Stellar started off as a platform that allows users to send money and assets across the globe. It makes cross-border and multi-currency remittances simple and accessible, particularly for the unbanked.
Unlike traditional payment providers and financial institutions that charge high fees, Stellar provides these services by incentivizing a distributed network of computers to run its software and validate transactions.
Also, money transfers through the Stellar network are completed in almost real-time (over 1000 TPS vs. Bitcoin’s 5 TPS) and are cryptographically secure.
In this regard, Stellar has similarities with Ripple, which also seeks to become a payment protocol for financial institutions.
What differentiates Stellar is that it also positions itself as a kind of decentralized exchange with its ledger containing a built-in order book tracking the ownership of Stellar assets.
What is the Lumen (XLM) token?
In the Stellar network, the native token Lumen (XLM) is used to cover transaction fees and serve as a bridge between currencies.
Unlike Ripple and XRP which work mainly with banks and financial institutions, Lumens can be used by regular folks like you and me!
Stellar requires users to pay a minimal transaction fee (100 stroops or 0.00001 XLM) to maintain its network and prevent ledger spam. Users are also required to maintain a minimum account balance of 1 XLM.
Stellar Lumens are pre-mined, with 100 billion tokens initially minted and increasing at a rate of 1% for the first five years.
In October 2019, the community voted to limit the supply to 50B XLM to hopefully spark interest and confidence in the project.
How does Stellar work?
The Stellar network has decentralized servers around the world that power the distributed ledger. These servers communicate among themselves to verify transactions and sync the ledger.
Anchors, which are bridges connecting currencies to the network, issue credit to the virtual wallets of users who make deposits.
When you receive money, you can withdraw it through the anchor in that currency. Anchors can also back assets that don’t originate from the Stellar network.
Unlike Bitcoin, which uses PoW, central to Stellar’s faster and cheaper transactions is Stellar Consensus Protocol (SCP).
The SCP implements the Federated Byzantine Agreement Protocol, which makes use of a ballot system.
When nodes try to reach an agreement, they must reach a threshold (or quorum) before it is implemented. But instead of requiring all nodes to reach a consensus for every single transaction, each node on Stellar manages a mini network on which it checks each transaction.
These mini networks are known as quorum slices, and they actually overlap to have multiple nodes verifying each transaction.
Team Background
One of the co-creators of Stellar is Jed McCaleb, who is known for founding the first bitcoin exchange, Mt. Gox.
Prior to co-founding the Stellar Development Foundation with Joyce Kim, McCaleb served as the CTO of Ripple and has been credited for designing the XRP Ledger.
Other notable contributors to Stellar’s ecosystem include Stanford University professor David Mazieres, who is the author of the Stellar consensus protocol. He holds a Ph.D. in Electrical Engineering and Computer Science from MIT and a BS in Computer Science from Harvard.
Denelle Dixon, who is the SDF’s Executive Director and CEO, previously worked as COO at Mozilla Corporation. Co-founder of Stellar and former Executive Director of the SDF Joyce Kim was previously CEO of Soompi in 2006 and a VC at Freestyle Capital.
Notable Investors:
- Galaxy Digital
- Parallax Digital
- Stripe
- Astronaut Capital
Token Metrics:
- Holder addresses: 7.159M
- Circulating supply: 25.62B XLM
- Maximum supply: 50B XLM
- Inflation rate: 6.38%
Notable Projects:
- StellarX: decentralized exchange
- LumenSwap: decentralized exchange