In This Article
Stellar (XLM) is often overlooked as a cryptocurrency project due to the presence of Ripple (XRP). Both projects were originally created to revolutionize cross-border payments. While Ripple often steals the spotlight due to its higher market cap, outspoken supporters, and regular headline presence, Stellar offers a great alternative with a mission rooted in financial inclusion.
Stellar is like a global money delivery service that works fast and costs almost nothing. With Stellar, you can send it almost instantly, and the person on the other side receives it in their currency. It uses a coin called Lumens or XLM to help the transaction move smoothly and make money transfers easier for everyone, everywhere.
Are you interested in learning what is Stellar? This beginner’s guide about Stellar will walk you through everything you need to know about the Stellar blockchain, its historic connection with Ripple, XLM tokenomics, and more.
Stellar Review: Summary
We will begin this article by discussing some technical terms that you need to know to better understand cryptocurrency blockchains. Thereafter, we will discuss Stellar, its history, founders, and the project’s purpose.
The second half of the article will cover all you need to know about the tokenomics and utility of the XLM token. We will then discuss the pros and cons of Stellar, on-chain metrics, and hear what the experts think about the project. Towards the end of the article, you will find our recommendations for the best crypto wallets to hold your Stellar-based cryptocurrencies.
Key Takeaways
- Stellar was created to provide a permissionless payment gateway that allows anyone to convert one fiat currency to another.
- The blockchain uses a unique consensus mechanism called the Stellar Consensus Protocol (SCP), where each validator can choose which other validator to trust.
- XLM holders do not have voting rights regarding Stellar upgrades and improvement proposals.
- In November 2019, Stellar Development Foundation reduced the total supply of the XLM token by half by burning 55 billion tokens.
- The Stellar Development Foundation controls the stewarding of the development of the Stellar Network and manages the XLM token supply.
Terms You Need to Know Before Understanding Stellar
Before diving into this Stellar review, let’s get familiar with some key terms to understand it better.
- Blockchain: A distributed and immutable ledger that records transactions and account balances.
- Native token: A cryptocurrency that is used to pay gas fees and for governance on a blockchain.
- Smart contracts: These execute instructions autonomously when pre-determined conditions are met. To know more about it, check out our ‘What is a smart contract‘ guide.
- Consensus mechanism: It is a system that enables distributed and independent participants of a blockchain network to agree on a single, shared state of the ledger.
- Stellar Consensus Protocol (SCP): A unique consensus algorithm used by Stellar that relies on trust-based quorums rather than mining or staking.
- Quorum slice: A trusted subset of validators chosen by a node in the Stellar network to reach agreement on transactions; overlapping slices create consensus without a central authority.
- RWA tokenization (Real-World Asset Tokenization): Issuing blockchain-based tokens representing real-world financial instruments like bonds, funds, or fiat currencies.
Stellar Lumens Explained: What is Stellar (XLM)?
Stellar is an L1 blockchain that can host smart contracts for financial applications, including payments, asset tokenization, lending, and more. The blockchain was created to allow anyone to send and receive money “in any pair of currencies.” Today, the project has expanded its use case to encompass decentralized finance (DeFi).
Stellar in Action
Ravi in India wants to send $100 to Sarah in the UK. A traditional bank transfer could take days and include high fees. With Stellar, the money is converted to XLM, sent in seconds, and received as British pounds: instantly and with minimal cost.
The protocol does not use popular consensus algorithms such as proof-of-work (PoW) or proof-of-stake (PoS), which are used in Bitcoin (BTC) and Ethereum (ETH), respectively. Instead, Stellar uses the Stellar Consensus Protocol (SCP), where each validator can choose which other validator to trust.
Our Take on Stellar (XLM) Crypto Project
Stellar is a cryptocurrency project with roots traced back to Ripple. While Ripple has gone on to cement its position among the world’s top five most valuable cryptocurrencies, Stellar is not far behind (ranked in the top 20 at the time of writing). Stellar has existed for over a decade now and has established itself as a key player in the real-world asset (RWA) tokenization sector. The blockchain welcomed Franklin Templeton in 2023 to issue on-chain U.S. government securities in a watershed moment for the Stellar ecosystem. Stellar ranks among the top three biggest RWA blockchains in the world.
SCP allows Stellar to grow organically without the need to depend on a centralized entity. This happens as validator nodes choose to trust one another, and trusted groups known as quorum slices are created. These slices overlap to form larger groups known as quorums, which are big enough to agree on the ledger’s state. As quorums enlarge, the Stellar network grows naturally. Each party keeps the other in check, removing the need for a centralized authority.
History of Stellar Crypto
Stellar was founded in July 2014 as a decentralized protocol with the primary function of “providing a conversion path between other currencies.” The protocol was to be developed as part of a non-profit organization called the Stellar Development Foundation. Stellar’s code was made open-source, allowing anyone to contribute to the project.
Jed McCaleb was one of the three co-founders of Stellar. Before co-founding Stellar, McCaleb helped create a blockchain payment network called Ripple.
Initially, Stellar employed the Ripple Protocol consensus mechanism. However, in December 2014, the Stellar blockchain experienced a fork after its network nodes began to disagree on its state and failed to come to consensus. Stellar’s core development team decided to temporarily run only one validating node until the network adopted a new consensus mechanism.
It raised key questions around the Blockchain Trilemma — read more here.
In November 2015, the protocol was upgraded to use the Stellar Consensus Protocol (SCP). Core developers said that SCP allowed Stellar to run faster, use less memory, and store data more easily.
About the Stellar (XLM) Team: Who created Stellar (XLM)?
Jed McCaleb, David Mazières, and Joyce Kim co-founded Stellar. According to the “Introducing Stellar” blog post published on July 31, 2024, McCaleb and Mazières led the development of the Stellar protocol. Meanwhile, former lawyer Joyce Kim took charge of the Stellar Development Foundation as executive director.
The project received its initial funding from Stripe, and according to DeFiLlama, Stellar raised $3 million in its seed round to help launch the network.
Mazières, who authored the Stellar Consensus Protocol whitepaper, is currently the chief scientist at the Stellar Development Foundation. McCaleb is the Chief Architect of the Foundation. At the time of this writing, the official website did not mention Kim among the team members.
McCaleb was one of the five board members of the Stellar Development Foundation in 2025. The other members were Lin-Hua Wu of General Motors, Ronaldo Lemos, Ginger Baker of Meta, and Asiff Hirji of MoonPay.
What Problems Does Stellar Solve?
Stellar was created to provide a permissionless payment gateway that allows anyone to convert one fiat currency to another.
Traditional finance systems are outdated, expensive, and slow for trading forex and international remittance. Imagine sending money to your friend’s bank account from the U.S. to India. Bank-to-bank transfers, especially conducted via the SWIFT payment network, will incur various types of fees, including sender bank fees, receiver bank fees, and intermediary bank fees. Furthermore, most traditional banks credit remittances at inferior foreign exchange rates compared to the prevalent market rates.
Additionally, if there is an ongoing banking holiday during the time of your remittance, the money will be credited only on the next working day, causing inconvenience to users.
By creating a universal, blockchain-powered payment network that runs 24/7 without intermediaries, Stellar makes it cheaper, faster, and easier to make cross-border payments. Transactions are confirmed instantaneously and cost users “a fraction of a US penny.” Stellar is also decentralized and permissionless, meaning that anyone can use it without the fear of being censored.
For a deeper look at modern alternatives, read Fiat-to-Crypto Exchanges to see how blockchain changes the game in 2025.
Stellar (XLM) Tokenomics
The native token of the Stellar blockchain is Lumens (XLM). Most cryptocurrency blockchains have native tokens designed to perform special functions such as decentralized governance, gas fee payment, ecosystem funding, etc. In this section, we dive deep into the XLM token’s tokenomics.
XLM Token Supply
When the Stellar Network went live in 2014, the Stellar Development Foundation created 100 billion XLM tokens. During the first five years of Stellar’s existence, XLM’s total supply increased by 1% annually. This inflation mechanism design was abolished in October 2019. In November 2019, the Stellar Development Foundation removed 55 billion tokens from XLM’s total supply to reduce its ownership stake.
Here is a summary of XLM token supply, according to data from CoinMarketCap:
- Total supply: 50 billion tokens.
- Max supply: 50 billion tokens.
- Circulating supply: 31.19 billion tokens.
- Circulating supply as a percentage of total supply: 62.4%
XLM Coin Distribution & Allocation
Since Stellar’s inception, the Stellar Development Foundation has controlled the entire initial XLM token supply and manages its distribution.
The Stellar Development Foundation distributed the initial token supply of 100 billion XLM tokens in the following manner:
- 50% of the total supply was distributed to individuals who signed up for Stellar accounts.
- 25% of the total supply was allocated to non-profits and businesses focused on growing and adopting the Stellar network.
- 20% of the total supply was given to Bitcoin and Ripple holders.
- 5% of the total supply was allocated to fund the operations of the Foundation.
In November 2019, Stellar Development Foundation burned 55 billion XLM tokens, reducing the total supply of the XLM token by half.
At the time, nearly 20 billion XLM tokens were in the open market. The remaining 30 billion of XLM’s token supply remained under the control of the Foundation to be distributed in the following manner:
- 12 billion tokens were allocated for direct development and advocacy for Stellar.
- 2 billion tokens were allocated for ecosystem support via grants.
- 10 billion tokens were allocated to fund new Stellar products. 8 of the 10 billion was given to the Stellar Enterprise Fund to acquire or invest in businesses.
- 6 billion tokens were kept aside for marketing, airdrops, and in-app distributions.
XLM Token Utility & Use Cases
Here are the use cases of the XLM token:
- Anti-spam: According to Stellar, users must hold a minimum XLM balance of 1 token in their accounts to discourage spam and large-scale bad behavior.
- Transaction fees: XLM tokens are used to pay transaction fees on the Stellar Network.
- Smart contract transactions: To interact with smart contracts on Stellar, users are required to pay a special fee called a resource fee in XLM tokens.
- Ecosystem funding: One of the main use cases of the XLM token is raising funds and distributing capital across the Stellar ecosystem.
- Marketing: XLM token is used for airdrops and distribution to incentivize more individuals and businesses to use the Stellar blockchain.
Governance & Protocol Control
Unlike other digital asset protocols, Stellar does not have decentralized governance. The XLM token does not hold voting rights, meaning token holders and community members have no power over implementing network upgrades.
The Stellar Development Foundation controls the stewarding of the development of the Stellar Network and manages the XLM token supply. Whenever a new upgrade is implemented, network validators vote and agree to it, reach a consensus, and adopt the changes. A number of validator nodes on Stellar are operated and managed by financial institutions and organizations.
How Does Stellar Work?
In this section, we will explain how the Stellar protocol functions. We will cover everything from its blockchain structure of the Stellar blockchain to the token structure behind the XLM token and other Stellar-based digital currencies.
Architecture Behind the XLM Coin
XLM is the only token on the Stellar blockchain that does not require an issuer. As we explained before, the XLM token’s total supply was minted at the creation of the Stellar blockchain. Initially, the XLM token was designed to inflate at a rate of 1% per annum. This inflation mechanism was removed in 2019. At the moment, about 62.4% of XLM’s total supply is in circulation. The remaining tokens that have not entered circulation yet are under the control of the Stellar Development Foundation.
Developers can issue custom tokens on the Stellar blockchain using smart contracts. Anyone can create smart contracts to create various digital assets, such as Dapp tokens, RWA cryptos, non-fungible tokens (NFTs), and stablecoins.
Stellar’s Blockchain Structure
Stellar is made up of three networks: the public network, known as the “Mainnet,” the test network, known as the “Testnet,” and the developer network, known as the “Futurenet.”
The Mainnet is where developers deploy Dapps for the public to use. It is the main blockchain that powers cross-border payment systems, DeFi applications, and peer-to-peer (P2P) payments. Users are required to hold a minimum balance of XLM tokens to use the Mainnet, which is run by a decentralized set of validator nodes.
The Testnet is a free-to-use blockchain maintained by the Stellar Development Foundation. It functions like the Mainnet but does not account for real money. The purpose of the Testnet is to provide an environment that mirrors the Mainnet for developers to test applications. The Futurenet is a network that is designed to test innovative new features. Futurenet is designed to reset whenever necessary.
Scalability & Performance
Stellar Network is designed to be fast, scalable, and energy-efficient to facilitate instant and cheap cross-border transactions and P2P payments. The network derives its energy efficiency through the use of a unique consensus mechanism called Stellar Consensus Protocol. Unlike proof-of-work consensus, Stellar Consensus Protocol does not require network validators to expend much electricity and computational resources to secure the network.
In terms of network throughput, Stellar has recorded maximum transactions per second (TPS) of 176, according to Chainspect. The max theoretical TPS of Stellar is said to be 2,032 TPS. Block time of the Stellar blockchain currently stands at 5.62 seconds, according to the platform.
Stellar’s Standout Features
- Stellar Consensus Protocol: Stellar uses a unique consensus mechanism called the Stellar Consensus Protocol that allows the blockchain to run faster, use less memory, and store data more easily.
- Stellar Disbursement Platform: The Stellar Disbursement Platform is a platform that can initiate and globally disburse bulk payments 24/7 with instant settlement.
- MoneyGram Ramps: MoneyGram Ramps is a tool that enables third-party applications such as crypto wallets and exchanges to deposit and withdraw USDC stablecoins on Stellar.
- Cross-Chain support: Stellar uses an interoperability network called Axelar to communicate with protocols and smart contracts on different blockchains such as Ethereum (ETH), Avalanche (AVAX), and Polygon (POL).
- RWA tokenization: Stellar allows developers to tokenize real-world assets such as fiat currencies, investment funds, bonds, equities, and commodities on its blockchain.
Drawbacks and Benefits of Stellar blockchain
From powering stablecoins to enabling tokenized assets, Stellar has built a strong reputation in the crypto space. But like any blockchain project, it has both strengths and trade-offs.
Pros: Cons:
Stellar (XLM) Coin’s Analytics
In this section, we analyze XLM tokens to learn how the token has performed over the years. We will look into some key on-chain metrics, market capitalization growth, and hear what experts say about the Stellar project.
On-Chain Metrics
Here are interesting stats and key on-chain metrics that Stellar investors will find insightful:
- Data showed that the market cap of the XLM token has grown from about $300 million in late May 2017 to over $8.9 billion in May 2025.
- The XLM token price has increased by over 9,000% since 2014.
- Stellar’s max recorded throughput stood at 176 TPS, according to Chainspect.
- Stellar’s block time was 5.62 seconds.
- Data from StellarChain Explorer showed over 8.847 billion accounts on the Stellar blockchain.
- Stellar had over 6.675 million active addresses at the time of writing.
- Total value locked (TVL) on Stellar was $90.71 million, at the time of writing, according to DeFiLlama.
What Do Experts Think About XLM?
In April 2025, crypto market research firm 10x Research highlighted a partnership between Stellar and South Asia’s largest retailer, AEON Group, to deploy blockchain payment infrastructure as a key event to boost investor confidence in the XLM token. 10x Research added that the Federal Reserve’s decision to ease crypto banking restrictions in the US has also contributed to XLM’s upward movement in 2025.
Elsewhere, RWA tokenization research firm rwa.xyz ranked Stellar as the third-largest blockchain network in terms of RWA assets. The firm said the total value of RWA assets on Stellar was about $460 million as of mid-2025. Only Ethereum and ZKsyncEra had more on-chain RWA assets than Stellar.
When traditional finance asset management firm Franklin Templeton issued a U.S. Government Money Fund on Stellar, Roger Bayston, Head of Digital Assets at the company, said:
“We believe that blockchain technologies have the potential to reshape the investment management industry by providing greater transparency and lower operational costs for traditional financial products. Blockchains like Stellar’s are important to the investment process of the future, and assets built on blockchain rails, like the Franklin OnChain U.S. Government Money Fund, will eventually be interoperable with the rest of the digital asset ecosystem.”
Is Stellar (XLM) a Buy?
Stellar is a crypto project that has been functioning for over a decade. It currently ranks among the top 20 largest cryptocurrency projects in the world by market cap. The XLM token is one of the ways to gain exposure to the Stellar project. So, if you are optimistic about the future of the Stellar network, you should analyze the XLM token to see if it meets your investment criteria. Remember, cryptocurrencies are highly volatile and risky investment assets. Investors should always conduct their own research before investing in cryptocurrencies. Your decision to buy the XLM token will ultimately depend on your research, outlook for the project, risk tolerance, available capital, and financial goals. Meanwhile, visit our list of 14 Cryptos With the Most Potential in 2025.
How to Buy XLM Coins?
You can buy XLM tokens on top crypto exchanges such as Binance and Bybit. New crypto users should use a centralized crypto exchange to buy their first tokens. These platforms are known for their user-friendly interface, secure environment, convenient fiat onramps, and easy fiat withdrawals. Intermediate and expert users can buy native XLM tokens on-chain using decentralized exchanges such as Stellar DEX.
Best Stellar Wallets
Here are the top DeFi crypto wallets you can download for free or buy online to store and manage your XLM tokens and other Stellar-based digital assets. You can also use these crypto wallets to hold digital representations of real-world assets such as the Franklin OnChain U.S. Government Money Fund on Stellar.
Why Use Best Wallet as #1 Choice? Best Wallet is our top pick for managing your entire crypto portfolio in one place. It supports dozens of major blockchains, offers secure self-custody, and includes built-in tools for swapping tokens, tracking prices, and accessing the best crypto presales. While some tokens are not natively supported yet, Best Wallet remains one of the best choices for anyone who holds assets across Ethereum, BNB Chain, Polygon, and beyond.
Conclusion: What is Stellar (XLM)?
After leaving Ripple, McCaleb launched a rival blockchain-powered payment network in Stellar that continues to grow in stature. While Stellar has always been closely compared with Ripple due to their close origins, it has to be said that Stellar has diverged to create a niche for itself within the RWA tokenization space. Looking forward, investors and users of the Stellar blockchain need to be wary of the centralization of power within the Stellar Development Foundation, which continues to exert control and influence over the ecosystem.
See Also:
- Best Stellar Wallets to Secure XLM in 2025
- Stellar Lumens ($XLM) Price Prediction 2025, 2026, 2030
- 7 Ways to Buy Stellar Lumens (XLM) Instantly in 2025
References
- Chainspect. “Stellar Chain Overview.” Chainspect, https://chainspect.app/chain/stellar.
- Stellar Developers. “Networks.” Stellar Documentation, https://developers.stellar.org/docs/learn/fundamentals/networks.
- Stellar Development Foundation. “Introducing Stellar.” Stellar.org Blog, https://stellar.org/blog/foundation-news/introducing-stellar.
- CoinMarketCap. “Stellar (XLM) Price, Charts, and News.” CoinMarketCap, https://coinmarketcap.com/currencies/stellar/.
- RWA.xyz. “Stellar.” RWA.xyz App, https://app.rwa.xyz/networks/stellar.
- Mazieres, David. The Stellar Consensus Protocol: A Federated Model for Internet-Level Consensus. Stellar Development Foundation, https://8130068.fs1.hubspotusercontent-na1.net/hubfs/8130068/stellar-consensus-protocol.pdf.
FAQs
What is XLM used for?
XLM is mainly used to pay gas fees and for ecosystem funding on the Stellar blockchain ecosystem.
How does Stellar differ from Ripple (XRP)?
Stellar vs. Ripple has always been a topic of interest. Both projects have a layer one blockchain that can host decentralized applications and facilitate cross-border transactions. The main difference is that Stellar is considered more decentralized and permissionless, catering to the everyday needs of individuals and businesses; meanwhile, Ripple is more into helping large corporations and governments tokenize assets, launch their blockchains, and create central bank digital currencies.
How fast are transactions on the Stellar network?
Stellar’s max recorded throughput stood at 176 TPS, according to Chainspect.
Where can I buy XLM?
You can buy XLM tokens on centralized exchanges such as Binance and Bybit. New crypto users are recommended to use a centralized crypto exchange or platforms like Best Wallet to buy their first tokens. These platforms are known for their user-friendly interface, secure environment, convenient fiat onramps, and easy fiat withdrawals. Intermediate and expert users can buy native XLM tokens on-chain using decentralized exchanges such as Stellar DEX.
Who is the founder of Stellar?
Stellar was co-founded by Jed McCaleb, David Mazières, and Joyce Kim.
What makes Stellar unique?
Stellar uses a unique consensus mechanism called the Stellar Consensus Protocol that allows the blockchain to run faster, use less memory, and store data more easily.
Is Stellar a layer-1 blockchain?
Yes, Stellar is a L1 blockchain capable of hostinf decentralized applications and facilitating cross border transactions and P2P transactions.
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