Quick Facts

Approximate Market Cap$5,381,032,242
Year Established2014
FounderJed McCaleb
Symbol/AbbreviationXLM
UtilityAsset

The Stellar network was originally derived from Ripple’s XRP token. Its native ability to represent external assets makes it a competitor with Ripple. The design allowed them to be globally scalable and accessible. Yet, they were built on fundamentally different principles.

Under the supervision of Ripple, XRP Ledger offers liquidity solutions for large-scale institutions. Stellar promotes inclusivity and transparency while providing low-cost financial instruments to undeveloped countries.

What is Stellar – Definition

Stellar is a decentralized peer-to-peer network. Its native coin is  Lumens (XLM).

Its main aim was to create a cross-border network of asset exchanges. Unlike Ripple, it focused more on protocol openness. Stellar ledger is open for view and doesn’t require permission to join. Moreover, Stellar is non for profit and promotes development within its ecosystem.

The Stellar network enables quick, safe, and low-cost conversions between different value units. These include dollars, euros, bitcoin, stocks, gold, and other tokens of value.

Stellar utilizes distributed ledger technology to validate transactions. The system implemented two important software modifications. The first is The Stellar Consensus Protocol (SCP). The second is a platform that allows developers to execute smart contracts and dApps.

Stellar is permissionless and secure. It is also pseudonymous and transparent. The total supply of XLM is now fixed at approximately 50 billion. It has a 1% annual inflation rate.

Pros and Cons

Pros

  • Fast transactions
  • Institutional support
  • Accessible for trading

Cons

  • Strong competition
  • Not so popular among traders
  • Small team

The History

Stellar and XLM emerged in 2014 as a result of differences among the Ripple team’s executives. The differences lead to the creation of two different networks: the Stellar and the SDF, a non-profit organization.

Stellar is based on the XRP Ledger codebase. It initially employed the Ripple Protocol Consensus Algorithm (RPCA). It was later replaced with the Stellar Consensus Protocol (SCP) as a result of an upgrade.

The creation of SDF, also known as Stellar.org, was to manage the technical development of the network. SDF funded the creation of its commercial arm, Interstellar, in September 2018.  SDF and Interstellar operate independently. Yet, they work together to advance Stellar technology and its adoption across commercial enterprises and individuals.

How Stellar Works

The Stellar network is comprised of four main components:

  1. The Stellar Core

Stellar Core is the open-source software serving as the basis for network participants to reach consensus. 

  1. The Stellar Consensus Protocol (SCP)

SCP is a distributed ledger that uses cryptography to hold, transfer, and trade assets. This consensus algorithm differs from the proof-of-work (PoW) or proof-of-stake (PoS). In a PoW or PoS network, participants are competing over rewards for uploading a transaction onto the blockchain.  In a consensus network, competition amongst participants does not exist.  The primary incentive for transaction validation is based on the trust and interests of participants in the network.

  1. The Horizon – Application Programming Interface (API)

Horizon is the API server that allows users to interact with the Stellar network.

  1. TheStellar Smart Contracts (SSCs)

Stellar Smart Contracts (SSCs) are pre-programmed compositions of transactions. Connected, they executed transactions based on chosen conditions. They work simultaneously to create a more inclusive, fast, and secure distributed payment network.

Stellar allows for near-instantaneous transactions across the world. Together, XLM and Stellar strive to achieve greater financial inclusivity. They connect merchants and financial institutions with individual users. especially those without access to traditional banking services.

Advantages & Disadvantages

Advantages

Fast transaction speeds

XLM transactions are completed at an average rate of 2-5 seconds. It is among the quickest settlement rails relative to the top ten digital assets by market cap.

Institutional network 

Fortune 500 organizations are now exploring Stellar for financial use cases such as cross-border payments.

Smart contract compatibility

Stellar features a development platform that is compatible with smart contracts and dApps.

Disadvantages

Volatility with Smart Contracts

Transactions resulting from smart contracts are irreversible. So, any vulnerabilities in the underlying source code can weaken the network.

Potential for Supply Shocks

60% of the total XLM remains in control of SDF. Yet, the timing and sizes of distributions are not known with complete precision.

Stellar in the Global Crypto Market

 XLM and the Stellar network have the potential to become a preferred currency and payment platform for low-cost, cross-border transactions.

Stellar’s mission is to reduce financial barriers for individuals and organizations ranging in all sizes. It is how it earned support from individual users as well as large-scale financial institutions.

Stellar issued 100 billion XLM upon launch. the total quantity was growing by 1% each year until 105 billion were in circulation. After 2019, this ratio dropped to a little more than 50 billion.

FAQ

Is Stellar a fork of Ripple?

No. The Stellar ledger was brand new, with no background from Ripple’s network.

Is there a need for a special wallet for Stellar?

Stellar is a well-known cryptocurrency. It’s supported by a wide range of wallets.

Is there any form of mining for Stellar?

Stellar does not support mining or staking.