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What is Stellar, and Why You Should Care

Jul 09, 2018

Stellar Background

The Stellar platform is an open source, distributed, peer-to-peer network used to send payments around the globe quickly, securely, and cheaply.  Stellar was originally formed from a hard fork of Ripple. Ripple works with larger banks and enterprises. In comparison to Ripple, Stellar focuses on developing markets and smaller entities.  Stellar is capable of executing conversions of both fiat currencies and cryptocurrencies on its platform, sometimes using its native asset, Lumens (XLM).  When fiat money is entered into the network, it is then exchanged for credits which can be sent anywhere, and then exchanged for the desired currency. This is done in one of two ways:

  • Direct Conversion Through an Offer- automatically exchanging currencies between two parties looking for each other’s currency (i.e. converting USD directly into EUR and vice-versa)
  • Using Lumens (XLM)- Lumens (XLM) can be used as an intermediary for an exchange (i.e. USD -> XLM -> EUR)

Stellar also enables Multisignatures and Smart Contracts -- like Ethereum does -- for other entities to use for their own purposes, such as ICOs.


Stellar servers around the world work together connecting the Stellar network. Each server has their own complete updated copy of the global ledger and communicates with each other to validate transactions on the ledger.

Key Highlights for Stellar Lumens (XLM)

As mentioned above, Lumens are Stellar’s native asset.  Lumens can be thought of as a cryptocurrency, much like Bitcoin (BTC) is, but one that facilitates the movement and conversions of money around the world.  The Stellar network launched in 2014 with 100 billion Stellars.  However, in 2015 Stellar upgraded its network, changing Stellars to Lumens in order to distinguish the network itself from, the nonprofit organization that contributed to the creation of the open source Stellar network.


Within the Stellar network, and aside from being a currency conversion intermediary, Lumens (XLM) are used for both transaction fees and account minimum balances. This prevents people with malicious intentions from creating a Denial of Service (DoS) attack, or purposely overwhelming the network until it is rendered useless.

Stellar Lumens (XLM) Statistics

  • 104,085,355,272 total Lumens
  • 8,143,325,835 Lumens distributed so far
  • 1% annual fixed inflation rate
  • Over 1000 transactions per second (tps) and extremely scalable
  • In a test with Deloitte, Stephen Van Coller, Barclays Africa Chief Executive for Corporate and Investment Banking said they had reached ~10,000tps1
  • 2-5 seconds for a confirmed transaction
  • .00001 XLM fee per transaction
  • .5 XLM minimum account balance

Stellar's Proprietary Blockchain Features

Since Stellar was created from a hard fork off of Ripple, it does not use traditional blockchain consensus methods like Proof-of-Stake (PoS) or Proof-of-Work (PoW). Stellar used the Ripple Consensus Algorithm (RPCA), a type of Practical Byzantine Fault Tolerant (PBFT) algorithm.  Soon after, Stellar’s own consensus protocol was created, the Stellar Consensus Protocol (SCP).  The SCP is based on the Federated Byzantine Agreement (FBA) and is considered an improvement from the RPCA.  The SCP enables quicker processing of transactions by not requiring the entire network to approve transactions on the ledger, only portions of the network need to approve them.  For example, each server/node only approves transactions after another group of “trusted” nodes approves them, this leads to very quick transaction times.


Recently, Stellar has partnered with tech giant IBM in an effort to issue its first token on a public blockchain.  IBM is working with Veridium Labs to create the “Verde” token, which will be a way to digitize carbon credits.  This will give polluting businesses a way to offset their environmental damage by supporting a portion of Indonesian rainforest. By tokenizing the already-existing carbon credits, it will increase the liquidity of the credits, make it much easier to now track the extent of the pollution, and to assure that the money is actually being used to fix the environment. 


Similarly, the Australian government has awarded IBM a USD$750 million contract to turn the government into an “e-government” using blockchain technology. Australia intends to use Stellar’s blockchain to better deliver its social security welfare benefits.



Stellar announced on July 5, 2018 the launch of its own universal trading marketplace, StellarX.  StellarX will be a full-featured trading app promising zero trading fees since XLM trading fees get added to the yearly inflation pool to be redistributed anyway.  StellarX will reportedly list many different asset classes available for exchange, such as cryptocurrencies, fiat currencies, and municipal bonds. Transactions will be completed in mere seconds and are all recorded on the open Stellar order book.