Stellar

What Is Stellar (XLM)?

Stellar is a decentralized, open-source blockchain designed for fast, low-cost payments, asset transfers and financial services. Its native cryptocurrency, XLM, also known as lumens, pays network fees, maintains account balances and facilitates transactions between different digital assets.

Launched in 2014, Stellar focuses on connecting traditional financial infrastructure with blockchain technology. Its network supports cross-border payments, stablecoins, tokenized financial assets and decentralized applications, allowing individuals and institutions to move value without depending entirely on conventional banking systems.

Unlike Bitcoin, Stellar does not rely on mining, and unlike Ethereum, it was originally designed around payments and asset issuance rather than general-purpose smart contracts. However, its capabilities have expanded considerably, particularly through the introduction of Soroban smart contracts and growing institutional adoption.

Who Created Stellar?

Stellar was co-founded in 2014 by Jed McCaleb, a co-founder of Ripple, and Joyce Kim. The project was established to make financial services more accessible by reducing the costs and complexity of transferring money across borders.

Development is supported by the Stellar Development Foundation (SDF), a nonprofit organization responsible for promoting ecosystem growth, funding development initiatives and supporting technical research.

Although the foundation plays an important role in Stellar’s development, the blockchain itself is open-source and maintained through a network of independent validators.

Stellar initially shared technological roots with Ripple but subsequently adopted its own consensus architecture and developed into a separate blockchain ecosystem.

How Does Stellar Work?

Stellar operates through the Stellar Consensus Protocol (SCP), a consensus mechanism based on federated Byzantine agreement.

Unlike proof-of-work blockchains that depend on miners or proof-of-stake networks that select validators according to staked cryptocurrency, Stellar allows validators to establish trusted relationships with other network participants.

Each validator identifies a group of nodes it considers reliable, known as a quorum slice. Consensus emerges when overlapping groups agree on the validity of transactions and the state of the ledger.

This approach enables Stellar to process transactions efficiently without energy-intensive mining or token-based staking requirements.

Stellar typically closes a new ledger approximately every five seconds, providing rapid transaction finality. Its base transaction fee is extremely small, currently 0.00001 XLM per operation, although fees may increase during periods of network congestion or for more complex operations.

These characteristics make Stellar particularly suitable for payment services that require predictable settlement times and minimal transaction costs.

What Is XLM Used For?

XLM supports the essential operations of the Stellar blockchain, rather than functioning solely as a speculative cryptocurrency.

Its primary uses include paying transaction fees, maintaining minimum account balances and transferring value between users.

Every standard Stellar account must maintain a minimum balance of 1 XLM to remain active. Additional account entries, such as trustlines for issued assets, generally increase this requirement by 0.5 XLM each.

These reserves discourage spam and prevent unnecessary ledger entries from consuming network resources.

XLM can also serve as an intermediary asset when users exchange different currencies through Stellar’s built-in decentralized exchange and path-payment functionality.

Importantly, users transferring stablecoins or other issued assets do not necessarily need to convert those assets into XLM. The token’s role is primarily to support network operations and facilitate liquidity where useful.

Stellar Tokenomics and Supply

Stellar has a largely fixed supply of approximately 50 billion XLM, with no ongoing mining rewards or staking-based issuance.

At launch, Stellar created 100 billion XLM and initially included an annual inflation mechanism of 1%. However, the network discontinued inflation in October 2019.

The following month, the Stellar Development Foundation permanently removed approximately 55 billion lumens from the supply, leaving roughly 50 billion XLM in existence.

No additional XLM is created through normal network operations. Nevertheless, circulating supply can increase as the foundation distributes tokens from its existing reserves to support development, partnerships and ecosystem initiatives.

This distinction matters because a fixed total supply does not mean that every existing token is already available on the open market.

How Does Stellar Support Cross-Border Payments?

Stellar’s payment infrastructure allows users to transfer digital assets internationally while reducing reliance on traditional correspondent banking networks.

One of its defining features is the use of anchors, which connect blockchain-based assets with conventional financial systems.

Anchors may accept bank deposits or cash and issue equivalent digital assets on Stellar. They can also facilitate redemptions, allowing users to convert supported tokens back into traditional currencies.

For example, someone could deposit dollars through a supported provider, receive a digital-dollar asset on Stellar and transfer it to a recipient in another country. The recipient could then redeem that asset through an available local payment provider.

Stellar’s built-in path payments can also convert between supported assets during a transfer, provided sufficient market liquidity exists.

The model has attracted established payment companies. In June 2026, MoneyGram introduced its MGUSD stablecoin on Stellar, extending the network’s role in connecting digital dollars with traditional payment infrastructure.

However, actual cross-border costs also depend on exchange rates, liquidity, redemption fees and local banking arrangements.

Stablecoins, Tokenization and Real-World Assets

Stellar supports the issuance of digital assets representing fiat currencies, securities, investment funds and other financial instruments.

Unlike networks that require custom smart contracts for basic token issuance, Stellar provides native asset functionality, allowing issuers to create tokens with built-in controls.

Users generally establish trustlines before receiving issued assets, specifying which assets they are willing to hold. Issuers may also implement authorization, freezing and clawback capabilities where required.

The network supports assets including USDC, PYUSD and USDT0, alongside tokenized investment products from established financial institutions.

Its growing role in tokenized real-world assets reflects adoption by financial firms such as Franklin Templeton and other providers issuing blockchain-based investment products.

In October 2026, Chainlink’s Data Feeds and Data Streams also became available on Stellar, giving developers access to pricing infrastructure for lending, derivatives and tokenized-asset applications.

These developments position Stellar as more than a cryptocurrency payments network, although the reliability of individual issued assets still depends on their issuers, backing and redemption arrangements.

Stellar Smart Contracts and Soroban

Stellar expanded into programmable blockchain applications with the introduction of Soroban, its smart contract platform, which launched on mainnet in February 2024.

Soroban enables developers to build decentralized exchanges, lending applications, financial automation tools and other services using smart contracts written primarily in Rust and compiled to WebAssembly.

Unlike Ethereum’s account-based smart contract environment, Soroban integrates with Stellar’s existing payment and native-asset infrastructure.

Development has continued through successive network upgrades. Stellar operates on Protocol 29, while the upcoming Protocol 30 upgrade, known as Bell, is scheduled for a mainnet validator vote on November 23.

Bell proposes improvements to smart contract addresses, post-quantum signature verification within contracts and more precise ledger timestamps. These capabilities are not yet active on mainnet and do not make the entire network quantum-resistant.

Stellar vs. XRP: What’s the Difference?

Stellar and XRP Ledger are frequently compared because both prioritize efficient payments, fast settlement and financial infrastructure.

Their similarities partly reflect their shared history through Jed McCaleb, but the networks operate independently and use different consensus designs.

XRP Ledger uses its own consensus protocol and supports payments, tokenized assets and decentralized trading. Stellar uses federated Byzantine agreement and places particular emphasis on anchors, asset issuance and connecting blockchain liquidity with traditional payment channels.

Both networks generally process transfers faster and more cheaply than conventional proof-of-work blockchains.

However, neither automatically provides better international payment services. Actual performance depends on supported currencies, liquidity, financial intermediaries and local regulatory requirements.

How to Buy and Store XLM

XLM is available through major cryptocurrency exchanges and supported trading platforms. It can typically be purchased using fiat currencies or other digital assets, depending on regional availability.

For self-custody, users can choose from Stellar-compatible wallets, including LOBSTR, Freighter and supported hardware wallets.

Two technical details require particular attention: Stellar accounts must maintain sufficient XLM reserves, and exchange deposits often require a memo identifying the recipient’s account.

Sending funds without a required memo can delay or complicate recovery, even when the destination address is correct.

Users should also verify issuer information before accepting Stellar-based tokens, since holding a token does not guarantee that its issuer can redeem it.

Stellar Risks and Limitations

Stellar’s low fees and fast settlement do not eliminate financial or technical risks.

The network’s consensus model depends on appropriately configured validator trust relationships, while its ecosystem remains influenced by the Stellar Development Foundation’s substantial token reserves and development activities.

Issued assets introduce separate counterparty risks involving custodians, stablecoin issuers and redemption providers. Soroban applications may also contain smart contract vulnerabilities.

For XLM investors, price volatility, competition from other payment networks and uncertainty about how ecosystem adoption translates into token demand remain important considerations.

Is Stellar More Than a Payments Blockchain?

Stellar has evolved from a cryptocurrency payment network into broader financial infrastructure supporting stablecoins, tokenization and programmable applications.

Its strengths lie in fast settlement, low transaction costs and direct integration between digital assets and established financial services. XLM remains essential for network fees, account reserves and selected asset conversions.

Nevertheless, Stellar’s long-term relevance depends on sustained payment activity, institutional adoption, reliable liquidity and continued development of its smart contract ecosystem.