If you've been in the crypto world for a reasonable time, you probably have heard about Stellar or about its coin Lumen (XLM). But if you're not a crypto-fanatic, a researcher or a developer, there's a good chance you don't know what Stellar is used for.

The Stellar Vision

Stellar vision is to make it possible to create, send and trade digital representations of all forms of money (dollars, pesos, bitcoin, euros etc.). Its purpose is to integrate all the world’s financial systems work together as a single network.

To accomplish this, the Stellar network has no owner and it's a open-source public blockchain.

Launched in 2015, Stellar's decentralized system is great for trading any kind of money in a transparent and efficient way. Its native digital currency, the Lumen, is required in small amounts for initializing accounts and making transactions.

A Basic Use-Case

With Stellar you can create a digital representation of any payment form, so let's assume you want to create a digital representation of a U.S. dollar. You will call this a “dollar token”, and you can tell anybody that for each U.S. dollar deposited with you, you’ll issue them one of this dollar tokens. At the same time, you promise to redeem each dollar token in turn for one of the regular dollars in that deposit account.

Now suppose someone loans their tokens to someone else, who then uses them to buy a car. No bank has to settle the purchase or approve the loan.

Stellar Network Principles

Like accountants did for centuries, the Stellar Network writes transactions in a ledger, with a network of independent computers each checking and rechecking the work of the others. A unique algorithm, called the Stellar Consensus Protocol (SCP), keeps everything in sync. For every account holder, Stellar’s ledger stores two things: what they own (account balances, like “10 euro tokens” or “300 lumens”) and what they want to do with their holdings (operations, like “buy 100 dollar tokens for 400 lumens” or “send 100 peso tokens to specific account”.) Every five seconds, all the balances and all the operations are broadcast to the entire network and resolved.

What Makes Stellar Unique?

Stellar is unique because every transaction costs just 0.00001 XLM, and with XLM trading at 0.40 against USDT, this means you're paying almost zero for every transaction. Also, the minimum balance for each user is only 1 lumen.

In addition, Stellar allows a user to create a redeemable, tradable representation of any asset.

Lumen Tokenomics

Lumens aren’t mined or awarded by the protocol over time.

100 billion lumens were created when the Stellar network went live in 2015, and for the first 5 or so years of Stellar’s existence, the supply of lumens also increased by 1% annually, by design.

That inflation mechanism was ended by community vote in October 2019. And in November 2019, the overall lumen supply was reduced. Now there are about 50 billion lumens, total, in existence, and no more lumens will be created.

Where you can buy Lumen (XLM)

XLM is a pretty common currency and a lot of exchanges support it.

Coinbase offers a zero-fee service for XLM purchase, withdrawal and conversion. If you're new to Coinbase, you can register using my referral here and you will get 10 USD for free on your first 100 USD invested on the platform.

A Business Use-Case

A lot of companies are developing Stellar-based financial systems. One of them is SatoshiPay.
One of the most important european publishing houses, Axel Springer, decided to use SatoshiPay for micropayments.

Axel Springer will accept crypto payments thanks to SatoshiPay and earning will arrive in the publisher personal wallet directly, without any intermediary.

Founded in 2014, SatoshiPay initally used Bitcoin blockchain, but since November 2017, the company decided to move on the Stellar blockchain to lower the payment transaction fees.

Thanks for reading, let me know what do you think about it in the comments and feel free to share your experiences!