What is Stellar (XLM)? A Plain-English Guide
Stellar is a blockchain for fast, low-cost payments and asset issuance. Learn how XLM works, its history, risks, and how it compares to Ripple and others.
In this article10 sections
Key points
- Stellar is an open-source blockchain designed for fast, low-cost cross-border payments and tokenized asset issuance.
- Its native token, XLM (lumens), pays transaction fees, meets minimum balance requirements, and acts as a bridge asset.
- Stellar faces competition from Ripple, SWIFT, and other payment-focused blockchains, and its long-term adoption remains uncertain.
What is Stellar?
Stellar is an open-source blockchain network built for payments and asset issuance. It launched in 2014 with the goal of making it cheaper and faster to move money across borders, especially for people and businesses in regions poorly served by traditional banking. The network’s native cryptocurrency is called lumens, ticker XLM. Stellar ranks 16th by market capitalization, with 35,407,571,693 XLM in circulation.
Unlike general-purpose blockchains that aim to run any kind of application, Stellar focuses on a specific job: helping value move between different currencies and assets quickly and at low cost. It does this through a built-in exchange and a consensus system that does not rely on energy-intensive mining.
How Stellar works in plain language
Stellar is a distributed ledger: a shared record of accounts and balances maintained by many independent computers (nodes) around the world. Anyone can run a node, and no single company controls the network.
To agree on which transactions are valid, Stellar uses a consensus protocol called the Stellar Consensus Protocol (SCP). Instead of miners competing to solve puzzles, nodes vote in small groups called quorums. Each node chooses which other nodes it trusts. If enough trusted nodes agree, the transaction is confirmed. This design lets Stellar close a new ledger about every five seconds and keeps energy use low compared to proof-of-work blockchains like Bitcoin. The SCP documentation explains quorum sets and slices in more detail.
The network also includes a decentralized exchange (DEX) where users can trade any asset issued on Stellar. This makes it possible to convert between different currencies or tokens directly on the network. For example, a business in one country could send a stablecoin representing US dollars, and the recipient could convert it to a local currency token without leaving Stellar.
Since 20 February 2024 (protocol 20), Stellar has also run Soroban, a smart contract platform. Contracts are small programs written in Rust and compiled to WebAssembly (Stellar smart contracts overview), and contract data pays rent instead of reserves. Stellar’s main focus remains payments and asset issuance, and its decentralized finance ecosystem is much smaller than Ethereum’s.
What is XLM used for?
XLM, or lumen, is the native asset of the Stellar network. It has three main uses:
- Transaction fees: Every transaction on Stellar costs a small amount of XLM, at least 100 stroops (0.00001 XLM) per operation. The fee is designed to prevent spam and rises only when the network is busy.
- Minimum balance: To hold assets on Stellar, an account must maintain a minimum XLM balance. This requirement helps reduce ledger bloat: every account keeps at least 1 XLM, plus 0.5 XLM for each trustline, offer or other entry it adds.
- Bridge asset: XLM can act as an intermediary in trades on the Stellar DEX. If two assets do not have a direct trading pair, the network can route the trade through XLM.
XLM is not required to send other assets on Stellar, but it is needed to pay fees and meet reserve requirements. The token is also traded on major cryptocurrency exchanges.
Stellar costs, with real numbers
These are the current network settings from the Stellar documentation on fees and lumens and reserves, checked against the latest ledger on 5 November 2026 (base fee 100 stroops, base reserve 0.5 XLM). Validators can change them by vote, which the docs say is rare. A stroop is one ten-millionth of a lumen.
| Setting | In XLM | In US dollars now |
|---|---|---|
| Minimum fee per operation | 100 stroops = 0.00001 XLM | $0.000001 |
| Minimum balance for an account (two base reserves) | 1 XLM | $0.144651 |
| Each extra trustline, offer, signer or data entry | +0.5 XLM | $0.072326 |
Worked example: an account that holds two stablecoins, which needs two trustlines, must keep 1 + 2 × 0.5 = 2 XLM as its minimum balance, about $0.289303 at 14 Nov 2026, 02:11 UTC. The reserve is freed when a trustline is closed, and another account can sponsor the reserves instead. Fees rise above the minimum only when more operations are submitted than a ledger can hold, in which case the network switches to surge pricing and higher bids go first. The XRP Ledger uses a similar reserve system; see our XRP guide.
Notable history
Stellar was co-founded by Jed McCaleb, who also co-founded Ripple, and Joyce Kim. The network launched in 2014 after a fork of the Ripple protocol codebase. Its nonprofit arm, the Stellar Development Foundation (SDF), was established to support the network’s growth.
In 2015, Stellar's consensus mechanism was upgraded to the Stellar Consensus Protocol, which improved speed and security. On 28 October 2019, validators voted to end the network’s 1% yearly inflation, so no new lumens have been created since. A week later, on 4 November 2019, the SDF sent about 55.4 billion XLM to an account no one can spend from, roughly halving the total supply to about 50 billion (Stellar lumen supply metrics). Also in 2019, IBM launched World Wire, a cross-border payments network built on Stellar.
More recently, Stellar has focused on tokenizing real-world assets and expanding its smart contract capabilities with Soroban. The network has also been used for humanitarian aid disbursements and remittances in partnership with organizations like MoneyGram, and in October 2026 Chainlink price feeds went live on Stellar.
Risks and criticisms
Stellar faces several challenges. One is adoption: while the network is technically capable, it competes with established payment systems and other blockchains. Its success depends on businesses and individuals choosing to use it.
Another concern is centralization. The Stellar Development Foundation has historically held a large amount of XLM and has influence over the network’s direction. As of July 2026, the accounts under the SDF’s mandate held about 15.6 billion XLM, close to a third of the roughly 50 billion lumens in existence, according to Stellar’s supply figures. Although the network is open, the SDF’s role in protocol upgrades and its holdings have raised questions about how decentralized Stellar truly is.
Regulatory risk is also present. Cryptocurrencies face evolving rules in many countries, and Stellar’s focus on cross-border payments could bring it under additional scrutiny. Finally, the broader crypto market is volatile, and XLM’s price can fluctuate widely.
How Stellar compares with alternatives
Stellar is often compared to Ripple (XRP), another payment-focused blockchain. Both aim to speed up cross-border payments, but they differ in governance and target markets. Ripple focuses more on banks and financial institutions, while Stellar emphasizes individuals and small businesses. Ripple’s XRP is also used as a bridge currency, but Ripple the company has a more centralized structure than the Stellar Development Foundation.
SWIFT, the traditional interbank messaging network, is another alternative. SWIFT is widely used but can be slow and expensive for small payments. Stellar aims to offer a faster, cheaper option, though it has not yet reached SWIFT’s scale.
Other blockchains like Ethereum and Solana also support payments and asset issuance, but they are general-purpose platforms with broader use cases. Stellar’s specialized design may give it an edge in cost and speed for simple payment flows, but it lacks the same level of developer activity and decentralized finance ecosystem.
Key facts at a glance
| Attribute | Details |
|---|---|
| Name | Stellar |
| Symbol | XLM |
| Market cap rank | 16 (live) |
| Circulating supply | 35,407,571,693 XLM (live) |
| Launch | 2014 |
| Supply | About 50 billion XLM in existence; no new XLM since inflation ended in October 2019 |
| Consensus | Stellar Consensus Protocol (SCP) |
| Primary use | Cross-border payments, asset issuance |
Frequently asked questions
Is Stellar the same as Ripple?
No. Stellar and Ripple share a co-founder and some technical roots, but they are separate networks with different goals and governance. Stellar is a nonprofit-led project focused on individuals and small businesses, while Ripple targets banks and large financial institutions.
Can I mine XLM?
No. Stellar does not use mining. 100 billion XLM were created at launch, and a 1% yearly inflation added more until validators ended it in October 2019; since then no new XLM has been created. The network relies on the Stellar Consensus Protocol to validate transactions.
What makes Stellar fast?
Stellar’s consensus protocol lets nodes agree on a new ledger about every five seconds without energy-intensive mining. Its built-in exchange also reduces the need for external intermediaries, speeding up asset conversions.
Disclaimer: This article is for information only and is not investment, financial or trading advice. Cryptocurrency prices are highly volatile. Always do your own research.
Sources and further reading
- Stellar official website
- Stellar Consensus Protocol white paper
- Stellar docs: lumens, reserves and supply metrics
- Stellar docs: fees, resource limits and metering
- Stellar docs: software versions (protocol 20, Soroban)
- Stellar docs: smart contracts overview
- CoinMarketCap: Stellar (XLM) price and market data
