Getting Started
The Stellar Developer Hub provides comprehensive documentation, software development kits (SDKs), and tutorials. It is the central resource for anyone interested in building on the network.
Smart Contracts with Soroban
Soroban is Stellar’s smart contract platform, designed for scalability and developer ease. It supports WebAssembly (Wasm), allowing developers to write contracts in popular languages like Rust and C++.
Testing and Deployment
Stellar offers both testnet and mainnet environments. Developers can test their applications on the testnet without risking real assets, ensuring security and functionality before going live.
Tools and Community
The Stellar community is active and collaborative, with events, hackathons, and forums available for support. Developers can also use Horizon, Stellar’s RESTful API, to interact with the network.
Whether you are building a payment solution, a trading platform, or a new financial service, Stellar provides the tools and infrastructure needed for success. 👉 Explore developer resources
Future Developments for Stellar and XLM
Stellar continues to evolve with a focus on real-world utility and adoption. The Stellar Development Foundation (SDF) plays a central role in guiding this growth.
Recent rebranding efforts emphasize Stellar’s mission: “Where Blockchain Meets the Real World.” This shift highlights the network’s commitment to practical applications over theoretical use cases.
Initiatives like the Stellar Social Club foster community engagement, allowing developers, businesses, and enthusiasts to collaborate and share ideas.
Upcoming protocol upgrades aim to enhance smart contract capabilities, improve interoperability, and support more complex financial instruments. These developments will further solidify Stellar’s position as a leading platform for inclusive finance.
Frequently Asked Questions
What is the main purpose of Stellar?
Stellar is designed to facilitate fast, low-cost cross-border transactions and connect global financial systems. It enables asset transfers between different currencies and supports financial inclusion through decentralized technology.
Why is XLM required on the Stellar network?
XLM is used to pay transaction fees, maintain account minimums, and serve as a bridge currency in trades. These functions help secure the network and prevent spam.
How is Stellar different from other blockchains?
Stellar uses the Stellar Consensus Protocol (SCP), which is faster and more energy-efficient than proof-of-work systems. It also focuses specifically on financial applications and interoperability.
Can I use Stellar without holding XLM?
No, a small amount of XLM is needed to create an account and perform transactions. This requirement helps maintain network security and efficiency.
Is Stellar suitable for enterprise use?
Yes, many businesses and financial institutions use Stellar for payments, settlements, and liquidity management due to its scalability, low cost, and reliability.
What are the transaction speeds on Stellar?
Stellar can process thousands of transactions per second, with settlement times ranging between 3–5 seconds, making it one of the fastest blockchain networks available.
Conclusion
Stellar represents a significant innovation in the blockchain space, offering a practical solution for global financial transactions. With XLM as its foundational asset, the network enables efficient, affordable, and accessible payments for users and institutions worldwide.
As blockchain technology continues to mature, Stellar’s focus on real-world utility and inclusivity positions it as a key player in the future of finance. Whether through cross-border remittances, smart contracts, or new financial applications, Stellar and XLM are paving the way for a more connected economic system.