A Guide To Stellar (XLM) Blockchain & Network
The Stellar Lumens XLM cryptocurrency is a by-product of the Stellar Blockchain – a brainchild of Jed McCaleb and Joyce Kim which was formed back in 2014 when it was forked from the Ripple protocol. In that manner, Stellar is a hard fork from Ripple (XRP) but also a company that connects banks, payment systems, and people.” As the website shows, Stellar “integrates to move money quickly, reliably, and at almost no cost”.
By using Stellar, one can move money across borders quickly and for a fraction of the cost that traditional money transfers would require. However, Stellar (XLM) is more than just a cryptocurrency with a solid technology. Below, we are going in detail in the network, blockchain and everything related to this altcoin.
What Is Stellar?
The best way to understand Stellar and the Lumens (XLM) token is as a distributed blockchain based ledger and database which facilitates cross-asset transfers of value and payments. Lumens (XLM) is Stellar’s native digital asset – but the network can apparently also support other tokenized assets on its blockchain.
So, it is safe to say that Stellar is a payment network (Horizon API and Stellar Core are its subdivisions) while Lumens (XLM) is the cryptocurrency. Both of these projects are overseen by a non-profit called Stellar.org.
Note: Just like people sometimes mix ETH with Ethereum (instead of Ether) and use the term “Ripple” when talking about XRP, Stellar is easy to be confused with Lumens. The token behind Stellar is called “Stellar Lumens” or just “Lumens” and is known by the XLM symbol.
Stellar came into the spotlight in October 2017 after locking a partnership with the big technology giant IBM. this partnership envisions the setting up of multiple currency corridors for nations in the south pacific – and will apparently enable better connections between small businesses, non-profit organizations and local banking institutions when expediting commercial transactions.
Who Is Jed McCaleb (The Founder Of Stellar)
Jed McCaleb is one of the well known figures in the cryptocurrency space. He was the founder of three famous projects including the cryptocurrency exchange Mt. Gox (founded in 2006) which was later sold to Mark Karpeles whose mismanagement made it one of the biggest crypto crisis.
In 2011, McCaleb founded Ripple, a cross-border payment system which enabled cross-border decentralized systems. However, despite his vision, he left Ripple due to a fundamental misunderstanding between the two parties which was past redemption.
Then, in 2014 along with Joyce Kim, they forked off from the Ripple protocol and founded the Stellar Development Foundation. Since then, Stellar (XLM) has grown from strength to strength.
How Does Stellar Work?
The basic operation of Stellar is very similar to the one of most decentralized payment technologies. Basically, XLM runs a network of decentralized servers with a distributed ledger which is updated every 2 to 5 seconds among all nodes.
However, what makes Stellar different from Bitcoin, for example, is its consensus protocol. In the Stellar network, this protocol does not rely on the entire miner network in order to approve transactions. Instead, it uses the Federated Byzantine Agreement (FBA) algorithm which will enable faster processing of transactions.
On top of this, each node in the Stellar network chooses another set of “trustworthy” nodes. Once a transaction is approved by the nodes within the set, it is considered approved. This short process has made Stellar’s network very fast over the years – and is known for processing as many as 1,000 network operations per second.
How Does Stellar Process Cross-Border Transfers Through XLM?
The processing of cross-border transfers is definitely a complex process which involves domestic banks maintaining accounts in foreign jurisdictions and local currencies.
Stellar’s blockchain, however, can shorten or eliminate the delays and complexity involved in this process. The Lumens (XLM) cryptocurrency can be used to provide liquidity as well as streamline the process. As some experts predict, banks will use their own cryptocurrencies to facilitate transfers like these in the future.
What Are The Main Advantages Of Stellar (XLM)
The Stellar network is basically unique in many ways. The main selling points include the following:
- Stellar is a network which is open-source, distributed and community owned. It is used to facilitate cross-asset transfers of value.
- Many other tokens can be created on the Stellar network (besides Lumens). Just like Ethereum, the Stellar blockchain can also be a host to other token types and tokenized versions of fiat money.
- Just like Ripple, Stellar can handle exchanges between fiat-based and cryptocurrencies
- Lumens (XLM) are known for their low fees – and each transaction comes with a minor fee of 0.00001 Lumens
- The Stellar network has fast transaction speeds which is why it is usually compared to Ripple
- Stellar is backed via the Stellar Consensus Protocol in order to ensure network security through a decentralized network
- The organization behind Stellar, Stellar.org, is centralized like Ripple and meant to handle many cross platform transactions and micro transactions such as Ripple.
- Unlike Ripple, Stellar.org is non-profit and its platform is open-source and decentralized (which makes it more traditional)
Where Can You Buy And Store Your Lumens (XLM)
There are many third-party websites which have developed wallets for Lumens (XLM) and apps that help users interact with the Stellar network.
In this manner, there are two types of wallets which can store your XLM cryptocurrency, including:
- Hardware wallets: The Ledger Nano S, Trezor
- Downloadable wallets: Keybase, Solar Wallet, Lobstr
- Web-based wallets: Coinbase
What Is The Future Of Stellar And Lumens (XLM)
The Stellar network and Lumens cryptocurrency are very competitive with other cryptocurrencies – on many levels. More importantly, they are in direct competition with Ethereum for ICOs and Ripple for being a digital partner supporting financial institutions, banks and businesses.
Stellar has stated a goal of processing up to 60% of all cross border payments in the region, including countries like Australia, Fiji and Tonga. So far, the Stellar network has been embraced by the prominent technology consulting firm Deloitte (2016), the payment service Stripe and more than 30 banks using XLM for cross-border transfers.
This certainly puts Lumens (XLM) in the spotlight and makes it a cryptocurrency worth watching out for.