What is Stellar?

Introduction

If you are asking what is stellar, the answer spans a decade of payments-focused blockchain design and adoption. Stellar (XLM) is a public, open-source Layer 1 blockchain optimized for fast, low-cost value transfer and asset issuance across borders. Created in 2014 by the Stellar Development Foundation (SDF) with Jed McCaleb as a co-founder, the network’s core mission is financial access: making it inexpensive and simple to move money globally and to tokenize real-world assets. Unlike general-purpose smart contract chains that started primarily with decentralized finance, Stellar began with a clear payments and remittance focus and later expanded to smart contracts via Soroban, its next-generation platform.

Stellar (XLM) uses the Stellar Consensus Protocol (SCP), a federated Byzantine agreement (FBA) model that emphasizes rapid finality and a flexible notion of trust among network participants. The native token, XLM (lumens), plays two essential roles: preventing spam on the network by requiring minimal base fees and reserves, and serving as a bridge asset for path payments between different tokens issued on the network.

For traders and learners, you can review a concise overview at the internal resource page for XLM on Cube: XLM, and if you’re considering market access, you can buy XLM, sell XLM, or trade XLM/USDT. To build foundational knowledge, see Cube’s glossary pages such as Blockchain, Federated Consensus, and BFT Consensus.

Authoritative references for Stellar (XLM) include the official site at stellar.org, the SCP whitepaper by David Mazières (The Stellar Consensus Protocol), and market profiles from CoinGecko, CoinMarketCap, and Messari. For general background, the Wikipedia entry is useful: Stellar (payment network).

History & Origin

Stellar (XLM) emerged in 2014 with the creation of the Stellar Development Foundation, a nonprofit tasked with supporting the open-source protocol and fostering an inclusive global financial system. Early on, the project drew conceptual inspiration from Ripple’s approach to cross-border value transfer, but Stellar soon re-implemented its own consensus—SCP—following academic work led by Stanford’s David Mazières in 2015. This shift, documented in the SCP whitepaper, differentiated Stellar’s design from other blockchains by introducing a federated Byzantine agreement (FBA) model where nodes define their own trust relationships through “quorum slices.”

By late 2015, the network transitioned to SCP, and over the ensuing years, Stellar (XLM) added features geared toward its payments and tokenization mission. Anchors—regulated financial entities that issue fiat-backed tokens and connect bank rails to the chain—became central to Stellar’s architecture. Partnerships and pilots with enterprises and fintechs followed. Notably, IBM’s “Blockchain World Wire” pilot leveraged Stellar for cross-border settlement, illustrating the network’s suitability for institutional experiments in payments (see Wikipedia’s overview: Stellar (payment network)).

From a token supply standpoint, a major change occurred in 2019 when SDF eliminated the long-standing 1% annual inflation mechanic and conducted a large supply reduction (often referred to as a burn), cutting the total supply to roughly 50 billion XLM. SDF discussed the rationale and mechanics on its official blog (see SDF communications referenced from stellar.org). This materially reshaped Stellar (XLM) tokenomics by fixing total supply and removing inflation.

In 2021, a significant ecosystem development arrived when USDC, one of the largest regulated dollar stablecoins, launched on Stellar, expanding payment and settlement use cases for the network (Circle announcement). Subsequently, the protocol enabled built-in automated market maker (AMM) functionality, integrating liquidity pools into the core ledger—an unusual feature among Layer 1s that can simplify swaps for path payments and tokenized assets. In 2024, the network activated Soroban smart contracts on mainnet (Protocol 20), expanding Stellar (XLM) beyond token transfers and built-in features to a broader developer surface for DeFi and Web3 applications (see developers.stellar.org).

Technology & Consensus Mechanism

Federated Byzantine Agreement and SCP

Stellar (XLM) relies on the Stellar Consensus Protocol, an instance of a federated Byzantine agreement (FBA). Rather than a single, globally uniform validator set managed by protocol-level staking or mining, SCP allows each node to select a set of other nodes it deems trustworthy. These trust relationships are called quorum slices. When the union of these slices forms overlapping sets across the network, the system can reach consensus, providing both safety and liveness properties characteristic of BFT Consensus systems.

The official SCP paper—The Stellar Consensus Protocol—lays out the theory, emphasizing that quorum intersection (overlap of trust sets) is critical for safety. This design is distinct from classic Proof of Work or Proof of Stake and can provide fast, deterministic finality once consensus is reached among chosen quorum slices. In practice, Stellar (XLM) targets short ledger close times (on the order of a few seconds) and very low fees, which are well-suited to cross-border payments and remittances.

Network Structure, Nodes, and Ledgers

Stellar Core is the reference implementation of the consensus layer. Nodes maintain the ledger, propose and vote on transactions, and publish consensus results. Because there is no mining, energy usage for Stellar (XLM) is comparatively low, and finality does not depend on probabilistic chain selection rules. Ledger entries include accounts, trustlines, offers, and data related to token issuance and AMM liquidity pools.

Developers interact with the network primarily through Horizon, an API layer that indexes ledger data and simplifies integrations with wallets, fintech apps, and enterprise systems. With Soroban, Stellar (XLM) added a dedicated smart contract engine designed for safety, performance, and predictable resource metering. Soroban uses Rust for contract development and is built for straightforward deployment and testing (see developers.stellar.org).

Fees, Reserves, and Spam Prevention

Stellar (XLM) applies a minimal base fee per operation and requires small reserves for accounts and trustlines. These mechanisms limit ledger bloat and mitigate spam. While base fee and reserve values can be adjusted by protocol consensus over time, they have historically kept per-transaction costs at a fraction of a cent—one of the network’s comparative advantages for retail and B2B payments. The fee and reserve model is covered in Stellar developer documentation (developers.stellar.org).

For readers new to fundamental concepts like network actors and transaction processing, see Cube’s resources on Validator, Consensus Algorithm, and Transaction.

Tokenomics

Supply, Distribution, and the 2019 Supply Reduction

Stellar (XLM) originally launched with a larger maximum supply and a 1% annual inflation mechanism. In November 2019, SDF removed inflation and reduced the total supply to approximately 50 billion XLM by discontinuing certain distribution programs and destroying a large portion of tokens. That left a fixed total supply and altered distribution plans going forward (see SDF posts linked from stellar.org and coverage shared in Messari’s Stellar profile).

• Total supply: fixed at roughly 50 billion XLM after the 2019 change
• Native utility: base fee payment, reserve requirements, and bridge asset for path payments
• Distribution: a significant portion is held by SDF to support ecosystem growth, grants, and partnerships, with the remainder circulating among users and entities across exchanges and wallets

Circulating Supply, Market Cap, and Volume

Up-to-date market metrics are available from industry trackers:

• CoinGecko: Stellar (XLM)
• CoinMarketCap: Stellar

As a general reference, trackers have reported a circulating supply in the high-20-billion range (roughly 28–29 billion XLM) in recent periods, within a total fixed supply of ~50 billion. Market capitalization and 24-hour trading volume vary with price and market conditions. Because these figures change constantly, consult the live pages on CoinGecko and CoinMarketCap for the latest verified numbers.

If you are evaluating market access or liquidity for Stellar (XLM), see Cube’s markets to trade XLM/USDT, or use the direct pages to buy XLM and sell XLM.

Fees, Minimum Balances, and Path Payments

The network’s minimal base fees are paid in Stellar (XLM) and are intentionally kept very low to enable micropayments and frequent transactions. In addition, accounts must maintain a small base reserve in XLM, and each trustline or offer requires an incremental reserve to reduce spam. Path payments allow a user to send one asset while the recipient receives another, using intermediate order books or AMM pools—with XLM often acting as a bridge asset when it improves price execution.

Smart Contracts with Soroban

With Protocol 20, Soroban smart contracts expanded the tokenomics surface for Stellar (XLM) by enabling programmability beyond the ledger’s built-in features. This opens the door for new fee dynamics, on-chain applications, and token standards that can complement the network’s existing payments and asset issuance capabilities. Developers can learn more from the official docs: Intro to Soroban.

Use Cases & Ecosystem

Cross-Border Payments and Remittances

Stellar (XLM) was purpose-built for moving value across borders. Entities called “anchors” connect fiat rails to the chain by issuing fiat-backed tokens (e.g., USD, EUR) and handling KYC/AML obligations off-chain. A sender can deposit fiat with an anchor, receive a tokenized representation on-chain, transmit it globally in seconds, and the recipient can redeem it for local currency with another anchor—often at significantly lower costs than traditional remittance corridors. XLM’s role as a bridge asset optimizes such transfers by routing through liquidity that minimizes slippage and fees.

Stablecoins and Tokenized Assets

Stellar (XLM) supports regulated stablecoins, most notably USDC, which launched on Stellar in 2021 (Circle announcement). Issuers can mint fiat-backed tokens for payroll, B2B settlement, or merchant payments, while users benefit from fast settlement and low fees. The network also hosts other tokenized assets, including regional stablecoins and representations of commodities or securities when issued by compliant entities.

Built-in AMM and Market Access

Unlike many Layer 1s where AMMs are solely application-layer constructs, Stellar’s protocol includes native AMM functionality integrated with its order book model. This design makes path payments and swaps a first-class operation and can simplify liquidity provisioning and routing for wallets and fintechs. For a broader trading primer, see Cube’s explanations of Automated Market Maker, Liquidity Pool, and Order Book.

Smart Contracts and DeFi via Soroban

With Soroban now live, Stellar (XLM) supports general-purpose smart contracts, enabling a spectrum of DeFi and Web3 applications: lending, borrowing, on-chain credit scoring, programmable payments, and tokenized asset strategies. Soroban is designed for safety and performance, using Rust for contract development and aiming to complement the base layer’s strengths in payments and compliance-friendly asset issuance (see developers.stellar.org and Messari profile).

Fiat On/Off-Ramps and Fintech Integrations

The anchor model and partnerships around cash-in/cash-out (CICO) have been a key differentiator for Stellar (XLM). Notable examples include collaborations with remittance providers and fintechs to let users fund wallets with cash, bank transfers, or cards, and redeem digital balances locally. Historically, IBM piloted cross-border settlement with Stellar, and other providers have explored using Stellar rails for remittances or B2B payments (see Wikipedia overview).

Advantages

• Payments-first design: Stellar (XLM) emphasizes simple, fast value transfer, making it an excellent fit for remittances, payroll, and B2B settlement.
• Low fees and quick finality: SCP’s consensus provides rapid confirmation and deterministic finality, with fees typically a fraction of a cent.
• Asset issuance and anchors: Built-in primitives for issuing tokens and connecting to fiat rails make compliant tokenization achievable for regulated entities.
• Native AMM: Integrating AMM functionality at the protocol level can streamline path payments and improve liquidity routing.
• Soroban smart contracts: Programmability enables DeFi and Web3 use cases on top of the payments backbone, expanding Stellar (XLM)’s utility.
• Environmental efficiency: No mining and no energy-intensive proof-of-work; the design is far lighter in energy consumption compared to PoW systems.
• Mature ecosystem and tooling: Horizon APIs, SDKs, and extensive documentation (developers.stellar.org) support developers and integrators.

Limitations & Risks

• Federated trust model complexity: SCP’s safety depends on healthy quorum intersection among chosen trust sets. If too many participants rely on a narrow validator set, centralization risks can emerge. Understanding Federated Consensus and quorum design is crucial.
• Anchor dependence and off-chain compliance: Tokenized fiat and CICO experiences require regulated anchors. Users rely on these off-chain entities for redemption, KYC/AML, and liquidity; their policies, solvency, and regional availability can impact user experience.
• Competitive landscape: Stellar (XLM) competes with established payment networks, other L1s, stablecoin issuers, and enterprise blockchain pilots. XRP Ledger, Ethereum L2s, and bank-backed stablecoin projects vie for similar corridors.
• Smart contract adoption is new: Soroban is comparatively recent on mainnet, so developer mindshare, security audits, and app maturity are still growing. As with all smart contract platforms, vulnerabilities and exploits are possible without rigorous testing and audits.
• Regulatory uncertainty: Treatment of crypto assets, stablecoins, and on/off-ramp providers varies by jurisdiction and may affect anchors, custodians, and issuers.
• Bridge and oracle risks: Cross-chain activity and price feeds can introduce external dependencies. For context on risk classes, see Cube’s primers on Cross-chain Bridge and Oracle Network.

Notable Milestones

• 2014: Stellar Development Foundation established; network launched focusing on accessible global payments (stellar.org; Wikipedia).
• 2015: SCP introduced and adopted—replacing earlier consensus and formalizing Stellar (XLM)’s federated Byzantine agreement approach (SCP whitepaper).
• 2018–2019: Enterprise pilots and partnerships showcased payments use cases, including IBM’s World Wire pilot (see Wikipedia).
• 2019: Removal of inflation and ~55B XLM supply reduction fixed total supply at roughly 50B (stellar.org; Messari).
• 2021: USDC launches on Stellar, broadening settlement and treasury use cases (Circle).
• 2021–2022: Built-in AMM functionality activated at the protocol level, integrating pools with the order book (see protocol updates summarized by Messari).
• 2024: Soroban smart contracts go live on mainnet (Protocol 20), expanding Stellar (XLM) into general-purpose programmability (developers.stellar.org).

Market Performance

Stellar (XLM) has experienced multiple market cycles typical of the broader cryptocurrency space. According to CoinGecko and CoinMarketCap:

• All-time high (ATH): reached during the 2017–2018 cycle (CoinGecko records ATH near early January 2018)
• All-time low (ATL): occurred in early network history in 2015

Price dynamics have historically responded to macro crypto trends, risk appetite, and protocol milestones such as supply changes, enterprise pilots, new anchors, and stablecoin integrations. Liquidity is distributed across major centralized exchanges and increasingly across on-chain venues thanks to native AMMs and, with Soroban, a growing set of DeFi applications.

When evaluating Stellar (XLM), consider both the payments utility (anchors, stablecoins, path payments) and the evolving smart contract ecosystem. For current market depth and spreads, view live order books via your exchange of choice, and consult Cube’s markets to trade XLM/USDT.

Technology Deep Dive: SCP in Practice

SCP’s guarantees hinge on properly configured quorum slices and the existence of quorum intersection. Put simply, if the sets of validators you trust overlap sufficiently with the sets others trust, the network can achieve agreement that is both safe (no two honest nodes confirm conflicting ledgers) and live (progress is made). This framework differs from classical permissioned BFT, because it allows each participant to choose whom to trust rather than relying on a fixed, globally agreed validator set. It also differs from proof-of-stake systems where stake weight determines validator selection and security assumptions.

For practitioners, it is important to monitor validator diversity (jurisdiction, hosting providers, organizations) and to encourage multiple independent entities to run high-quality nodes. Healthy Client Diversity and distributed infrastructure support resilience. Quorum configuration best practices are covered in community resources and discussions highlighted by SDF and ecosystem validators.

Developer Experience and Smart Contracts

Developing on Stellar (XLM) historically involved the Horizon API, account flows, and transaction building for payments and asset issuance. With Soroban, developers can now write Rust-based smart contracts, test locally, and deploy with deterministic resource metering. The design places emphasis on safety and predictability—qualities that are important for financial applications. Soroban also complements native features like asset issuance and AMMs, creating a layered approach where simple payment and swap flows can rely on base features, while complex logic (loans, insurance, programmable treasury) can live in contracts.

Stellar’s documentation, SDKs, and reference tutorials are available at developers.stellar.org. For conceptual clarity about networks, see Cube’s entries on Execution Layer, Settlement Layer, and Consensus Layer.

Governance and Upgrades

The SDF coordinates community discussion, core development, and ecosystem support, but the network is open and permissionless. Protocol changes (e.g., fee adjustments, feature activations like AMMs and Soroban) are implemented through versioned protocol upgrades that validators adopt. This hybrid of open governance and foundation stewardship aims to balance stability with innovation. Stakeholders—including anchors, wallets, exchanges, and app developers—monitor changes through release notes and SDF communications.

Security Considerations

• Consensus safety: SCP’s formal model targets strong safety guarantees when quorum intersection holds; validator configuration and diversity are practical concerns.
• Key management: As with any crypto network, user security depends on robust self-custody practices. See Cube’s guides on Hardware Wallet, Seed Phrase, and 2FA (Two-Factor Authentication).
• Smart contract risk: Soroban enables new possibilities, but contracts should undergo audits, formal verification where feasible, and conservative rollouts. See Cube’s entries on Formal Verification and Bug Bounty.
• Bridge/oracle risk: Any cross-chain or oracle-dependent application introduces additional trust assumptions. See Cube’s coverage of Bridge Risk and Price Oracle.

Regulatory and Compliance Landscape

Because Stellar (XLM) is widely used for tokenized fiat and remittances, anchors must comply with local KYC/AML regulations, licensing, and consumer protection rules. The network does not enforce KYC at the protocol level; instead, it enables rails that regulated entities can integrate. The presence of USDC and other regulated stablecoins supports enterprise and fintech use cases that demand transparency and compliance frameworks. Industry analyses by outlets like Binance Research, Messari, and coverage in established media provide useful context when evaluating policy shifts.

Comparing Stellar to Other Layer 1s

• Versus PoW chains: Stellar (XLM) achieves fast finality without mining, resulting in lower energy usage and predictable confirmations.
• Versus PoS chains: SCP does not rely on stake-weighted validator selection; instead, trust is configured via quorum slices. This can be beneficial for certain threat models but places a premium on careful validator diversity and configuration.
• Versus XRP Ledger: Both target cross-border payments. Stellar emphasizes open issuance of assets by anchors, native AMMs, and Soroban for programmability; XRP Ledger has its own DEX and escrow features and a separate validator ecosystem. Choice depends on corridors, partners, and developer needs.
• Versus general-purpose smart contract L1s: Stellar’s payments-first design, low fees, and asset issuance may be more turnkey for fiat-linked use cases. With Soroban, it now competes for DeFi and Web3 use cases while retaining its core remittance strengths.

Market Access and Trading Considerations

For traders, the key factors include liquidity, spreads, and integration of on/off-ramps. Stellar (XLM) is listed on major centralized exchanges and can be bridged or integrated into on-chain venues using the network’s AMM and order book. Consider:

• Liquidity depth and the Depth of Market
• Order types such as Limit Order and Market Order
• Slippage and Price Impact

To access markets, you can trade XLM/USDT directly on Cube or consult the XLM overview if you are just getting started.

Future Outlook

Several themes define the forward path for Stellar (XLM):

• Soroban ecosystem growth: The network’s programmability is new. Expect a focus on audited, high-quality primitives—lending, payments apps, tokenized asset tooling—that leverage the chain’s low fees and fiat connectivity.
• Deeper anchor networks and CICO coverage: Expanding geographic coverage for cash-in/cash-out and bank integrations remains central to the mission of inclusive finance.
• Stablecoin traction: USDC and regionally compliant stablecoins will likely continue to anchor payment and settlement use cases for businesses and consumers.
• Institutional pilots and partnerships: As fintechs and institutions explore blockchain-based settlement, Stellar (XLM) may serve as lightweight rails for specific corridors and remittance routes.
• Governance and resilience: Ongoing efforts to decentralize validator sets and improve quorum configurations, along with robust client and infrastructure diversity, will be important for security and uptime.

Given the competitive environment—other L1s, stablecoin networks, and payment companies—execution quality, developer momentum, and real-world integrations will shape adoption. Independent analyses from Messari, CoinGecko, CoinMarketCap, and Wikipedia provide background and metrics to monitor.

Conclusion

Stellar (XLM) is a payments-focused, open-source Layer 1 blockchain with a proven track record in asset issuance, cross-border transfers, and now, with Soroban, general-purpose smart contracts. Its SCP consensus offers fast finality and low fees; anchors and stablecoins translate crypto-native speed into fiat-accessible user experiences; and a fixed total supply following the 2019 supply reduction defines its tokenomics going forward. The addition of native AMM functionality and Soroban smart contracts extends Stellar (XLM) beyond remittances to a wider set of DeFi and Web3 applications while staying true to its mission of expanding financial access.

Whether you are integrating payments, exploring tokenized assets, or evaluating on-chain finance, Stellar (XLM) delivers a pragmatic blend of speed, cost efficiency, and developer tooling. To learn concepts referenced here, browse Cube’s glossary on topics like Blockchain, Consensus Algorithm, and Validator. For market access, you can buy XLM, sell XLM, or trade XLM/USDT. For authoritative protocol and market information, consult the official site (stellar.org), the SCP paper (whitepaper), and market profiles on CoinGecko, CoinMarketCap, and Messari.