What is Stellar (XLM)?
Stellar (XLM) is an open-source payment protocol designed for fast, low-cost cross-border transactions. Founded in 2014 by Jed McCaleb and Joyce Kim, the network connects financial institutions, payment systems, and individuals, enabling the seamless transfer of any currency — fiat or digital — in seconds with near-zero fees. Lumens (XLM) are the native token that powers the network, used for transaction fees and as a bridge currency between different assets on the blockchain.
Key Facts
What is Stellar?
Stellar is a decentralized, open-source payment network that enables fast, low-cost transfers of any currency. It was designed to bridge the gap between traditional financial systems and blockchain technology, making money more fluid and accessible — particularly for the unbanked and underbanked populations worldwide.
Unlike Bitcoin, which was created as a peer-to-peer electronic cash system, Stellar was purpose-built as a payment rail that connects banks, payment systems, and people. The network supports tokenized assets (digital representations of fiat currencies, commodities, or securities) and includes a built-in decentralized exchange (SDEX) for trading these assets.
Lumens (XLM), the native token, serve three functions: paying tiny transaction fees (average 0.00001 XLM), preventing network spam through minimum balance requirements, and acting as a bridge currency when no direct market exists between two assets. With 5-7 second settlement times and fractions-of-a-cent fees, Stellar is among the fastest and cheapest blockchain payment networks.
Who Created Stellar? A Brief History
Origins: From Ripple to Stellar
Stellar was co-founded in July 2014 by Jed McCaleb and Joyce Kim. McCaleb had previously co-founded Ripple (the company behind XRP), but left due to disagreements about the project's direction. He wanted to build an open, inclusive payment network rather than one focused primarily on large banking institutions. The Stellar Development Foundation (SDF), a nonprofit, was established to support the network's growth.
Protocol Evolution
Stellar initially forked Ripple's codebase but quickly diverged. In November 2015, Stanford professor David Mazières designed the Stellar Consensus Protocol (SCP), a completely new consensus mechanism based on Federated Byzantine Agreement. This replaced the original code and gave Stellar its own technical identity, independent from Ripple.
Key Milestones
- • 2014: Stellar launches. Stripe provides $3 million in seed funding to the SDF.
- • 2015: Stellar Consensus Protocol (SCP) replaces the original forked codebase.
- • 2017: Partnership with IBM for cross-border payments in the South Pacific.
- • 2019: Community votes to remove the 1% annual inflation mechanism. SDF burns ~55 billion XLM, halving the total supply.
- • 2021: MoneyGram pilots Stellar-based USDC remittances.
- • 2024: Soroban smart contracts platform launches on mainnet. Stripe integrates Stellar for crypto payments. Protocols 21 and 22 deliver passkey signing and advanced cryptography.
Governance Structure
The Stellar Development Foundation (SDF) is a nonprofit organization that supports Stellar's development, ecosystem grants, and partnerships. The SDF does not control the network — it contributes to open-source development and promotes adoption. Network governance is decentralized through SCP, where each validator independently chooses its trusted quorum set.
How Stellar Works
Stellar is a Layer-1 blockchain designed for payments and asset tokenization. It uses a unique consensus mechanism that enables fast, low-cost transactions without mining or staking, while supporting a built-in decentralized exchange for multi-currency transfers.
Stellar Consensus Protocol (SCP)
SCP is based on Federated Byzantine Agreement (FBA), designed by Stanford professor David Mazières. Unlike Proof-of-Work or Proof-of-Stake, SCP allows each validator to independently select which other validators it trusts (its "quorum set"). Consensus is reached through overlapping quorum slices rather than competition or economic stake. This makes the network energy-efficient, fast (~5 seconds per ledger close), and resistant to centralization.
Anchors and Asset Tokenization
Anchors are trusted entities on Stellar that bridge between traditional financial systems and the blockchain. They accept deposits of fiat currency (or other assets) and issue corresponding tokens on the Stellar network. For example, an anchor might accept USD deposits and issue USDC or their own USD token.
This tokenized asset can then move freely on the network, enabling instant, low-cost transfers of real-world value.
Stellar Decentralized Exchange (SDEX)
Stellar has a built-in decentralized exchange at the protocol level. Users can trade any pair of tokenized assets directly on the network without a centralized intermediary. The SDEX supports order books and path payments — a feature that automatically finds the best multi-hop route to convert one asset to another through intermediate pairs, enabling seamless cross-currency transfers.
Soroban Smart Contracts
Launched in early 2024, Soroban brings full smart contract programmability to Stellar. Built with Rust and WebAssembly, Soroban enables developers to build DeFi applications, automated market makers, lending protocols, and other programmable financial tools directly on Stellar — while benefiting from the network's fast settlement and low fees.
Supply and Tokenomics
Stellar launched with 100 billion XLM and initially had a 1% annual inflation mechanism that distributed new tokens to account holders. In 2019, the community voted to remove inflation, and the SDF burned approximately 55 billion tokens, reducing the total supply to about 50 billion XLM.
As of 2025, roughly 31 billion XLM are in public circulation, with the SDF holding around 18 billion for ecosystem development, grants, and operations. There is no mining or staking — all XLM that will ever exist have already been created.
How to Earn with Stellar
No native staking or mining
Stellar does not use Proof-of-Work or Proof-of-Stake, so there are no mining rewards or native staking yields. Validators on the Stellar network do not earn block rewards — they run nodes to support the network and their own operations, not for direct financial incentives.
Third-party yield opportunities
Some centralized platforms and DeFi protocols on Stellar may offer yield on XLM deposits. These are not native to the protocol — they involve counterparty risk. Always research the platform and understand the risks before depositing funds. With Soroban smart contracts now live, DeFi lending and liquidity protocols on Stellar are expanding.
SDEX trading and liquidity provision
Users can provide liquidity on the Stellar DEX (SDEX) by placing orders. While this is not passive staking, active traders and liquidity providers can earn from the spread between buy and sell orders. Soroban-based AMMs (automated market makers) also allow liquidity provision similar to platforms like Uniswap.
Why Stellar Has Value
Stellar's value comes from its utility as a fast, low-cost payment network with real-world adoption. The network settles transactions in 5-7 seconds with fees averaging 0.00001 XLM — making it practical for microtransactions, remittances, and high-volume payments that are uneconomical on most other blockchains.
XLM serves as the bridge currency on the network. When no direct market exists between two tokenized assets, the network routes through XLM automatically via path payments. This creates natural demand for lumens proportional to network usage.
Every Stellar account also requires a minimum balance of 1 XLM (plus 0.5 XLM per additional entry), creating a base demand tied to the number of active accounts.
Institutional partnerships add credibility and usage. IBM's World Wire used Stellar for cross-border settlement. MoneyGram piloted Stellar-based USDC remittances. Stripe integrated Stellar for crypto payments in 2024. These real-world integrations demonstrate the network's practical value beyond speculation.
The reduced supply (after the 2019 burn from 100B to ~50B XLM) and the absence of new token emissions (no inflation, no mining) mean the existing supply is the final supply, providing scarcity similar to fixed-supply assets.
How to Buy Stellar
Stellar (XLM) is widely available on most major cryptocurrency exchanges. Here's how to purchase it.
1Compare providers
XLM is available on major exchanges including Coinbase, Binance, Kraken, and many others. Compare fees, spreads, and payment methods to find the best option for your country and preferred funding method.
2Create an account
Register on your chosen exchange and complete identity verification (KYC). This typically requires government ID. Enable two-factor authentication (2FA) for security.
3Fund your account
Fund your account via bank transfer, credit/debit card, or by depositing other cryptocurrencies. Bank transfers have lower fees but take longer. Cards offer instant purchases at higher fees.
4Buy XLM
Place a market order for instant purchase at current prices, or use a limit order to specify your target price. Start with a small test purchase to familiarize yourself with the process.
5Withdraw to your wallet
For maximum security, withdraw XLM to a personal wallet. Remember that Stellar accounts require a minimum balance of 1 XLM, so you'll need to account for this when withdrawing. Always include the correct memo/tag when transferring to exchanges.
Next step: Compare XLM providers in your country to find the best price.
How to Store Stellar
Wallet types
Stellar wallets come in several forms:
- • Mobile wallets: LOBSTR, Solar Wallet, and Beans App provide easy access on iOS and Android.
- • Desktop wallets: Solar Wallet (desktop version) and Stellarport offer full-featured interfaces.
- • Hardware wallets: Ledger Nano X/S Plus and Trezor Model T support XLM for cold storage.
All Stellar accounts require a minimum balance of 1 XLM plus 0.5 XLM per additional trustline or data entry. Keep this in mind when setting up a new wallet.
Hardware Wallets
Ledger Nano X and S Plus both support Stellar natively through the Ledger Live app. Trezor Model T also supports XLM. Hardware wallets keep your private keys offline, providing the strongest security for long-term holdings.
Seed phrase and memo tags
When setting up a self-custody wallet, you'll receive a recovery phrase. Write it down on paper and store it securely offline. Never share it. Additionally, when sending XLM to exchanges, always include the correct memo/tag — exchanges use shared addresses, and the memo identifies your account. Sending without the memo may result in lost funds.
How to Use Stellar (XLM)
Cross-Border Payments
Stellar's primary use case is fast, low-cost international transfers. Send money to anyone with a Stellar wallet worldwide in 5-7 seconds for fractions of a cent. Path payments allow automatic currency conversion — send USD and the recipient receives EUR, with XLM routing the exchange through the built-in DEX.
Remittances
Stellar was designed with financial inclusion in mind. For migrant workers sending money home, Stellar offers a dramatic cost reduction compared to traditional remittance services like Western Union (which can charge 5-10%). MoneyGram's USDC-on-Stellar pilot demonstrated this use case at scale.
Asset Tokenization
Any asset — fiat currencies, commodities, securities, or loyalty points — can be tokenized on Stellar and traded on the built-in SDEX. This enables 24/7 trading of traditionally illiquid assets with instant settlement and minimal fees.
DeFi on Soroban
With the launch of Soroban smart contracts in 2024, Stellar now supports decentralized finance applications including lending, borrowing, automated market makers, and more. Developers can build sophisticated financial tools using Rust, benefiting from Stellar's fast finality and low transaction costs.
Risks
XLM carries standard cryptocurrency risks: price volatility, regulatory changes, and security risks from self-custody. The SDF still holds a significant portion of total supply (~18 billion XLM), and future distributions could create selling pressure. Additionally, the minimum account balance requirement means a small portion of your XLM is locked.
Users should research carefully and invest only what they can afford to lose.
Notable People in Stellar
Stellar's development has been shaped by experienced technologists and leaders in finance and cryptography.
Jed McCaleb
Co-founder of Stellar and the Stellar Development Foundation. Previously co-founded Ripple and created Mt. Gox (later sold). One of the most influential figures in cryptocurrency, McCaleb brought his vision of an inclusive, open financial network to Stellar.
Joyce Kim
Co-founder of Stellar. A lawyer and entrepreneur, Kim helped establish the Stellar Development Foundation and shaped its mission around financial inclusion. She later became a partner at Sparkland Capital, a crypto venture fund.
David Mazières
Stanford University professor of computer science who designed the Stellar Consensus Protocol (SCP). His academic paper on Federated Byzantine Agreement provided the theoretical foundation for Stellar's unique approach to consensus. He serves as Chief Scientist at the SDF.
Denelle Dixon
CEO and Executive Director of the Stellar Development Foundation since 2019. Previously served as COO of Mozilla. Under her leadership, the SDF has expanded Stellar's partnerships with major enterprises including IBM, MoneyGram, and Stripe.
Tomer Weller
VP of Technology at the Stellar Development Foundation. Weller has been instrumental in the development of Soroban smart contracts and the network's protocol upgrades, bringing programmability to Stellar while maintaining its performance characteristics.
Regulation Overview for Stellar
Regulatory Status
Stellar (XLM) is widely available on regulated exchanges globally and has not faced the securities classification concerns that have affected some other tokens. The SDF has worked proactively with regulators and emphasizes compliance-friendly features such as built-in asset controls and regulated anchor infrastructure.
Country Differences
Regulations vary by jurisdiction. Here's a snapshot:
United States: XLM is available on major regulated exchanges including Coinbase and Kraken. Subject to capital gains tax on disposal. Not classified as a security by the SEC.
Canada: Legal and available on Canadian exchanges. Subject to capital gains tax. Exchanges must register with FINTRAC as MSBs.
European Union: Widely available. Subject to MiCA regulations. XLM is listed on all major EU-compliant exchanges.
Australia: Legal and available on Australian exchanges. Subject to capital gains tax rules under ATO guidelines.
Stellar's emphasis on regulatory compliance and its nonprofit governance structure have helped it maintain broad exchange availability worldwide. Always verify local rules before buying XLM.
Compliance Features
Stellar has built-in compliance tools at the protocol level. Asset issuers can require authorization for holding their tokens, freeze assets when necessary, and integrate with KYC/AML providers through the SEP (Stellar Ecosystem Proposal) standards. This makes Stellar particularly attractive for regulated financial institutions and compliant stablecoin issuers.
FAQs About Stellar (XLM)
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