What is Stellar

Stellar is a blockchain system that aims to connect different people and financial institutions worldwide. The project is very similar to Ripple’s, as both companies share the same co-founder.

The main goal of Stellar is to make an accessible, cheap, and easy-to-use payment system.

XLM (or, in other words, Lumens) is the native cryptocurrency of the network. XLM is similar to other cryptocurrencies to a large extent but is distinguished by the fact that it is not the token that is the focus but the blockchain itself.

Stellar’s history

  • 2014 – Mt. Gox founder and Ripple co-founder Jed McCaleb created the Stellar network with former lawyer Joyce Kim. The non-governmental organization (NGO) Stellar Development Foundation was created in partnership with Stripe director Patrick Collison. The project itself was officially launched in July of that year after an initial investment of $3 million (for which Stripe received 2% of XLM’s total offering or $2 billion in tokens.) Initially known as “stellars,” the tokens were later rechristened XLM or Lumens.
  • In 2014, the name was changed to lumens. In 2014, the Foundation put 100 billion tokens into circulation, increasing supply by 1% per year over the next 5 years.
  • 2015 – The Foundation behind the project released an updated proof of stake (PoS) algorithm that uses the Stellar Consensus Protocol (SCP) crypto protocol. The same year, Stellar unveiled an integration with Vumi (a messaging platform in South Africa) that uses talk time as a currency. In April, Stellar also integrated Oradian’s banking platform.
  • 2016 – Deloitte announced building an international payments app using Stellar. Later that year, the payment system expanded to Philippine startup Coins.ph, private Indian bank ICICI, African payments company Flutterwave, and French payments company Tempo Money Transfer.
  • 2017 – Stellar partnered with IBM in October for international payments in the South Pacific. In December, TechCrunch wrapped up Stellar’s partnership with Nigerian payments platform SureRemit.
  • 2021 – Ukraine’s Ministry of Digital Transformation announced a collaboration with Stellar to develop the country’s digital infrastructure. The same year, Franklin Templeton launched the first tokenized mutual fund in the US that is based on Stellar.

How does Stellar (XLM) work?

Stellar’s decentralized network is based on a proof-of-stake consensus mechanism. While the project is not as decentralized as Bitcoin, this disadvantage is compensated by fast transactions and the high efficiency of the blockchain.

Apart from the consensus mechanism, Stellar differs from Ripple in how transactions are carried out. Banks use Ripple to offer intermediary services for currency exchange. Stellar uses a decentralized method called “anchors.”

Anchors act as a bridge between different currencies and the Stellar network. All monetary transactions on the Stellar network (except for the local digital currency XLM) take the form of credits issued by so-called anchors.

Transaction on the Stellar network occurs in several different ways. Peer-to-peer exchange ranks first. Secondly, lumens can be exchanged for Indian rupees. And lastly, linking through various fiat currencies – for example, you can exchange US dollars for euros to buy Indian rupees.

Network specifications

Stellar’s distributed ledger tracks the ownership of accounts and tokens on the network using the unique Stellar Consensus Protocol (SCP) algorithm.

The ledger stores the balances and transactions of all accounts. Each transaction is confirmed by computers (nodes) with the Stellar software. All this information is shared across the network every 5 seconds.

Stellar can process transactions within 5 seconds, and the transfer fees are negligible – 0.00001 XLM, which may vary.

The main goal of the project is to become a global system. Unlike the traditional financial system, Stellar can speed up transactions, where it would take days before funds arrive. But instead of seeking a solution by replacing traditional banking methods, Stellar aims to improve them.

Key network features

Token creation: the Stellar network allows the creation of tokens from any currency you can think of: dollars, euros, yen, pesos, and even cryptocurrencies like Bitcoin.

Automatic conversion: The blockchain automatically regulates the exchange from one currency to another – meaning you can send dollars that can arrive in another currency without having to calculate exchange rates.

Global connectivity
: Stellar aims to improve the current financial system by offering collaboration with banks and a growing network of partners. This way, users can convert their XLM into any other currency outside the blockchain.

Passive income with Stellar

With Ultra Stellar, you can generate passive income. Ultra Stellar issues the following income-generating tokens:

  • yXLM
  • yUSDC
  • yBTC
  • yETH

Each of these tokens is pegged 1:1 with the corresponding cryptocurrency. In other words, the price of yETH corresponds to that of ETH.

This Stellar product allows you to exchange tokens for network-specific assets that generate daily profits.