Stellar Lumens dominates the niche blockchain market. What does it do?
Stellar is a payment protocol based on distributed ledger technology. In many ways, it resembles other blockchain-based cryptocurrencies. It enables rapid cross-border transactions between currency pairs. According to its website, Stellar is a platform that connects banks and payment systems so people can move money for free.
Stellar Lumens (XLM) is Stellar’s native digital currency that drives the entire bandwidth of the blockchain network. More than 100 billion XLMs of Stellar Lumen have been created since the Stellar Blockchain platform was founded.
The only other mechanism for creating XLM is inflation. There is a fixed annual inflation of 1% of the lumen production rate to take into account the economic growth of the lost lumens. The newly created lumens are generated each week and distributed through a direct voting process.
Stellar differs from its predecessor Ripple in that it uses a decentralized open source network. This means that it has no specific central authority, like an employee of a single bank. Instead, there are several nodes that work together to verify transactions and enter them into the Stellar register.
Stellar has a unique method of reaching consensus between the nodes, known as the Federated Byzantine Agreement. This means that there is no wait-and-see procedure to verify transactions, but there is an agreement between the entire node network to reach an agreement: individual nodes select other nodes they consider trustworthy, which in turn selects other nodes they consider more reliable, and then a quorum is reached comprising several quores (so-called quota slices) of these nodes, after which transactions are added to the register.
“The creation of Stellar and the confirmation process, combined with the fact that mining companies cannot control supply policy and can increase volume by up to 1% per year, means that transactions can run much faster than other blockchain technologies such as Bitcoin.”
The creation of Stellar and the confirmation process, combined with the fact that mining companies cannot control supply policy and can increase volume by up to 1% per year, means that transactions can run much faster than other blockchain technologies such as Bitcoin. One of Stellar’s biggest attractions is the seamless transaction of currencies. On average, a Stellar transaction takes between three and five seconds, and the network can process thousands of Stellar transactions simultaneously, making it extremely scalable.
For example, if Peter in Chicago wants to send money to Jacob in Warsaw, he has to worry about how the money will be converted into Polish zlotys. With Stellar, he can have his USD transferred from his bank to the Stellar network, where it is then converted into lumens.
This is done in seconds with a minimum transaction fee of 0.00001 XLM (0.00001 USD). Next, Stellar looks for the best exchange rate between lumens and zloty. As soon as they find it, the money will be deposited in the form of a zloty into Jacob’s account in Warsaw.
Stellar is an open source decentralized payment protocol that enables fast cross-border transactions between currency pairs. Unlike other cryptocurrencies, Stellar uses blockchain technology. Its domestic asset, a digital currency, is called XLM. It is operated by Stellar itself, but is also operated with Ether (ETH), which is supplied with power via the Ethereum network.
That’s how the Stellar blockchain works. Each transaction that takes place on Stellar is added to a distributed public register and shared, a publicly accessible database. To reach a consensus on transactions, Stellar uses its own unique consensus method.
Stellar is useful and valuable because it has a global exchange network capable of exchanging thousands of currencies and tokens per second. Swapping cryptocurrencies for fiat currencies can be a lengthy and expensive process, but Stellar makes it quick and cheap. Hence the value of Stellar. It’s a blockchain, but different coins use it differently. XLM is an asset that supports wallets to pay transaction fees and maintain an account with Stellar.
In the case of Stellar, the company has developed a blockchain network that serves as an open source infrastructure for distributed payments. Stellar facilitates transactions between banks, payment services and individuals. It’s like PayPal, but without the benefits of blockchain and its own national currency. Lumen allows transactions to be processed faster, easier and cheaper. Like many cryptocurrencies, it is characterised by cross-border transactions.
Stellar lumen has some advantages. For example, it is the currency of choice for more than 100 trusted financial institutions and has partnerships with major stock exchanges in the US and Japan. It supports a wider range of digital assets than other cryptocurrency systems. A Stellar Lumen is always available and no registration is required to use it.
One of the most exciting things about Stellar is the speed of its growth. With its multi-partner ecosystem, Stellar has become the “pebble” of the cryptocurrency community. It is growing faster than Bitcoin, which is still far behind.
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