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What is Stellar Lumens (XLM)?

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What is Stellar Lumens

Stellar (XLM) is a cryptocurrency launched in 2014 by Jed McCaleb. It was conceived with the aim of making international money traffic easier, faster and above all cheaper. The market for so-called ‘cross-border payments’ is a multi-billion dollar market. Transactions between different countries are often very expensive, so there is a fairly large market for XLM’s service. 

In the years after its foundation, XLM grew into one of the eye-catchers in the market. During the bull run of 2021, it was overtaken in terms of market cap by a number of newer coins. As a result, it fell outside the top ten in terms of market size, but still managed to grow to a new high of $16 billion. It remains to be seen if and when this will be surpassed.

Tip: Below you will find a video that explains what Stellar is.

The technique

The Stellar blockchain does not use a mining system like Bitcoin to verify transactions. There it has an agreement with many of the newer projects in the crypto market. The consensus mechanism that the Stellar blockchain uses is a different story. McCaleb devised his own protocol based on a so-called ‘federated Byzantine agreement system’.

How that works exactly is a long and complicated story, but we can say that a Byzantine agreement system uses a layered system of voting. In other words, multiple rounds of consensus are needed to process transactions. Despite that layered system, transactions with XLM are quite fast, and also virtually free. The fact that the consensus mechanism is ‘federated’ more or less means that groups of voters are brought together each time to calculate the consensus. In this way many participants can participate in the voting process, but an agreement can still be reached fairly quickly.

In any case, it is good to know that the consensus mechanism of the Stellar blockchain is thus quite different from Bitcoin, Ethereum and other major projects. This makes XLM a lot faster and cheaper than most other coins when it comes to transactions.


Who is the creator of Stellar Lumens?

Jed McCaleb is the creator of Stellar. The first thing you should know about him is that he worked at Ripple before launching Stellar. McCaleb is a bright man from California, which is home to more brains in computer and internet technology. He can be counted among the most interesting figures in the crypto world, because even before he started at Ripple, he was already known as the founder of one of the first crypto exchanges called Mt Gox. It collapsed like a house of cards in 2014 after McCaleb sold his shares.

By then, McCaleb had already established himself as the first architect of the Ripple Protocol. In 2011, he conceived the concept for a digital currency system where consensus could be reached safely. For the elaboration and business aspects, he attracted the well-known names David Schwartz, Arthur Britto and Chris Larsen. Still, in 2013 he thought it was time to leave Ripple . He did that by the way with a big bag of XRP, which he sold millions at a time where possible in the following years.


The USP of Stellar

If you know what XRP can do well, then you actually know what XLM can do well. It is a crypto that can handle transactions quickly and cheaply, which is especially useful when money has to be sent across international borders. Until recently, companies like MoneyGram and Western Union were making gold profits in that market, being the only alternative to the seriously outdated banking network. With XLM, people have another alternative: as long as they have internet and a mobile device, they can basically transfer money in XLM. These transactions can take place worldwide, and always cost exactly 0.00001 XLM. At the current rate, that’s still… almost nothing.

While McCaleb left Ripple shortly after his bright idea in 2011, when he started Stellar, he largely stuck with the same concept. Not only is the target market the same, but the consensus protocol we briefly discussed earlier has many similarities with Ripple’s. It doesn’t always have to be complicated.

Stellar has already partnered with a number of large companies and organizations over the past few years. For example, it was involved in a project by a Philippine start-up that wanted to stimulate digital payments. One project, however, particularly stands out when it comes to Stellar. In January 2021, it was announced that the government of Ukraine had signed a deal with the company to improve the country’s digital infrastructure. Immediately the price of XLM rose sharply – for a while an XLM was even more expensive than an XRP. It can go wrong!

Where can you buy Stellar?

You have to buy XLM. Since there is no staking or mining involved in the consensus processes of the Stellar blockchain, there is no other option. You can go to almost any reputable exchange to purchase XLM.

Would you like to purchase and store them on a Dutch exchange? Then you should be at Bitvavo. Via the button below you can easily create an account on the exchange and pay no trading costs on the first €1000 in transactions.

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