What is Stellar (XLM)?

Introduction

Stellar (XLM) is an open-source decentralized protocol. The Stellar network enables fast cross-border transactions between any pair of currencies. XML drives the Stellar network and all of its operations in the same way that ETH drives the Ethereum network.

According to its profile on the Stellar website, Stellar is an open-source network optimized for payments and asset issuance. Stellar allows you to create, send, and trade digital representations of any type of value, including dollars, Argentine pesos, bitcoin, real estate, and almost anything else. It is intended to allow all of the world’s financial systems to freely interact with one another on a single network.

Stellar, as a public network, has no owner; in fact, the public owns it. The software is decentralized and open, and it processes millions of transactions per day. Stellar, like Bitcoin and Ether, use the blockchain to keep the network synchronized, but the end-user experience is more akin to cash. Stellar is faster, cheaper, and more energy efficient than typical blockchain-based systems.

The Origin of Stellar

Among the founders of various mainstream coins nowadays, Jed McCaleb, the founder of Stellar, is a legendary figure because he has a very glamorous entrepreneurial history.

Before entering the crypto world, Jed McCaleb created eDonkey in 2000, which was later one of the largest P2P file-sharing software in terms of users.

After being introduced to BTC, Jed McCaleb decided that there was only mining in the space that lacked a trading mechanism, so in 2010 he set up Mt.Gox – an exchange where people could buy and sell bitcoins, but he changed ownership six months after starting it.

Mt.Gox was once the world’s largest bitcoin exchange, accounting for roughly 70% of the global trading volume. Jed McCaleb’s cash out made him miss out on the glory of Mt.Gox’s global #1 and certainly allowed him to avoid the crisis. Jed McCaleb founded Ripple in 2012, developing the Ripple protocol to solve the problem of cross-border payments. However, due to major disagreements with the rest of the team, he left Ripple the following year and founded Stellar in 2014.

Stellar was built on the Ripple protocol at first, but its code was quickly forked and modified. The Stellar coin is essentially a hard fork of Ripple.

In terms of positioning, Stellar and Ripple are essentially the same; both are “cross-border payments,” and both are dedicated to alleviating the pain points of the current closed financial system, such as high transaction costs between systems, slow capital transfer, and poor liquidity.

What is the Stellar Consensus Protocol (SCP)?

Before understanding XLM, one should be familiar with Stellar’s transaction consensus construction.

Stellar’s public ledger operates in a shared, decentralized, and distributed manner, and its database is accessible to anyone worldwide. Stellar employs a novel consensus approach based on XLM to achieve fast and accurate transaction consensus.

The Stellar Consensus Protocol (SCP) is the Stellar Network’s underlying consensus algorithm, serving as a secure structure for the Federated Byzantine Agreement System (FBAS) while also making the Stellar Network a decentralized and permissionless network.

Stellar’s consensus approach enables quick and low-cost transactions, with everyone on the network agreeing on the validity of a transaction in seconds. When a participant adds a transaction to a transaction node, it creates its own mini-network that agrees with other trusted participants, and when these mini-networks overlap, the entire Stellar network can reach an agreement on the validity of those transactions and add them to the ledger quickly.

The FBAS agreement system used by Stellar is a pair of node set “V” and distributed system “Q”, which can specify one or more Quorum Slices for each node. The nodes in SCP can select Quorum Slices using other nodes that they consider important and trustworthy.

With four key components: decentralized control, flexible trust, low latency, and progressive security, FBAS is the key agreement system that underpins the consensus on Stellar transactions.

What is the value of XLM?

Stellar has some practical applications, most notably, it is a global exchange network capable of hosting thousands of currencies and tokens per second.

Stellar simplifies the previously difficult and time-consuming process of exchanging cryptocurrencies for fiat currencies.

On the Stellar network, XLM is used to pay transaction fees and maintain user accounts, and as a crypto asset that is supported by a number of blockchain wallets.

Today, Stellar offers fast, inexpensive, and secure cross-border transactions worldwide with a network built on the native token XLM that facilitates all cross-currency transactions.

The main features of XLM are as follows:

• High capacity (up to 1000 transactions per second) and great network scalability.
• Average operation latency of less than 5s.
• Lowest transaction fee - 0.0001XLM.
• The ability to exchange tokens within the platform.

XLM was created in 2014 and it did not appear on an exchange until 2017. The first landing platform for XLM was Poloniex, with an initial price of about $ 0.002.

The price of XLM fluctuated in the years that followed, falling to between $0.01 and $0.02, but XLM maintained a high volume of trading and liquidity, and subsequently increased in price as the market changed.

XLM is currently maintaining a decent trading volume and value despite the overall market downturn.

To inhibit commercial interests, the project team created the Stellar Development Foundation with the maximum purpose of supporting the development of the open-source Stellar network.

In addition, the XLM has an initial issue size of 100 billion units, with a slight inflation of 1% per year thereafter. The specific distribution ratio for the initial 100 billion units is as follows.

• 50% to be distributed worldwide through a direct distribution program
• 25% to nonprofits to give to people who are financially underserved
• 20% distributed through the Bitcoin program (distribution complete)
• 5% retained for operating expenses, held by the Stellar Development Foundation

This means that 95% of XLM was distributed for free via airdrop. XML explored a new form of token distribution at the time, and it was one of the earlier coins to take the form of a large airdrop.

Participation on Stellar requires all accounts to hold at least 20 XLM, with a very small fee of about 0.00001 XLM charged per transaction, meaning you can complete 100,000 transactions with 1 XLM. This is one of the reasons why XLM has always had a high circulation as an instrumental token and an intermediate bridge currency, but even with a large number of people using it, it is unable to drive the price of XLM from a supply and demand standpoint.

What do Stellar and XLM bring to the industry?

Stellar is based on open-source code and offers a crypto-to-fiat currency exchange service. Nodes that implement the appropriate protocols will form a single decentralized network that exposes and shares relevant information.

Each individual node maintains the chain selected by the user and the account it belongs to, and any network node can declare a need to change the account database to change the properties of certain accounts. To make changes, all nodes must reach some kind of agreement, called “consensus”, in order for the changes to take effect. The consensus algorithm is triggered at intervals of 3 to 5 seconds. The modified copy of the blockchain is stored in the same form on each node’s server, and disabling one or more nodes does not affect the performance of the entire ecosystem.

Conclusion

The current number of XLM users is actually decreasing, and while it achieved a good technological breakthrough in the early days, Stellar’s competitors have gradually lost their technological advantage over the years, as far as the results are concerned.

XLM has been on the major exchanges for nearly five years, and while it is always in circulation, there is less and less information about it in the trading space since the price crashed due to market volatility in 2019.

The Stellar Development Foundation, the current team’s main body, released its roadmap for 2022 this year, but the emphasis has already shifted to the network and applications. Stellar’s decentralized community is still active and can be used to research relevant technological trends and directions.

Overall, XLM is currently a member of the Altcoins sequence, and many factors, such as the price trend of BTC and Stellar’s changes and adjustments to the inflation mechanism, will influence its future value.