What is Stellar (XLM) and How Does it Work?

What is Stellar (XLM) and How Does it Work

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Stellar (XLM) is a decentralized, open-source blockchain network that enables fast, low-cost international money transfers. The network connects banks, payment systems, and people, allowing for cross-border transactions with minimal fees.

Transactions on the Stellar network are processed and confirmed within a few seconds, and the network can handle many transactions per second.

Stellar uses a consensus algorithm called the Stellar Consensus Protocol (SCP), which allows for decentralized network control while still providing high security and reliability.

Users can hold and transfer XLM, the native cryptocurrency of the Stellar network, and other assets, such as digital representations of fiat currencies, commodities, and more.

Stellar (XLM) Unique Features

The Stellar network has several unique features that make it stand out from other blockchain networks:

  1. Low transaction fees: The network is designed to enable fast, low-cost international money transfers, with transaction fees typically being a fraction of a cent.
  2. High scalability: The network can handle many transactions per second, making it suitable for real-world applications.
  3. Decentralized control: The Stellar Consensus Protocol (SCP) allows for decentralized network control, making it more resistant to censorship and downtime.
  4. Multi-currency support: The network supports multiple currencies, including digital representations of fiat currencies, commodities, and more, allowing users to exchange different assets easily.
  5. Interoperability: The Stellar network is designed to connect easily with other financial systems, such as banks, making it possible to move money across different networks and systems.
  6. Strong focus on financial inclusion: Stellar is a non-profit organization with a strong focus on financial inclusion and bringing access to financial services to underbanked or unbanked people.
  7. Built-in decentralized exchange: Stellar has a built-in decentralized exchange (DEX) that allows users to trade network assets without needing a centralized intermediary.

What is XLM Coin and How Does it Work?

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XLM, also known as Stellar Lumens, is the native cryptocurrency of the Stellar network. Like many other cryptocurrencies, XLM can be used to make digital transactions, but it also serves a few unique functions within the Stellar network.

  1. XLM is used to pay transaction fees on the network, which helps to prevent spam and ensure that the network remains secure.
  2. XLM can be used as a “bridge” currency for exchanging different types of assets on the network. For example, if someone wants to exchange euros for US dollars on the Stellar network, they would first need to convert their euros to XLM and then convert the XLM to US dollars.
  3. XLM can vote on changes to the network through the Stellar Consensus Protocol (SCP), which allows for decentralized network control while still providing a high degree of security and reliability.
  4. XLM can create and issue new assets on the network, allowing for digital representations of fiat currencies, commodities, and more.
  5. XLM holders are incentivized to hold and participate in the network as the Stellar Development Foundation (SDF) distributes some XLM tokens to holders regularly.
  6. XLM is also used as a currency of exchange in the built-in decentralized exchange (DEX) of the Stellar network, allowing users to trade assets without needing a centralized intermediary.
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