What is Stellar – XLM?

What is Stellar – XLM:  Stellar is an open-source payment technology similar to Ripple.  Jed McCaleb, the founder of Stellar, also co-founded Ripple. Stellar aims to connect financial institutions to reduce the cost and time required for cross-border transfers and initially, they used the same protocol until a fork in November 2015.




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The Differences


Two main differences between Stellar and Ripple:-

  1. Stellar is open source and decentralised vs Ripple being a company and closed system.
  2. Stellar is focused on developing markets with multiple use cases for its technology such as money remittances and bank loan distribution to the unbanked vs Ripple’s focus on established banking and financial institutions streamlining cross-border transfers/payments.


The Stellar Mission


As stated on their website “With a team of top technology and finance professionals, the nonprofit Stellar.org expands access to low-cost financial services to fight poverty and maximize individual potential.”


How did Stellar begin?


The non-profit Stellar Development Foundation was created in collaboration with Stripe CEO Patrick Collison.  $3 million in seed funding was received from Stripe and the project was launched in July 2014. At the time, the currency was launched as Stellar, 100 billion were released. Stripe received 2 billion Stellars in return for its seed investment.  Some 25 percent were given to other non-profit organisations working toward financial inclusion.



The Cryptocurrency


Firstly known as Stellar, the cryptocurrency was later renamed as Lumens (XLM).  Stellar is the non-profit payment network which is overseen by the Stellar.org.

Lumen supply is determined by fixed, protocol-level rules with 100 billion lumens created initially with a 1% inflation rate every year.



How does Stellar work?


There are no restrictions on any commercial use of the Stellar network. Stellar is free to use for faster and cheaper transactions with low fees – a 3-5 second confirmation time that supports thousands of transactions every second. The Stellar network runs on decentralized servers globally and these support the distributed ledger keeping track of all data and transactions on the network.


To start using Stellar, you need upload funds to an anchor on the network.  Anchors serve as a bridge for any currency and the Stellar network. You can convert your funds into Stellar’s public ledger and send funds instantly on the network vs waiting for a bank transfer.  You can send money (remittances) to other countries for a fraction of a cent and as a result, enabling micropayments.


As per the Stellar website, the benefits are:-

  • Real-time settlement (2-5 seconds)
  • Cryptographically secure transactions
  • Regulatory compliance
  • Payments that move like email
  • International reach with a single integration
  • Micropayments: A $0.01 fee handles ~600,000 transactions
  • Automatic currency exchange




Stellar Partners – Anchors and Companies


On October 15, 2017  Stellar announced they were “partnering with IBM and KlickEx to develop a blockchain-based cross-border payments solution to help financial institutions and consumers eliminate inefficiencies and frustrations in current cross-border payment systems, including high fees, slow processing, error-prone transactions, and inefficient capital utilization.”


A number of other businesses such as Deloitte, Parkway Projects and Tempo have started to build services on the Stellar network.


Visit the Stellar Directory to view the list of anchors and companies partnering with Stellar – Directory


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