What is Stellar
Stellar is a blockchain system that aims to connect different people and financial institutions around the world. The project is very similar to that of Ripple, as both companies share the same co-founder.
The main goal of Stellar is to make an accessible, cheap and easy to use payment system.
XLM (or in other words Lumens) is the native cryptocurrency of the network. XLM is similar to other cryptocurrencies to a large extent, but is distinguished by the fact that it is not the token that is the focus, but the blockchain itself.
Stellar’s history
- 2014 – Mt. Gox founder and Ripple co-founder Jed McCaleb created the Stellar network with former lawyer Joyce Kim. The non-governmental organization (NGO) Stellar Development Foundation itself was created in partnership with Stripe director Patrick Collison. The project itself was officially launched in July of that year after an initial investment of $3 million (for which Stripe received 2% of XLM’s total offering, or $2 billion in tokens.) Initially known as „stellars,“ the tokens were later rechristened XLM or Lumens.
- In 2014, the name was changed to lumens. In 2014, the Foundation put 100 billion tokens into circulation, increasing supply by 1% per year over the next 5 years.
- 2015 – The foundation behind the project released an updated proof of stake (PoS) algorithm that uses the Stellar Consensus Protocol (SCP) crypto protocol. The same year, Stellar unveiled an integration with Vumi (a messaging platform in South Africa) that uses talk time as a currency. In April, Stellar also integrated Oradian’s banking platform.
- 2016 – Deloitte announced building an international payments app using Stellar. Later that year, the payment system expanded to Philippine startup Coins.ph, private Indian bank ICICI, African payments company Flutterwave, and French payments company Tempo Money Transfer.
- 2017 – Stellar partnered with IBM in October for international payments in the South Pacific. In December, TechCrunch wrapped up Stellar’s partnership with Nigerian payments platform SureRemit.
- 2021 – Ukraine’s Ministry of Digital Transformation announced a collaboration with Stellar to develop the country’s digital infrastructure. The same year, Franklin Templeton launched the first tokenized mutual fund in the US that is based on Stellar.
How does Stellar (XLM) work?
Stellar’s decentralized network is based on a proof-of-stake consensus mechanism. While the project is not as decentralized as Bitcoin, this disadvantage is compensated by fast transactions and high efficiency of the blockchain.
Apart from the consensus mechanism, Stellar differs from Ripple in the way transactions are carried out. Banks use Ripple to offer intermediary services for currency exchange. Stellar uses a decentralized method called „anchors“.
Anchors act as a bridge between different currencies and the Stellar network. All monetary transactions on the Stellar network (with the exception of the local digital currency XLM) take the form of credits issued by so-called anchors.
Transaction on the Stellar network occurs in several different ways. Peer-to-peer exchange ranks first. Secondly, lumens can be exchanged for Indian rupees. And lastly is linking through various fiat currencies – for example, you can exchange US dollars for euros to buy Indian rupees.
Network specifications
Stellar’s distributed ledger (ledger) tracks the ownership of accounts and tokens on the network using the unique Stellar Consensus Protocol (SCP) algorithm.
The Ledger stores the balances and transactions of all accounts. All this information is shared across the network every 5 seconds. Each transaction is confirmed by computers (nodes) that have the Stellar software.
Stellar can process transactions within 5 seconds and the transfer fees are negligible – 0.00001 XLM, which may vary.
The main goal of the project is to become a global system. Stellar can speed up transactions, unlike the traditional financial system where it would take days before funds arrive. But instead of seeking a solution by replacing traditional banking methods, Stellar aims to improve them.
Key features of the network
- Token creation: Stellar’s network allows the creation of tokens from any currency you can think of: dollars, euros, yen, pesos and even cryptocurrencies like Bitcoin.
- Automatic conversion: The blockchain automatically adjusts the exchange from one currency to another – meaning you can send dollars that can arrive in another currency without having to calculate exchange rates.
- Global connectivity: Stellar aims to improve the current financial system by offering collaborative work with banks and a growing network of partners. This way, users can convert their XLM, into any other currency outside the blockchain.
Passive income with Stellar
With Ultra Stellar, you can generate passive income. Ultra Stellar issues the following income generating tokens:
Each of these tokens is pegged 1:1 with the corresponding cryptocurrency. In other words, the price of yETH corresponds to that of ETH.
This Stellar product allows you to exchange your tokens for network-specific assets that generate daily profits.
How do I buy Stellar?
1. Choose a crypto exchange
There are numerous cryptocurrency exchanges and exchanges that range from easy-to-use systems to complex dashboards for advanced traders.
Because Stellar is so popular, you’ll be able to purchase the token on most cryptocurrency exchanges, but it’s advisable to stick to a few of the more popular exchanges like Binance, Kraken, Coinbase, etc. Different platforms come with different fees, security measures, and may include other features, so it’s a good idea to do your research before signing up.
2. Create an account and confirm it
Start with account registration, which is completely free on the aforementioned platforms. For added security, 2FA – two-factor authentication – is also enabled. This way, you and your device are the only ones who can grant access to the account.
You are then taken through a KYC process, which is providing personal information – ID card/passport/driving license details, proof of address (e.g. bank statement or utility bill).
After completing these steps, you are ready to buy, sell and trade Stellar (XLM), as well as take advantage of various services such as staking.
3. Fund your account
Once your account has been registered and verified, you need to fund the account so you can start taking advantage of the platform’s buying and trading services.
The main deposit options are:
- Credit/Debit Card
- Bank deposit
- Peer-to-peer (P2P)
Where to buy Stellar?
On Binance, the world’s largest cryptocurrency exchange, deposits are absolutely free.
Withdrawal fees from the platform are as follows:
If you’re heading to a direct deposit account, depending on which fiat currency you use, the deposit fees are:
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