Stellar was born in 2014 as an offshoot of Ripple because Jed McCaleb, the co-founder, had philosophical differences with the rest of the Ripple board. While Ripple is focused on providing solutions to banks, Stellar aims to help facilitate payments between people. While they work in a similar fashion, Stellar is sort of like a “bottom-up” approach compared to Ripple’s “top-down”.
Stellar Lumens are the currency used by the Stellar network, and when the network was started 100 billion Lumens (XLM) were created. A transaction using Lumens costs just 0.0001 XLM, worth a small fraction of a penny, and usually takes less than 6 seconds to be settled. The supply of Stellar Lumens grows about 1% annually.
How Stellar Works
What makes Stellar more than just a fast cryptocurrency are partner organizations that act as “Anchors”. Anchors are trusted entities that provide lines of credit for people to use the Stellar network using assets such as dollars or euros.
Let’s say you live in the United States and have a friend in France who needs you to send him €100. You could use the Stellar network to do that by paying an equivalent amount in dollars to a Stellar anchor in the US, who would update a balance on the Stellar Ledger, which could be used by a Stellar anchor in France to send euros to your friend. If the two Stellar Anchors settled their books using Lumens, the transaction would cost them less than a penny (though they’re likely to add on their own fees).
When converting between currencies like in the example we just used, the Stellar Network will automatically attempt to find the best exchange rate for you. It does this through a built-in Decentralized Exchange which matches buy and sell offers from the Anchors that actually hold the currency.
The Decentralized Exchange at the heart of the Stellar Network may be its most powerful and least recognized feature because it can be used to trade anything held by the Stellar Anchors – including other cryptocurrencies. Already the Stellar Market supports trading Bitcoin, Stellar Lumens, and Ripple, among others. You can watch buy and sell orders being placed live on the Stellar Dashboard.
Though it’s still in stealth mode, a new company called Fairx looks to be working on using the Stellar network to become both an Anchor and part of the Stellar decentralized exchange by accepting US dollars for cryptocurrencies, similar to Coinbase. If Fairx offers a wider selection of cryptocurrencies than Coinbase, you can expect it and the Stellar Network to explode in size.
Tokens and ICO’s
Ethereum’s “killer app” appears to be tokens and ICOs. But Stellar offers the ability to create tokens as well, and creating a token on the Stellar network offers several advantages. Any token on the Stellar network is automatically already on the Stellar distributed exchange, making it instantly tradable for any other cryptocurrency and, if the right Anchor exists, purchasable for fiat currency, too.
And while the Ethereum ICO craze has, at times, brought the Ethereum network to its knees, the Stellar network can already handle nearly 1,000 transactions per second, compared to Ethereum’s 15 per second. Additionally, the average fee on the Ethereum network has grown to around $0.30, but on the Stellar network, it remains a fraction of a penny.
The Stellar network already had one successful ICO with Mobius, which is meant to be the “Stripe for Blockchain”, letting crypto tokens be used in real-world applications.
The Stellar website also has an incredible amount of documentation for developers looking to integrate. Stellar also provides a RESTful API and Software Development Kits (SDKs) in many languages.
Stellar Foundation and Partnerships
The Stellar Development Foundation (SDF) is in charge of Stellar and is a registered non-profit incorporated in Delaware. Its funding comes from the initial creation of Stellar Lumens, of which it controls 5%. Additionally, the SDF received a loan of $3,000,000 from Stripe back in 2014, which it repaid with 2 billion Lumens.
Stellar has also announced a long list of partners, including IBM, which has announced it intends to use Stellar to move money across borders.
A fast cryptocurrency with low-fees, a built-in decentralized exchange, and the ability to issue tokens and host ICOs may make Stellar the most popular cryptocurrency of 2018.
How to Buy Stellar Lumens (XLM)
Unfortunately, Stellar Lumens aren’t as easy to purchase as Bitcoin. You can’t buy Lumens with a credit card, so you’ll have to use one of the cryptocurrency exchanges to buy Lumens.
We recommend using Binance to buy Stellar Lumens. Read our walkthrough – How To Buy Cryptocurrencies – for a step-by-step guide.