Today we are looking into one of the oldest cryptocurrencies out there: XLM Stellar Lumens.

What is mean by XLM Stellar Lumens?

• Stellar is the network.
• Lumens are the blockchain’s native tokens.
• XLM is their market abbreviation.

What is Stellar’s goal?

To bridge the gap between cryptocurrencies and fiat currencies, by using Fiat’s wide adoption and the blockchain’s decentralization, speed of transactions.

It doesn’t look to replace fiat currencies, but instead to bring them into the new era of borderless, nearly instant, and virtually feeless transactions.

What is Stellar XLM?

• Stellar is an open-source network for currencies and payments.
• Jed McCaleb is a co-founder of stellar in 2014.
• who previously founded Ripple XRP.
• YES!! That’s even before Ethereum!
• Stellar allows its users to send dollars, euros, pesos, yens, and potentially any other currency to anyone with a Stellar address, anywhere in the world, with practically zero fees and in just a few seconds.

• And even though there are platforms nowadays that offer such transactions in the traditional financial system, Stellar does it blockchain-style: Decentralized and uncensored.

How do they do that?

How do they bring fiat currencies onto the blockchain?

The answer is by tokenization.

• If a Stellar user wants to send dollars to another user, they don’t send actual dollars but “dollar tokens”.
• These tokens live on the Stellar blockchain, it has the same price as the dollar-backed 1:1 by actual dollars in a bank account dedicated to this purpose.
• So, when a user wants to “cash out” to actual fiat dollars there’s always the necessary reserve to get their money.
• If you’re thinking that sounds a lot like stable coins, such as Tether, or DAI, and USDC, well, it’s because it sort of does.
• Stellar invented Stable coins.

But there are some key differences:

• The network doesn’t privilege any particular currency.
• Any currency can be a transaction through the network.
• So, you can have dollar tokens, euro tokens, yen tokens, etc.
• The tokenization process is integrated right into the network protocol and fully documented, making it extremely easy for any fintech company to issue fiat-backed tokens.
• Anything can be tokenized in the same manner, not just currencies: gold, silver, shares, corn bushels.
• Stellar achieves that through third-party companies, called Anchors.
• These companies take on the responsibility of bridging the gap between Stellar and blockchain and the traditional financial system, either by issuing tokens or working as fiat on/off ramps or both.
• And in exchange for these services, they usually charge some sort of fee.
• The Stellar Development Foundation is a non-profit organization.
• that works for the advancement and development of the network, sets some standards that all Anchors should meet.

These include:

• Always having a reserve that matches the issued tokens in a dedicated, audited bank account.
• Complying with local regulations.
• Applying KYC and AML policies when on-ramping or off-ramping users.
• Using local bank transfers and not wire transfers.

For these reasons,

Anchors are usually local businesses that issue a particular currency and serve customers in their specific country or region.

That’s not all Stellar has to offer:

• Users can exchange any token they hold for any other token on the Stellar network, peer-to-peer. Because Stellar has a Decentralized Exchange, or DEX, built right in the network, with its order book and everything.
• All trades are atomic, meaning either both sides of the trade complete simultaneously or none does.
• What’s more, let’s say you have a business in the US and you want to pay a vendor in Mexico, but they want to be paid in pesos.
• The tokenized dollars to them and will be converted using the best conversion rate, to their respective pesos tokens.
• The vendor can then use it to pay their suppliers or cash them out for fiat pesos without converting them first.
• Borderless transactions in your local currency at their best!

what about Stellar XLM or Lumens- the tokens?

• Lumens are needed to pay the fees for transacting on the stellar network.
• The minimum fee is 0.00001 XLM is practically zero, making Stellar Lumen ideal for micropayments and with transactions that are finalized in 5 seconds, Stellar does feel like cash.
• Instead, 100 billion Stellar Lumens were created upon network launch, with a 1% yearly inflation rate.
• But in October 2019 the inflation was removed and the total supply of XLM was reduced to a little over 50 billion, and no more Lumens will ever be added to this number.

• This large supply is probably what’s keeping the price of XLM at relatively low levels, but that doesn’t prevent Stellar Lumen from
• holding the 14th position in market cap in 2021 and although XLM saw a steady decrease in price since its all-time high of 86 cents during the December 2017 bull run, Stellar Lumens 2021 price has seen an increase of more than 100%.

• Do you think the rise will continue and can XLM attain its all-time high prices again? Or even surpass them, now that the supply has been halved?

Now, if you’re wondering what kind of consensus algorithm Stellar uses, it’s none of the usual suspects, like Proof-of-Work or Proof-of-Stake.

Important Fact about Stellar XLM

• With Byzantine Consensus or Agreement, the nodes on a network can reach consensus on a value, in our case a block, even if there exists among them a small number of unresponsive, or even malicious, nodes.
• However, the Byzantine Agreement relies on a list of participants set and controlled by a single entity, which is how Ripple works.
• That didn’t work for the Stellar team, so they came up with a variation of the typical
• A byzantine agreement called the “Federated Byzantine Agreement” (FBA).
• In a nutshell, FBA has the advantages of a Byzantine Agreement, but additionally, it doesn’t need to rely on a predetermined list of trusted nodes, which is hard to alter and leads to centralization.
• Lumens it’s a reward for running a node that can’t be mined or produced.

There’s only the incentive of securing the network. And if you’re thinking that’s too idealistic, it’s not.

The cost of running a node is very low, comparable to running an email server.

Companies like IBM, Satoshi Pay, Wire x, Key base, and more, who have integrated Stellar in their products

An have built products on top of Stellar, are also running their own nodes to validate transactions and make sure the blockchain is secure.

Well, crypto fam, that was our deep dive into Stellar.

What do you believe is its future as a payment network and bridge between the legacy financial system and blockchains?

What’s your XLM price prediction?

Let us know your thoughts in the comments below.