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

What is Stellar (XLM) and How Does it Work

Content provided by various contributors. DYOR.

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?

Bitcoin live price
price change

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.
Read more from author

Editor's picks

What Is Crypto Historical Data and How to Use It in Trading

Crypto historical data refers to past information related to cryptocurrencies such as Bitcoin, Ethereum, and others. This data includes various metrics such as price, trading volume, and market capitalization. Crypto historical data is useful for several purposes in crypto trading. First, it helps traders and investors make informed decisions by comprehensively understanding the crypto market's past performance. Crypto Historical Data Use Cases Here are some of the ways crypto historical data is used in crypto trading: Technical Analysis: Traders use…

How to Effectively Predict Crypto Prices

Predicting crypto prices is a complex task and requires a combination of technical analysis, fundamental analysis, and market sentiment. Here's a guide to help you effectively predict crypto prices: Technical Analysis: This involves studying past market data, including price and volume trends, to identify patterns and predict future price movements. Use charting tools, such as candlestick charts, to visually represent this data. Fundamental Analysis: This involves analyzing the underlying factors that may impact the value of a cryptocurrency, such as…

Guide to Value a Cryptocurrency

Valuing a cryptocurrency can be difficult and subjective, as many factors contribute to its worth. However, here are some steps and considerations for valuing a cryptocurrency: Market capitalization: This is the total value of the cryptocurrency in circulation. It is calculated by multiplying the total number of coins by the current market price. Adoption and usage: The more people use cryptocurrency, the more valuable it is likely to become. This includes individuals and businesses using it for transactions or as…

The Best Crypto Portfolio Trackers (Coin Trackers)

Crypto portfolio trackers are apps or websites that allow users to monitor their cryptocurrency holdings across multiple exchanges and wallets in one place. They connect to users' exchange and wallet accounts through APIs (Application Programming Interfaces) and automatically track the user's cryptocurrency holdings and transactions. The tracker updates in real-time and provides an overview of the user's total portfolio value, asset allocation, and returns. This allows users to track their investment performance and make informed decisions easily. What Should The…

An Overview of Different Cryptocurrency Scams

Cryptocurrency scams are fraudulent schemes that are becoming increasingly common as the popularity of cryptocurrencies continues to grow. They can take many forms and are often designed to appear legitimate investment opportunities or exchanges. Unfortunately, these scams can cause significant financial losses for individuals and harm the reputation of the cryptocurrency industry as a whole. It is crucial for anyone considering investing in cryptocurrencies to be aware of the various types of scams and to take steps to protect themselves.…

What Are Crypto Data Aggregators?

Crypto data aggregators gather data from multiple sources to provide comprehensive and real-time information about the cryptocurrency market. They pull data from various exchanges, trading platforms, and other sources to centralize the information and present it in a user-friendly format. The data includes cryptocurrency prices, trading volume, market capitalization, news, and other relevant information. Crypto data aggregators use algorithms to clean, process, and normalize the data to ensure accuracy and consistency across multiple sources. The information is then presented in…

What Is CoinGecko?

CoinGecko is a cryptocurrency data aggregator and tracking platform. It provides information and insights on the cryptocurrency market, including price, volume, trading activity, developer activity, and community growth. How CoinGecko Works Data Aggregation: CoinGecko collects crypto data from various cryptocurrency exchanges, wallets, and blockchains to create a comprehensive database of cryptocurrency information. Calculation of Metrics: CoinGecko calculates several metrics, such as market capitalization, trading volume, liquidity, and community growth, to provide a comprehensive overview of the cryptocurrency market. Display of…

What Is CoinMarketCap (CMC)?

CoinMarketCap (CMC) is a website that provides information about the cryptocurrency market and tracks the capitalization of various cryptocurrencies. It was founded in 2013 and has become one of the most popular cryptocurrency data providers. CMC aggregates information about the prices, volume, and market capitalization of cryptocurrencies from various exchanges and calculates the average value. Furthermore, the website displays this information in real-time, giving users a comprehensive overview of the cryptocurrency market. CMC tracks over 22,000 cryptocurrencies, including Bitcoin, Ethereum,…

What Are Crypto Pyramid Schemes?

A crypto pyramid scheme is a fraudulent investment scheme where returns are paid to existing investors from funds contributed by new investors. It's called a "pyramid" because it typically has many new entrants at the bottom, with each layer representing fewer investors. Example: John starts a pyramid scheme and invites five friends to invest 1 Bitcoin each. John promises to return 2 Bitcoins to each participant in a month. John needs 10 Bitcoins to fulfill his promise, so he invites…