Stellar Coin: Connecting Economies with Ease

The rise of cryptocurrency is the dawn of a new economic and financial idea. The borderless and instant transaction of cryptocurrency like Stellar coin makes it one of the top innovations of this time. Statistics suggest that about 560 million crypto users exist as of 2024. 

Stellar is a one-stop-shop solution for crypto enthusiasts because it offers various opportunities to crypto users. For instance, Stellar coin or Lumens XLM is the top-notch choice for crypto traders and investors. 

Furthermore, Stellar Network or blockchain allows blockchain developers to benefit from multiple perks and innovations. This is a complete guide to Stellar crypto, covering: 

• What is a Stellar Coin?
• Stellar Network and its working 
• Features of Stellar network
• Advantages and disadvantages of Stellar crypto

Read on to explore a blockchain network that aims to cut the gap between digital currency and real-world finance. 

What Is a Stellar Coin? 

Stellar Network is a decentralized blockchain that ensures digital payments and finances with matchless security protocols. Stellar coin or XLM is the native crypto token of the network, which is your key to utilizing the user-friendly blockchain network. 

Stellar Network or Stellar.org was officially launched in 2015 by one of the Ripple Network’s lawyers. Jed McCaleb started Stellar organization with a mission to transform the financial landscape by giving adequate and equal opportunities to developing nations. 

The key objective of Stellar Crypto is to drive the digital finances mainstream globally. Therefore, it is one of the few blockchain platforms with minimal fees and faster transaction speeds. Moreover, the micro-level security guarantees a tough time with malicious actors and hackers, making Stellar a safer network than others. 

Stellar Coin: Lumens (XLM) 

Lumens (XLM) is the driving force or ticket for Stellar users to perform any action or governance on the crypto network. XLM serves a few essential purposes in the Stellar network, including:

• The anti-spam mechanism on the platform, which we will discuss later in the article
• Multi-currency transactions
• Governance and control of the blocks on the Stellar blockchain

The native crypto token of Stellar network also bridges the gap between fiat and cryptocurrency, smoothening transactions and cutting the need for a third-party payment gateway. 

The original supply of Lumens was around 100 billion XLMs in 2015 with a 1% inflation mechanism. However, the Stellar community voted against the inflation mechanism in 2019. This reduced supply to 50 billion. At present, only 20 billion XLMs are available on the open market. The rest functions to develop and upgrade the Stellar blockchain. 

Stellar Blockchain 

Stellar network is just like any other blockchain technology, such as Ethereum, Polkadot, etc. It is an open-source or public distributed ledger that functions to store the immutable record of transactions. 

Stellar network is unique when it comes to functionality. Users can enjoy various perks. That includes: 

• Payments and remittances: Stellar network is one of the best for instant and cost-effective payments across borders with support for traditional currency, such as the US dollar, UK pound, etc. 
• Consumer applications: Stellar XLM also allows developers to use a suite of top-notch tools to develop digital wallets and Decentralized Finance (DeFi) applications. 
• Smart contracts: Smart contracts are automated documents and algorithms that take action when a set of conditions are fulfilled. With Stellar’s unmatched utility allows the development and execution of unparalleled DeFi smart contracts for individuals and businesses. 

For those interested in exploring more about other blockchain technologies and tokens, check out our comprehensive guides on:

• Exploring Solana: A Complete Guide to the High-Performance Blockchain
• Earn Crypto Browsing with Basic Attention Token (BAT)
• Chainlink: Decentralized Oracle Network Explained
• MANA Coin: The Currency Powering Decentraland’s Metaverse
• NEAR Protocol: Scalability Through Sharding
  
  

The Tech Behind Stellar 

What we see and appreciate about Stellar crypto would have never been possible without the technology on the backend of Stellar coin. The matchless security and reliability of XLM crypto is possible due to the following tech: 

• Decentralized Finance Model: The decentralized payment protocol of Stellar facilitates simplified and instant payments. Without access to a bank, users from developing or underdeveloped countries can enjoy cross-border payments through Stellar crypto. 
• Stellar Consensus Protocol: Stellar Consensus Protocol (SCP) adds to the functionality and governance of the network. It uses nodes for the validation and storage of transactional records on the Stellar blockchain. SCP uses proof-of-agreement (PoA), which is energy-efficient and time-consuming with high performance. 
• Anti-Spam Mechanism for XLM: The anti-spam mechanism of Lumens crypto ensures that the crypto network avoids exhaustion due to unwanted transactions. Moreover, custom tokens of the Stellar network are an additional perk that bridges fiat currency, gold, stocks, etc., to cryptocurrency. 
• Soroban for Smart Contracts: In 2022, Stellar Development Foundation (SDF) announced the complete functionality of smart contract development with the Stellar Soroban product. Developers can use Rust programming language to write and execute smart contracts for automated blockchain functionality. 

How Does It Work? 

As a cryptocurrency platform to connect economies with ease, Stellar Network utilizes a unique mechanism to function. It acts as a mediator for transactions in cryptocurrency as well as fiat currency. 

When it comes to verifying transactions, Stellar doesn’t rely on Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus protocols. The personalized protocol, or the Stellar Consensus Protocol (SCP), which was developed by the Stellar Development Foundation (SDF) works on the Proof-of-Agreement (PoA) mechanism. 

Here is how it works: 

• The PoA employs a Federated Byzantine Agreement (FBA) algorithm. 
• The FBA has several nodes with quorum slices or portions to verify transactions. 
• Once the node gets approval, it adds to the blockchain. 
• The process offers high scalability with 1,000 transactions per second. 

Key Features of Stellar Coin 

The number of blockchains increases rapidly due to its 10% adoption rate in worldwide businesses. What makes Stellar coin different from other cryptos is the multiple distinguishing features of the Stellar blockchain. 

You can read about the decentralized data storage network Filecoin in our guide. 

As transaction and platform fees are sticking points for consumers, Stellar crypto has considered them the most. With just 0.00001 XLM as a transaction fee, users can enjoy fast-paced payments on the go. Cross-border payments with low cost make Stellar effective and efficient for businesses and individuals. 

In addition to this, here is a quick overview of those features: 

1. Speed and Scalability 

Scalability refers to the rate of transactions a blockchain can handle. Since renowned blockchains like Bitcoin and Ethereum have experienced scalability concerns, crypto users need a platform that tackles this issue with care. 

Stellar XLM offers the best services with enhanced speed and scalability. This means that you can make multiple transactions without compromising on security protocols and performance. 

Moreover, the unique consensus mechanism validates transactions in a matter of time. The SCP works effortlessly on the backend to ensure the faster speed of transactions and safety simultaneiously. 

2. Limited Crypto Supply 

Lumens are the native crypto tokens that allow Stellar users to participate in governance, make transactions, and perform any action on the platform. It is essential for the Stellar network to limit the supply of available XLM crypto. 

At the beginning of this blockchain network, the widespread token supply was a problem. As you read the initial supply was about 100 billion XLM tokens, the value of one XLM was near to nothing. 

With the limitation of the crypto token supply, XLM is on the way to becoming one of the most lucrative crypto projects for traders and investors. The daily increase of XLM’s trading volume on various crypto exchanges is alluring for day traders. 

3. User-Friendly Financial Operations 

The Stellar Development Foundation (SDF) released their first quaterly financial report of 2024 recently. This reflects over 125 million total payments with a volume of $4.8 billion on the Stellar Network. 

These significant stats are a testament to Stellar’s commitment to its business goals. As it aims to connect economies with ease, user-friendly policies and effortless accessibility have become the best selling points for XLM crypto. 

Moreover, Stellar has converged its focus to facilitating individuals more than businesses. Despite multiple partnerships with big fish in the crypto and financial industries, Stellar prioritizes individual customers that belong to a less privileged economy. 

4. Widespread Partnerships 

Stellar Coin has extended supportive hands to multiple top-class organizations, including Visa, Tala, CIRCLE, Tangem, and more. The purpose of these collaborations is to bring convenience and comfort to its customers. 

The Stellar Development Foundation (SDF) has recently announced its collaboration with Visa, Tala and CIRCLE. This partnership will enable users to enjoy buying cryptocurrency with debit or credit cards and fiat currency. This way, SDF fills the gap between crypto and traditional finance. 

On top of that, UNHCR and Stellar collectively initiated aid for Ukraine to help them with financial assistance. Moreover, frictionless cross-border payments, Stellar Ramps for cash transactions, and Real World Assets (RWA) tokenization are some of the top use cases of XLM Stellar.  

5. Matchless Security 

Stellar has placed various security protocols to avoid any unwanted activity on the platform. For instance, the anti-spam mechanism put an end to the flood of useless transactions. This helps Stellar users enjoy seamless and smooth usage of the blockchain without any downtime. 

Microtransactions on Stellar are extremely costly and overpriced. The reason for this practice is to limit malicious actors like hackers and scammers taking out crypto from Stellar users. Hackers make microtransactions to stay unnoticed. With this measure, they won’t be able to do anything odd. 

However, crypto users must ensure various security practices to avoid unpleasant consequences. For instance, you must use a well-secured digital wallet alongside a cold wallet. Ensure to safeguard your private key and be vigilant of any phishing and other social engineering attacks. 

Stellar Blockchain Payment System Explained

Stellar XLM is becoming the top priority for global banks to benefit from faster and cost-effective borderless transactions. This is due to the effective payment system of the Stellar blockchain. 

The payment system works when two different banks or financial institutions are connected to the Stellar network. Here is an illustrating example: 

Mr. X wants to make a business deal with Mr. Y. X lives in the USA while Y lives in the UK and has bank accounts in their respective regions. To make a transaction, Mr X makes a transaction of $5,000 from his US-based bank, which is associated with the Stellar network. 

After the approval, Stellar Network converts the mentioned amount to Pounds Sterling (GBP). After the conversion, Mr Y will receive the amount in his UK-based bank account in a few seconds. This entire process is more efficient and faster than conventional banking systems. 

Top 3 Components of Stellar Network 

You have read about the working and payment system of Stellar XLM. The entire process is made possible by the following three fundamental components. Each component plays an essential role in completing the cycle of the Stellar functionality. 

From ledger systems to anchors and distributed exchanges, Stellar blockchain is a complete network. This entire operation would have been a dream without the native token of Stellar crypto, Lumens XLM. 

XLM acts as a ticket to enter and perform the payment and transaction processes on the Stellar network. Here is a quick overview of the top components of the Stellar token:

1. Ledger System 

The ledger system is the core principle of blockchain technology. A decentralized ledger system records the transaction data and puts them into a block inside a big ledger. The ledger system keeps the chain of records. 

The chain of records guarantees the authenticity of each block, enhancing the trustworthiness and safety of the blockchain technology or ledger system. Stellar network also operates with an open-source and decentralized ledger system. 

The governance of the ledger enables the validation of the new transaction or payment records. With its designated consensus system (Stellar Consensus Protocol), users can rest assured about the security of their crypto assets. 

2. Anchors 

Crypto anchors refer to the unique key assigned to any crypto asset. Just like a fingerprint, crypto anchors are one-of-a-kind with no counterparts worldwide. An optical chip or identifier can be an anchor to give a unique identity to a crypto token. 

In the Stellar network, an anchor is the connecting entity that links the Stellar network to conventional banking rails. In other words, it bridges the digital world of cryptocurrency to the real world. 

Anchors are vital to tackle the various payment systems in different regions of the world. For instance, Single Euro Payment Area (SEPA), SPEI, etc., are some payment systems that serve a specific jurisdiction. To facilitate a borderless and global payment system, Stellar introduced Anchors. 

3. Distributed Exchanges 

Cryptocurrency exchanges are essential for buying/selling or trading crypto assets. A Stellar network connects with multiple distributed exchanges. This offers crypto enthusiasts a chance to trade and invest in Stellar coins globally. 

Stellar blockchain keeps a record of every purchase and sale of XLM. A few trustworthy and high-volume crypto exchanges for XLM trading and investing are the following: 

• Binance
• Kraken
• MEXC Global
• KuCoin
• OKX, etc. 

Benefits and Risks of Stellar Crypto 

Lumens XLM is a lucrative crypto asset for day traders. On top of that, the Stellar Development Foundation has made the Stellar network a remarkable platform for DeFi developers. 

Moreover, SDF aims to transform the financial landscape and bring prosperity to unprivileged and unbanked consumers globally. These perks are just the tip of the iceberg. The Stellar network is more than that. 

With benefits, Stellar crypto comes with various risks. You will learn about the advantages and disadvantages of Stellar coin. 

Pros of Stellar 

• Cross-Border Payments: Stellar charges negligible transaction fees and offers faster speed of transaction. These features alongside its unique payments system, pave the way for borderless payments. It also enables consumers to make transactions to any jurisdiction in any currency, including fiat currency as well as crypto. 
• Micropayments: Micropayments refer to small amounts of payments. Unlike microtransactions, micropayments are feasible with the Stellar network. For instance, consumers can make payments and remittances without going into deep pockets. It is due to Stellar’s objectives to help developing countries get financial opportunities. 
• Asset Tokenization: Stellar blockchain has a distinguished functionality of asset tokenization. This process allows consumers to carry out various events, such as crowdfunding, loyalty programs, and many more. With asset tokenization, you can create a custom token of real-world assets like currency, commodity, etc. 
• Versatile Usage of Lumens XLM: Day traders and investors can enjoy earning direct and indirect income through trading, investing, and margin trading of Lumens XLM. At this moment, Stellar Network does not offer staking due to its designated Stellar Consensus Protocol (SCP). Staking can possibly become accessible for Stellar consumers in the future. 
• Community and Support: Stellar network has a warm and robust community for crypto enthusiasts and blockchain developers. The community is the hub of educational content and the best place to uplift an unprivileged area, thanks to Stellar Community Fund. Moreover, the timely customer support of Stellar Coin is commendable. You can get in touch with Stellar via social media, email, and the community. 

Cons of Stellar 

• Less value of Lumens: Lumens XLM is the foundation of the Stellar network. Users must own XLM to access and perform any action on the platform. Despite the core functionality of this crypto token, its value remains stagnant in the crypto market. It might be due to SDF’s attention to growing the blockchain instead of the crypto token. Thus, traders may not get high returns on their investments. 
• Dependence on SDF: Stellar Development Foundation is the core organization that looks after everything related to Stellar Coin. Whether it is the blockchain, organization, or crypto token, SDF must make updates and improvements to enhance its value among traders and investors. This dependence may hinder Stellar’s growth and global popularity. 

Conclusion: The Future of Stellar Crypto 

Stellar blockchain is the right solution that can fill the gap in the modern financial atomsphere. With cryptocurrency rising, conventional banking and financial systems may feel they are left behind. It is when Stellar Coin comes to the rescue. 

Despite the crypto asset, it connects economies with ease. The fundamental objective of the Stellar Development Foundation (SDF) is to help underserved populations in the world. Thus, Stellar Ramps, which is one of the many products and services of Stellar, facilitates unbanked consumers to be inclusive in the financial landscape. 

Stellar Network is collaborating tirelessly with multiple organizations, such as Visa, CIRCLE, etc. The future roadmap of Stellar suggests the following: 

• A flourishing Soroban Ecosystem for improved smart contracts,
• Top-notch development experience, 
• Expanded functionality and scalability,
• Network monitoring strategy,
• Prototype privacy solution, etc. 

These developments will skyrocket the essence of Stellar coin in the crypto market. Thus, it is the right time to utilize the full potential of Stellar crypto for financial solutions. 

FAQs: Stellar Coin 

Is XLM similar to XRP?

No, XLM is not similar to the fork of Ripple (XRP). Though the founder of the Stellar network was associated with Ripple, resulting in Stellard, which was the modified fork of the Ripple node software. However, the Stellar network and its native token XLM is a completely different and unique crypto platform and asset. 

Is Stellar crypto safe?

Stellar coin and its network are highly secure due to the Stellar Consensus Protocol that works on the Proof-of-Agreement (PoA) mechanism. Moreover, the open-source and public decentralized ledger system provides users and consumers with transparency of their records, safeguarding their assets and data. 

Is Stellar better than Ethereum?

Ethereum is the big fish in the crypto market. For blockchain usage, Ethereum stands tall in the list of the most used blockchain technologies. However, Stellar offers the best functionality with higher scalability and cost-effective transactions to consumers. Therefore, crypto enthusiasts and developers prefer Stellar over Ethereum. 

What makes Stellar unique?

The multi-currency functionality is the distinguishing feature of the Stellar network. Consuemrs can use fiat currency as well as cryptocurrency to make transactions. Moreover, the custom token creation on the Stellar blockchain allows tokenizing real-world assets like gold, US dollar bills, etc. These make Stellar unique and different from other blockchain networks. 

What is the future of Stellar?

The future of Stellar coin and network is making financial services mainstream in underserved areas of the world. With the fulfillment of Stellar’s objectives, unbanked and less privileged people will be able to connect to financial and banking services effortlessly. Moreover, the development of a prototype privacy solution will improve the platform even further.