What is Stellar (XLM)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Stellar is a blockchain launched in 2014 for cross-border payments and asset issuance. Development is led by the non-profit Stellar Development Foundation, and the ledger has built-in machinery for issuing and cheaply moving fiat-denominated tokens. Its native asset, XLM, pays fees and deters spam.
Key points
- Issuing and exchanging fiat-denominated tokens is built into the ledger
- No mining: transactions settle via the Stellar Consensus Protocol, a federated Byzantine agreement
- Development is led by a non-profit foundation with financial inclusion as a stated goal
- A smart contract environment, Soroban, went live in 2024
Definition
A blockchain built for issuing, exchanging and transferring fiat-denominated tokens, settling transactions through federated Byzantine agreement.
Stellar set out to address cross-border payments and access to financial services for people without bank accounts. Co-founder Jed McCaleb had also been involved in starting Ripple; with Stellar the approach was to build public infrastructure under a non-profit foundation for remittance and payment companies to use.
Its defining technical feature is that issuing fiat-denominated tokens is native to the ledger. Issuers known as anchors mint tokens backed by deposits, and users can send them on-ledger or swap them for other currency tokens on the built-in decentralised exchange. Fees are tiny and settlement takes seconds. Consensus uses the Stellar Consensus Protocol, in which each node declares which sets of nodes it trusts and agreement emerges from the overlap between them.
In practice it is used by remittance services, for issuing and circulating stablecoins such as USDC, and in aid-disbursement pilots in developing countries. In 2024 Soroban, a Rust-based smart contract environment, went live, allowing applications beyond payments.
XLM pays transaction fees, forms the minimum balance required to open an account, and acts as a bridge between currencies that have no direct trading pair.
Watch out for
- · A token issued by an anchor is only as good as that issuer's actual reserves; the ledger guarantees nothing about them
- · The foundation holds a substantial share of XLM, and its distribution policy affects supply
- · Opening an account requires a minimum XLM balance that cannot be freely withdrawn
Frequently asked questions
How is it different from XRP?
Both target cross-border payments, but Stellar is led by a non-profit and uses a different consensus design, whereas the XRP Ledger is company-led and tied to products sold to financial institutions.