What is Stellar (XLM)?

Stellar (XLM), or Stellar Lumens, is a distributed payment platform that aims to connect people worldwide with various payment systems. It aims to enable people to move money quickly across borders without the hassles of hefty transaction fees.

According to the World Bank Report of 2018, financial inclusion is rising. Before the current value of 69%, only 61% of adults had access to financial services in 2014. Hence, Stellar aims to create worldwide access to the global economy.

Unlike other cryptocurrencies that aim to make a profit, Stellar (XLM) only desires to improve the world’s financial situation. Hence, 5% of the network’s total cryptocurrency is kept aside to support operational costs. They also accept donations from investors who wish to see the network grow.

The Lumen (represented by XLM) is the native token of this platform. Stellar achieved immense success upon its introduction to the crypto space, as many investors became interested in it. It has grown from being a relatively unknown cryptocurrency to one of the most successful, judging by its market cap.

Who Created Stellar (XLM)?

Stellar (XLM) is the creation of Jed McCaleb, the co-founder of Ripple. Jed left Ripple in 2013 with a desire to improve the world’s financial system. He created this new financial system (Stellar Lumens) on July 31, 2014, with the help of the former lawyer, Joyce Kim.

Jed McCaleb has had a great deal of experience in the online industry since he started MetaMachine Inc. in 2000. As Bitcoin started receiving public attention in 2009, he had already begun developing a similar digital currency. His, however, relied on a consensus among network members to verify a transaction.

Jed later named the network Ripple, and it utilized a proof of stake consensus for mining. He recruited the aid of individuals like David Schwartz and Arthur Britto while seeking investments for the platform. Jed abandoned his active role in Ripple in 2013 to create the Stellar Open-Source Protocol in 2014.

The Stellar Lumens project later received the aid of Stripe’s CEO, Patrick Collison, to establish the Stellar Lumens foundation. Initially, Stellar utilized a similar consensus protocol with Ripple; however, that changed in 2015. They created their new consensus protocol in 2015, the Stellar Consensus Protocol.

How Does Stellar (XLM) Work?

Stellar (XLM) operates as the Stellar Consensus Network, a couple of decentralized peer networks running independently of each other. Although it started with a similar code from Ripple, the Stellar Consensus Network works on a completely different algorithm.

Unlike Ripple, which requires a financial institution to provide intermediary services for an exchange, Stellar works independently. It uses the concept of ‘Anchors’ to conduct a more decentralized version of money exchange.

Anchors are trustworthy entities that hold onto people’s deposits and issue credits into the stellar network in exchange. These entities facilitate the exchange of different currencies within the Stellar network. Hence, they’re involved in every transaction on the network, except those conducted in Lumens (the network’s native token).

For example, if someone wishes to send 20 dollars to a friend in Japan, the Anchors can facilitate the exchange. The dollars can be converted to Lumens and sent to the recipient, who then converts them back to the Yen. The dollars could also be exchanged for Yen from someone who wishes to sell theirs before getting sent.

All these transactions happen in seconds, making this network very efficient.

Is Stellar (XLM) a Good Investment?

If you’re wondering if Stellar (XLM) is worth investing in, you should consider their future potential and past performances. In 2019, the Stellar Foundation burnt 55 billion XLM tokens, bringing its number down to just half its original. This means the coin will only get scarce in the future, making it rare and more valuable.

Regarding its past performance, there have been a lot of ups and downs with this coin. It rose sharply in 2020 and early 2021 before falling in value after May 2021. However, its value has been on a steady increase recently, making it worthwhile as a risky long-term investment.