What is Stellar (XLM)?

Deep Dive

1. Purpose & Value Proposition

Stellar’s core mission is to connect the world’s financial systems. It aims to solve inefficiencies in cross-border payments and remittances—which are often slow and expensive—by providing a decentralized protocol for near-instant, low-cost transactions. The network is designed to serve payment providers, financial institutions, and developers, enabling them to build inclusive financial products. Its value lies in bridging traditional finance and blockchain, focusing on real-world utility like tokenizing real-world assets (RWAs) and facilitating stablecoin transfers.

2. Technology & Architecture

The network is secured by the Stellar Consensus Protocol (SCP), a unique mechanism that differs from Proof-of-Work or Proof-of-Stake. SCP relies on a system of trusted, identifiable validators that reach agreement through a federated voting process, making it highly energy-efficient and fast, with transaction finality in 3-5 seconds. In 2024, Stellar launched its Soroban smart contract platform, built with Rust and WebAssembly, which extends its capabilities to support complex decentralized finance (DeFi) applications while maintaining low, predictable costs.

3. Tokenomics & Core Utility

Lumens (XLM) are the network’s native digital currency with two primary functions. First, a small amount of XLM (approximately 0.00001 XLM) is burned to pay for each transaction fee, which acts as a spam-prevention mechanism. Second, XLM serves as an intermediate “bridge” asset in the built-in decentralized exchange; the protocol can automatically convert one currency to another via XLM in seconds, simplifying cross-currency transfers. The total supply is capped at 50 billion XLM.

Conclusion

Stellar is fundamentally a public, purpose-built financial rail that prioritizes efficiency, accessibility, and compliance to enable practical blockchain applications for global finance. As its ecosystem grows with smart contracts and institutional partnerships, how will its focus on bridging traditional and digital finance shape its role in the future monetary system?