What Is Stellar (XLM)? Everything You Need to Know

What is Stellar (XLM)?

Stellar (XLM) is a decentralized, open-source blockchain network designed to facilitate fast and low-cost transfers of digital assets, including currencies and tokens, between banks, payment systems, and individuals. Its primary aim is to speed up cross-border payment processes and enable transactions between different currencies at minimal costs.

Key Features of Stellar (XLM)

Low Transaction Fees

⭐ Stellar offers very low transaction fees, making it particularly suitable for international transactions. This cost-effectiveness is one of its major advantages over traditional financial systems and other blockchain networks.

Transaction Speed

⚡ Transactions on the Stellar network can be processed in seconds, which is much faster compared to other blockchain networks like Bitcoin or Ethereum. This rapid transaction capability enhances its utility for cross-border transfers.

Financial Inclusion

🌍 Stellar is designed to improve access to financial services for those without access to traditional banking, especially in developing countries. This focus on financial inclusion is a key aspect of its mission.

Strategic Partnerships

🤝 Stellar has established partnerships with large companies such as IBM and TransferTo. These partnerships help expand the Stellar ecosystem and enhance its relevance in the global financial landscape.

Tokenomics

Total Supply

🔢 After a coin burn in 2019, the total supply of XLM is 50 billion tokens, with approximately 27 billion XLM circulating on the market. This controlled supply is part of Stellar's strategy for maintaining demand and value.

Distribution

🎯 The Stellar Foundation manages XLM distribution to support adoption and development of the Stellar ecosystem. This is achieved through incentive programs, partner grants, and community initiatives.

History of Stellar

Stellar was founded by Jed McCaleb in 2014, with initial funding from early investors like Stripe. The project has since innovated and expanded its partnerships, including significant deals with IBM and TransferTo, solidifying its place in the blockchain ecosystem.

How Does Stellar (XLM) Work?

Discover how Stellar (XLM), a decentralized blockchain network, facilitates fast and low-cost cross-border transactions. From its network structure to its consensus protocol, here's a step-by-step guide to understanding Stellar's operation.

Network Structure 🌐

Stellar operates on a decentralized network that allows for the creation, transfer, and trading of digital assets. These assets can represent various types of value, including fiat currencies, cryptocurrencies, and commodities.

Native Token: Lumen (XLM) 💰

The native token of the Stellar network is called Lumen (XLM). Each account must hold a small number of lumens to participate in transactions, facilitating operations within the network.

Consensus Protocol ⚡

Stellar uses the Stellar Consensus Protocol (SCP), a unique and energy-efficient consensus mechanism. SCP works through a Proof-of-Agreement (PoA) mechanism, enabling fast transactions without mining.

Transaction Process ⏱️

Transactions are validated by globally distributed nodes. If the majority agree on the validity, the transaction is added to the ledger, settling in typically 2-5 seconds.

Anchors & Token Creation 🚀

Anchors convert fiat currencies into digital credits, allowing seamless cross-currency transactions. Users can also create custom tokens representing various assets on the network.

Automated Market Makers (AMMs) 🔄

Stellar's AMMs facilitate direct token exchanges between buyers and sellers, reducing the need for intermediaries and minimizing rate fluctuations.

Security 🔐

The network is secured through digital signatures and a special hashing function, adaptable to thwart powerful hackers.

Partnerships 🤝

Stellar collaborates with major companies like IBM and Deloitte, enhancing its role in financial services and demonstrating its potential for widespread adoption.

Use Cases of Stellar (XLM)

Scenario 1: Cross-Border Payments

Scenario Description: Stellar facilitates fast and low-cost international money transfers.
Challenges: Traditional banking systems often involve high fees and long delays.
Solutions: Stellar provides quick and affordable transactions, addressing these inefficiencies.
Results or Benefits: Users enjoy reduced transaction costs and faster transfer times. 💸

Scenario 2: Asset Tokenization

Scenario Description: Stellar enables the digital representation of real-world assets.
Challenges: Tokenizing assets requires compliance and secure transfer mechanisms.
Solutions: Stellar's built-in compliance tools facilitate secure and regulatory-compliant tokenization.
Results or Benefits: Enhanced asset liquidity and simplified ownership transfers. 🔑

Scenario 3: On- and Off-Ramps

Scenario Description: Stellar simplifies the conversion between fiat and cryptocurrencies.
Challenges: Bridging fiat and crypto requires a reliable infrastructure.
Solutions: Stellar provides robust infrastructure for seamless transitions.
Results or Benefits: Easy and efficient integration between cash and crypto payments. 🌉

Scenario 4: Humanitarian Aid

Scenario Description: Stellar facilitates the distribution of humanitarian aid.
Challenges: Aid distribution often involves intermediaries, causing delays and extra costs.
Solutions: Stellar enables direct financial assistance delivery to recipients.
Results or Benefits: Increased transparency, speed, and cost-effectiveness in aid delivery. 🤝

Scenario 5: Financial Inclusion

Scenario Description: Stellar aims to enhance access to financial services worldwide.
Challenges: Many regions lack efficient financial service access.
Solutions: Stellar connects various financial networks for easier transactions.
Results or Benefits: Broader access to financial services, especially in underserved areas. 🌍

Scenario 6: Peer-to-Peer Payments

Scenario Description: Stellar supports direct fund transfers between users.
Challenges: Traditional transfers can be slow and involve intermediaries.
Solutions: Stellar eliminates intermediaries for quicker transactions.
Results or Benefits: Fast and efficient payments to friends, family, or vendors. 💼

Scenario 7: Bridge Assets

Scenario Description: Stellar acts as a bridge between different financial systems.
Challenges: Different payment methods often lack interoperability.
Solutions: Stellar ensures seamless interaction between various systems.
Results or Benefits: More integrated and efficient financial ecosystem. 🔗

Scenario 8: Decentralized Finance (DeFi) Integration

Scenario Description: Stellar links centralized and decentralized finance systems.
Challenges: Bridging CeFi and DeFi requires secure and transparent solutions.
Solutions: Stellar provides the necessary infrastructure for integration.
Results or Benefits: Users gain more control and transparency over their assets. 🔍

Why Choose Stellar for These Use Cases

🌟 Decentralization and Security: Stellar's blockchain ensures secure and transparent transactions.
⚡ Speed and Cost-Effectiveness: Stellar offers fast and low-cost solutions for financial transactions.
🌐 Interoperability: Stellar seamlessly connects different financial systems and networks.
🤝 Compliance and Flexibility: With built-in compliance tools, Stellar adapts to various regulatory environments.

Pros of Stellar (XLM)

Low Transaction Fees

Stellar is renowned for its minimal transaction fees, which makes it an attractive option for international transactions that typically incur high costs. This affordability is especially beneficial for users in developing countries.

Transaction Speed

Transactions on the Stellar network are processed within seconds, offering a significant advantage over slower blockchain networks like Bitcoin and Ethereum. This speed enhances user experience and efficiency in cross-border payments.

Focus on Remote Economies

Stellar aims to democratize access to financial services, focusing on individuals without traditional banking access, particularly in developing regions. This mission aligns with the increasing demand for inclusive financial technology solutions.

Strategic Partnerships

Stellar has forged strategic partnerships with major corporations such as IBM and TransferTo, expanding its ecosystem and enhancing its credibility and reach within the financial sector.

Cons of Stellar (XLM)

Global Adoption Challenges

Despite its potential, Stellar faces hurdles in gaining widespread adoption. Many financial institutions remain hesitant to adopt new technologies, which slows the network's growth among retail users.

Competition with Similar Projects

Stellar contends with significant competition from other projects like Ripple (XRP) and SWIFT GPI, which also focus on cross-border payments. This competition could impact Stellar's market share and growth trajectory.

Controversial Coin Burning

The 2019 decision to burn half of the XLM supply was met with criticism, as some viewed it as market manipulation contrary to decentralization principles. This controversy may affect trust and perception among potential users.

Is Stellar (XLM) Right for You?

Stellar (XLM) is an excellent choice for those seeking low-cost, fast cross-border payment solutions, especially in regions lacking traditional financial infrastructure. However, potential users should consider the challenges of global adoption and competition. Its decentralized approach and focus on individual empowerment set it apart from competitors like Ripple, which targets institutional clients.

Pros and Cons Summary

Pros	Cons
Low Transaction Fees	Global Adoption Challenges
Transaction Speed	Competition with Similar Projects
Focus on Remote Economies	Controversial Coin Burning
Strategic Partnerships

Where to Buy and Sell Stellar (XLM)?

You can buy and trade XLM through exchanges such as Coins.ph, a trusted platform that enables Filipino users to trade XLM with ease, while also offering high security and fast transactions.

Coins.ph is regulated by the Bangko Sentral ng Pilipinas (BSP) and is the first-ever blockchain-based company in Asia to hold both Virtual Currency and Electronic Money Issuer licenses from a central bank.

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How to Buy Stellar (XLM)?

Via Coins Pro, BSP Licensed Spot Exchange:

Step 1: Log into your Coins Pro account and click [Balance].
Step 2: Select the currency you want to deposit, click on [Deposit] and enter your desired cash-in amount.
Step 3: Select XLM/PHP pair and enter the [Order Quantity] you would like to trade.
Step 4: Click Buy or Sell to place your Limit and Stop Orders.
Step 5: Wait for your order to be filled.

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Disclaimer: The information and publications in this article are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation offered or endorsed by Coins.

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