Understanding Stellar and Lumens (XLM)
The Stellar network is a distributed blockchain based ledger and database that facilitates cross-asset transfers of value, including payments. The native digital asset of Stellar is called Lumens (XLM). However, Stellar can also support other tokenized assets on its blockchain.
In other words, Stellar is the payment network (Horizon API and Stellar Core) and Lumens (XLM) is the cryptocurrency. Those are both overseen by a non-profit called Stellar.org.
NOTE: People sometimes call Lumens “Stellar,” just like people sometimes call XRP “Ripple” or Ether “Ethereum.” In all cases they are confusing the name of the token with the name of the platform / company. The token is called “Stellar Lumens” or just “Lumens.”
Stellar (the non-profit and network) and Lumens (the cryptocurrency) main selling points are:
- The Stellar network is an open source, distributed, and community owned network used to facilitate cross-asset transfers of value.
- Other tokens can be created on the Stellar network aside from Lumens. Like Ethereum, the Stellar blockchain can house other token types, for example tokenized versions of fiat money can be created to help facilitate cross-asset transfers of value. Due to tokens being able to be issued, exchanged, and transferred via the Stellar Network, Stellar is one of the only other choices for ICOs aside from Ethereum (but not the only other choice; for example the Tron network can handle ICOs as well).
- Like Ripple, Stellar can handle exchanges between fiat-based currencies and between cryptocurrencies.
- Lumens have low fees (each transaction has a minor fee—0.00001 lumens—associated with it).
- The Stellar network, and thus Lumens and any other asset using the Lumen network, has fast transaction speeds that rival Ripple.
- Stellar is secured via the Stellar Consensus Protocol to ensure network security via a decentralized network.
- Stellar.org, the organization that supports Stellar, is centralized like Ripple and meant to handle cross platform transactions and micro transactions like Ripple. However, unlike Ripple, Stellar.org is non-profit and their platform itself is open source and decentralized. Thus, they have the perk of feeling a bit more like a traditional company who can network with other companies on one hand, but have the open source, distributed, and community owned vibe that Ethereum and Bitcoin have on the other. Some might see this has “the best of both worlds.” Major companies thus far, to the extent that they embraced any cryptocurrency, have generally embraced Ripple and Stellar. See: IBM and Stellar Are Launching Blockchain Banking Across Multiple Countries.
In general then, Stellar and its Lumens are competitive with other cryptos on many levels, but are in direct competition with Ethereum for ICOs and Ripple for being a digital partner for banks and businesses.
This makes Lumens (XLM) a cryptocurrency to watch out for moving forward. Keep in mind though, its low price relative to other cryptocurrencies speaks at least in part not to it being underrated, but to its high supply.
FACT: Stellar was originally based on the Ripple protocol and model. This can help us understand why Ripple and Stellar have so many common traits. It isn’t incorrect to say “Stellar is essentially a more open source and decentralized Ripple.”