Stellar (XLM) is more than just a cryptocurrency—it’s a mission-driven blockchain network designed to democratize access to financial services. Built on the innovative Stellar Consensus Protocol (SCP), it emerged as a fork of Ripple’s blockchain but evolved with a fundamentally different vision: one centered on individuals, not institutions. With its focus on cross-border payments, financial inclusion, and low-cost transactions, Stellar has positioned itself as a powerful force in the decentralized finance (DeFi) ecosystem.
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The Genesis of Stellar: A Blockchain for the People
Launched in 2014 by Jed McCaleb—co-founder of Ripple—Stellar was born out of a desire to create a more open and equitable financial system. Unlike Ripple, which primarily targets banks and financial institutions, Stellar aims to serve individuals, especially those in underbanked or unbanked regions.
The network uses Lumens (XLM) as its native token, serving dual roles: facilitating multi-currency transfers and preventing spam attacks through minimal transaction fees. With a total supply now capped at 50 billion XLM after a major burn event in 2019, Stellar stands out for its transparency, scalability, and social impact orientation.
How Stellar Works: Bridging Currencies and Communities
XLM as a Cross-Currency Bridge
One of Stellar’s most powerful features is its ability to act as an intermediary between different currencies. In traditional markets, converting between two less-traded currencies often involves multiple steps and high fees. Stellar solves this by using XLM as a universal bridge asset.
For example, if someone in Kenya wants to send money to a recipient in the Philippines using local currencies (KES → PHP), there may be no direct liquidity path. Instead, the transaction can follow this route:
KES → XLM → PHP
This significantly improves liquidity efficiency and reduces costs, making remittances faster and more affordable—especially vital for developing economies.
Built-In Security Against Network Abuse
To protect against spam and DDoS attacks, every transaction on Stellar requires a minimal fee: 0.00001 XLM per operation. These fees are negligible for legitimate users but deter malicious actors from flooding the network.
Additionally, each account must hold a minimum balance of 0.5 XLM, ensuring that only active, economically meaningful accounts occupy space on the ledger. This design promotes network health and sustainability.
Newly created XLM from inflation are distributed weekly via a voting mechanism. Users can nominate an "inflation destination," and any account receiving over 0.5% of total votes gets a proportional share of newly issued tokens.
Token Distribution and Supply Evolution
Stellar began with an initial supply of 100 billion XLM, distributed without an ICO—unusual for blockchain projects at the time. Instead, it relied on strategic airdrops and partnerships:
- 50% to individuals via invitation campaigns (50–300 XLM per user)
- 25% to ecosystem-building partners (governments, NGOs, fintechs)
- 20% to Bitcoin and Ripple holders (19% to BTC holders, 1% to XRP holders)
- 5% reserved for operational funding
However, in November 2019, the Stellar Development Foundation (SDF) made headlines by burning 55 billion XLM—over half the total supply. This bold move aligned with its long-term vision: reducing artificial scarcity concerns and reinforcing commitment to decentralization.
Post-burn, the total supply stands at 50 billion XLM, with SDF retaining reserves for ecosystem development, future airdrops, and strategic partnerships.
FAQ: Common Questions About Stellar (XLM)
Q: Is Stellar a fork of Ripple?
A: Yes, Stellar originated as a fork of Ripple’s codebase but diverged significantly in governance, use case, and consensus mechanism. While both focus on cross-border payments, Stellar emphasizes individual access and non-profit operation.
Q: Can you mine XLM?
A: No. Unlike Bitcoin or Ethereum (pre-merge), XLM cannot be mined. All tokens were pre-created, and new ones are issued through inflation rather than proof-of-work.
Q: What is the purpose of the 1% annual inflation rate?
A: The inflation mechanism encourages participation by rewarding users who vote for inflation destinations. It also helps distribute XLM more widely across the network over time.
Q: Why did Stellar burn so many tokens?
A: The 2019 token burn aimed to increase trust and align supply with real-world usage. By removing excess tokens from circulation, the foundation signaled confidence in organic growth over speculative demand.
Q: Who uses Stellar today?
A: Major organizations like IBM, Stripe, and Coins.ph have integrated Stellar for cross-border settlements and remittance services, particularly in emerging markets.
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Key Partnerships Driving Real-World Adoption
Stellar’s mission of financial inclusion has attracted high-impact collaborators:
- IBM: Partnered with Stellar to launch World Wire, a global payment system enabling instant settlement in multiple currencies using stablecoins pegged to fiat.
- Stripe: Previously supported XLM integration for low-cost international payouts before pausing crypto services in 2018.
- Coins.ph (Philippines): A mobile wallet serving millions, leveraging Stellar for fast, low-fee remittances.
- KlickEx: A Pacific-based financial network using Stellar for real-time interbank clearing across island nations.
- ICICI Bank (India): Explored cross-border trade finance solutions on the Stellar network.
These partnerships demonstrate how Stellar bridges traditional finance with decentralized infrastructure—particularly where legacy systems fall short.
The McCaleb Chapter: Visionary or Controversial Figure?
Jed McCaleb’s journey from Ripple co-founder to Stellar creator remains one of crypto’s most debated narratives. After leaving Ripple due to strategic disagreements with the board—particularly over leadership and direction—he channeled his vision into building a more inclusive alternative.
While Ripple’s David Schwartz criticized McCaleb’s actions as a betrayal, others view him as a true believer in decentralization who sought to build what he felt Ripple failed to become.
Regardless of perspective, McCaleb’s influence is undeniable. His work laid foundational tech used by both networks, and his advocacy continues to shape conversations around ethical blockchain development.
Related Cryptocurrencies & Ecosystem Impact
Stellar shares similarities with Ripple (XRP) in technical architecture and use case—both aim to streamline cross-border transactions. However, their target audiences differ sharply:
- Ripple: Enterprise-focused, bank-centric solutions
- Stellar: User-centric, inclusive finance model
This contrast highlights two divergent philosophies in blockchain adoption—one top-down, the other bottom-up.
Recent Developments and Market Sentiment
Stellar continues to gain attention beyond technical circles:
- IBM-backed USD-pegged stablecoin: Running on the Stellar network, this project enhances dollar accessibility in global markets.
- Reddit co-founder Alexis Ohanian publicly endorsed XLM in 2018, calling it “definitely worth following.”
- Growing integration in remittance corridors across Southeast Asia, Africa, and Latin America.
These developments reinforce Stellar’s role not just as a speculative asset but as a functional tool for economic empowerment.
Final Thoughts: A Sustainable Model for Inclusive Finance
Stellar represents a rare blend of idealism and practicality in the crypto space. By focusing on real-world problems—high remittance costs, lack of banking access, inefficient currency exchange—it offers tangible value beyond price speculation.
With strong institutional backing, a clear mission, and continuous technological refinement, Stellar (XLM) remains a compelling player in the evolution of decentralized financial systems.
Whether you're an investor, developer, or advocate for financial equity, understanding Stellar’s model provides insight into how blockchain can serve humanity—not just markets.