The Stellar network is an open source, distributed, and community owned network used to facilitate cross-asset transfers of value. The network officially launched in 2015 with the purpose of connecting the world's financial systems and ensuring a protocol for payment providers and financial institutions. The platform is designed to move financial resources swiftly and reliably at minimal cost. Stellar links people, banks, payment processors and allows users to create, send and trade multiple types of crypto.
What is Stellar?
Stellar (XLM) is a peer-to-peer (P2P) decentralised network created in 2014 by The Stellar Development Foundation or Stellar.org. The network officially launched in 2015 with the purpose of connecting the world's financial systems and ensuring a protocol for payment providers and financial institutions. The platform is designed to move financial resources swiftly and reliably at minimal cost. Stellar links people, banks, payment processors and allows users to create, send and trade multiple types of crypto.
The basis of the network is its native digital currency - XLM or Lumens. XLM acts as an intermediate currency for operations and is also used to pay transaction fees. How it works: the protocol converts money in a few seconds, first into XLM, and then into the requested currency.
The Stellar payment protocol is based on distributed ledger technology -- an open-source development, community-owned and distributed by community. The crypto asset of the Stellar platform helps with cross-border transactions, overcoming the problems of high fees and slow procedures. XLM is more focused on assisting individuals transfer money than they are with institutions. Thus, Stellar offers access to financial systems, and people can send money at low cost and promptly around the world.
Moreover, Stellar serves as a decentralised exchange and marketplace, with a built-in order book that tracks ownership of Stellar assets. Platform users can manage buy/sell orders, as well as select and set their preferred assets in settlements. XLM is a built-in coin that helps reduce transaction fees.
The network maintains a high level of security. XLM holders must have at least one token in order to remain active on the network. This nuance performs a global goal - the execution of network transactions efficiently and with minimal time costs. Plus, Lumens offers protection against flood attacks by making microtransactions too expensive for hackers with no chance of profit, which keeps Stellar Network safe from serious threats.
The target audience of Stellar is the inhabitants of developing countries, ordinary users who are provided access to the global economy through fast, simple and inexpensive transactions. Stellar Network makes extensive use of Lumens to produce live convection as well as to send cash in multiple currencies; currency is sent from one peer, and the recipient can receive the amount in another currency. This feature is beneficial when a transaction is made between currencies without widely traded pairs.
Support for multi-currency transactions is another competitive advantage of Stellar, and the ability for cross-currency transactions has only enhanced processes with foreign operations. Moreover, stable speed and low transaction costs are a privilege that users receive.
This functionality is powered by a development called Anchors (a bridge between different currencies and the network), which simplifies the exchange within the network and helps speed up the whole process.
What is the goal of Stellar?
Stellar aims to help facilitate cross-asset transfer of value at a fraction of a penny while aiming to be an open financial system that gives people of all income levels access to low-cost financial services.
Who Are the Founders of Stellar?
Jed McCaleb founded Stellar with the lawyer Joyce Kim after leaving Ripple in 2013 over disagreements about the company’s future direction.
In explaining the rationale behind Stellar in September 2020, McCaleb told CoinMarketCap: “The whole original design of Stellar is that you can have fiat currencies and other kinds of forms of value run in parallel with each other and with crypto assets. This is super important to drive this stuff mainstream.”
McCaleb’s goal is to ensure that Stellar can give people a way of moving their fiat into crypto — and eliminate the friction that people normally experience when they are sending money around the world.
He currently serves as the CTO of Stellar, as well as the co-founder of the Stellar Development Foundation. This not-for-profit organization aims to “unlock the world’s economic potential by making money more fluid, markets more open, and people more empowered.”
What makes Stellar Unique?
Stellar can handle exchanges between fiat-based currencies and between cryptocurrencies. Stellar.org, the organisation that supports Stellar, is centralised like XRP and meant to handle cross platform transactions and micro transactions like XRP. However, unlike Ripple, Stellar.org is non-profit and their platform itself is open source and decentralised.
Transactions fees are a sticking point for many. However, high costs when making cross-border payments aren’t just exclusive to fiat-based payments solutions such as PayPal — transaction fees have also been known to go through the roof on the Bitcoin and Ethereum blockchains because of congestion.
Stellar is unique because every transaction costs just 0.00001 XLM. Given how one unit of this cryptocurrency only costs a few cents at the time of writing, this helps ensure that users keep more of their money.
Few blockchain projects have managed to secure partnerships with big-brand technology companies and fintech firms. A few years ago, Stellar and IBM teamed up to launch World Wire, a project that allowed large financial institutions to submit transactions to the Stellar network and transact using bridge assets such as stablecoins.
Although other blockchains have community funds, meaning that grants can be given to projects that help further the ecosystem, Stellar allows its users to vote on which ventures should be given this support.
What is Lumens (XLM)?
Lumens are the native asset (digital currency) that exist on the Stellar network that helps to facilitate multi-currency transactions and prevent spams. For multi-currency transactions, XLM is the digital intermediary that allows for such a transaction to occur at a low cost.
In-order to prevent DoS attacks (aka spams) that would inevitably occur on the Stellar network, a small fee of 0.00001 XLM is associated with every transaction that occurs on the network. This fee is small enough so it does not significantly affect the cost of transaction, but large enough so it dissuades bad actors from spamming the network.
Prior to Protocol 12, Stellar had a built-in inflation mechanism conceived to allow account holders to collectively direct inflation-generated lumens toward projects built on Stellar.
As the network evolved and grew, it became increasingly clear that inflation wasn’t working as intended and account holders either didn’t set their inflation destination or joined inflation pools to claim the inflation themselves, and the operational costs associated with inflation payments continued to rise. Therefore, a protocol change to disable inflation was proposed, implemented, voted on by validators, and ultimately adopted as part of a network upgrade.
How Many Stellar (XLM) Coins Are There in Circulation?
A total of 100 billion XLM tokens were issued when the Stellar network launched in 2015 — but things have changed since the release date. At present, the total supply stands at 50 billion XLM tokens, and the circulating supply is currently around 25.03 billion.
In 2019, the Stellar Development Foundation announced that it was burning over half of the cryptocurrency’s supply. This means that it now controls approximately 30 billion XLM tokens. While some of this capital is earmarked for marketing and helping the organisation develop, about one third is reserved for making investments in other blockchain ventures.
How Is the Stellar Network Secured?
This network is secured using the Stellar Consensus Protocol, which is described as having four main properties: “Decentralised control, low latency, flexible trust, and asymptotic security.”
Through SCP, anyone is able to join the process of achieving consensus, and no single entity can end up with the majority of decision-making power. Transactions are also confirmed cheaply and within a few seconds — and safeguards are in place if bad actors attempt to join the network.
