International payments can be slow and expensive, sometimes taking several days to settle and passing through multiple intermediaries. Stellar was created as a blockchain network to address these challenges by offering a faster, lower-cost, and more accessible way to transfer money across borders. The network’s native token, Lumens (XLM), is used to pay transaction fees, and serves as a bridge between currencies without a direct exchange pair.
What Is Stellar?
Stellar is an open-source blockchain network designed to enable quick and affordable payments and asset transfers across borders. It was launched in 2014 by Jed McCaleb, co-founder of Ripple, together with Joyce Kim, with the aim of building a more inclusive and accessible financial system.
The network is supported by the Stellar Development Foundation (SDF), a nonprofit organization that manages its ongoing development and adoption. The SDF’s role includes maintaining Stellar’s open-source code, fostering ecosystem growth, and advancing financial inclusion by supporting use cases, such as remittances and asset tokenization.
How Stellar Works
Stellar Core
Stellar’s network is powered by nodes running a program called Stellar Core. These nodes work together to validate transactions, decide their order, and update the shared ledger roughly every five to seven seconds. While anyone can use Stellar without running a node, operating one allows you to take part in governance by voting on issues like protocol upgrades and minimum fees while also strengthening the network’s decentralization and security.
Stellar Consensus Protocol (SCP)
Stellar uses the Stellar Consensus Protocol (SCP) instead of traditional consensus mechanisms like Proof of Work (PoW) or Proof of Stake (PoS). SCP is based on a model called the Federated Byzantine Agreement (FBA).
In this model, each validator chooses a group of trusted peers, known as its quorum set. Consensus is reached when enough overlap exists across these sets, allowing nodes to agree on which transactions to include. Through a process of voting and confirmation, all nodes eventually agree on the same set of transactions.
This approach makes Stellar relatively fast, energy-efficient, and open to new participants. Transactions can be confirmed within seconds without the need for mining or large amounts of staked tokens. SCP prioritizes security and consistency, ensuring that conflicting versions of the ledger are not finalized, though in rare cases this can also result in short pauses while validators try to reach agreement.
Key Features of Stellar
Smart contracts (Soroban)
Soroban is Stellar’s smart contract platform. Soroban contracts are written in the programming language Rust and compiled into WebAssembly (Wasm), a lightweight format designed for fast and secure execution across many environments.
Traditional Stellar accounts use a system of base reserves, requiring small minimum balances of XLM to prevent the ledger from being filled with unused entries. Soroban introduces a rent-based model, where contracts pay fees according to how much storage they consume and how long it remains active.
This approach allows developers to build applications like lending platforms and asset management tools while maintaining efficient resource use and benefiting from Stellar’s fast and low-cost base layer.
Anchors
Anchors are trusted entities like banks, fintech companies, or payment providers that serve as Stellar’s on- and off-ramps. They accept deposits in fiat currency like U.S. dollars or Euros and issue equivalent tokens on the Stellar network. These tokens can be transferred globally in seconds and redeemed back into fiat currency through the same or another anchor. This makes Stellar suitable for cross-border payments and remittances, where speed and lower costs are a priority.
Use cases
Stellar is built for payments, but its design allows for several real-world applications:
Cross-border payments: Transactions settle within seconds at low cost, making the network suitable for remittances and global settlements.
Asset tokenization: The network supports the issuance of tokenized assets, such as bonds, ETFs, commodities, and other securities. Once tokenized, these assets can be distributed through digital wallets and traded in either closed ecosystems or across multiple exchanges and payment platforms.
Stablecoin issuance: Several fiat-backed stablecoins have been launched on Stellar, including USDC, which can be used for payments and transfers.
Micropayments: With minimal fees, the network supports small-value transactions, such as tipping, donations, or pay-per-use access to digital services.
Financial inclusion: In regions with limited access to banking, Stellar can be accessed via mobile wallets and anchors to provide basic digital financial services.
XLM Token
The XLM token is the native utility token of the Stellar protocol. It is used within Stellar’s infrastructure and ecosystem for a variety of purposes, including:
Bridge currency: XLM can act as an intermediary asset between two currencies that do not have a direct trading pair, supporting efficient cross-currency transactions.
Transaction fees: Every transaction requires a small fee in XLM, which helps prevent spam on the network and ensures transactions can be prioritized during periods of high activity.
Minimum balances: To keep an account active on Stellar, users need to hold a small balance of XLM. The requirement increases as the account adds more features like trustlines or offers.
Smart contracts: On Soroban, XLM is used to pay rent for storing smart contract data on the ledger.
Launch and distribution
When Stellar launched in 2014, 100 billion XLM tokens were created at genesis. For the first few years, the supply of tokens increased by 1% annually through an inflation mechanism, but this feature was removed by community vote in 2019. Later that year, the SDF decided to burn approximately 55 billion tokens and reduce the total supply to around 50 billion, with no new tokens to be created in the future.
As of August 2025, around 31.3 billion tokens are in public circulation, while the SDF holds around 18.4 billion tokens to support the network’s development and ecosystem growth.
