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A 2020 Introduction to Stellar Lumens (XLM)
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[Image: stellar-cover.jpg:resizeboxcropjpg?1580x888]
If you consider yourself a crypto-veteran, Stellar Lumens XLM, -2.54% should require no introduction to signify its importance to the broader public cryptocurrency market. For newcomers, we'll capitalize on this opportunity for you to get a first date with Stellar as 2020 gets underway. 

Key takeaways
  • Stellar was initially conceived and developed back in 2014 when key founding members of Ripple Labs disagreed about the future of the company and the XRP cryptocurrency
  • The project has a vision to provide its p2p payment network not just to private businesses, and/or public organizations, but also to those with limited access to traditional banking services.
  • Stripe, Franklin Templeton, and IBM are involved with Stellar to different extents. 

First things first, let's take a look at the terms "Stellar", "Lumens", and "Stellar Development Foundation", which are the three key pillars of the Stellar ecosystem. They are all interconnected with the aim of making Stellar a fast and reliable digital payments network tailored for the underbanked.

The Stellar Development Foundation (SDF) is essentially a supervisory community of core developers, board members and open-source engineers that plays a role in making sure the Stellar blockchain and its native digital currency Lumens (XLM) are working as intended.

Stellar was initially conceived and developed way back in 2014 when key founding members of Ripple Labs had disagreements about the future of the company and the XRP XRP, -1.39% cryptocurrency. 

Jed McCaleb, who was one of the original founders of Ripple and XRP as we know it, was not too keen about the fact that Ripple was going full-on with a for-profit business model, essentially withdrawing itself from the rest of the public cryptocurrency sphere.

Alongside Joyce Kim, McCaleb used Ripple's base-code to create what is today known as Stellar. Even simpler, one could say that Stellar started as a fork of Ripple due to the dispute mentioned above. 

Over time, Stellar managed to get rid of the Ripple mark, shifting its consensus mechanism from RCPA (Ripple Protocol Consensus Algorithm) to a newly developed architecture dubbed SCP (Stellar Consensus Protocol) with a scheduled network upgrade. Besides the fact that SDF didn't want to rely on Ripple Labs technology, the key factor for this shift was the fact that RCPA focused on the "minimization of transaction safety in favor of system activity and node integrity, as well as the ability of the algorithm to achieve correctness".

How Stellar's vision differs from Ripple and other cryptocurrencies

Unlike other cryptocurrencies that let their users figure out what they're going to do with their respective token, and especially unlike Ripple that is targeting specifically enterprise-level customers, Stellar has a simple vision to provide its peer-to-peer payment network, which is reportedly one of the cheapest and fastest around in terms of transaction/confirmation speed, not just to private businesses and/or public organizations, but also to those with limited access to traditional banking services.

Stellar is being promoted in South-East Asian countries, as well as North African countries, where many people do not have access to high quality banking services. In some cases, they have to resort to using SMS credits as a payments medium to perform fast and reliable transactions.

Fintech giant Stripe invested in XLM with a seed investment of $3 million dollars in Stellar's early days. Other major companies that have been involved with the Stellar technology include investment management firm Franklin Templeton and IT giant IBM, who is involved with the public cryptocurrency sphere through a handful of projects.


From an investor's perspective, one should consider Stellar's tokenomics strategy, which at first glance looks similar to that of XRP. However, it does differ in several key areas.

For starters, Stellar's max total supply is 50 billion XLM, while a little over 20 billion XLM is currently circulating in the market. 

While Stellar indeed started with a total supply of 100 billion units, just like XRP, 50 billion XLM was burned (sent to an inaccessible wallet) earlier this year.

Stellar used to have an inflation mechanism, which means that the total XLM supply increased slowly over time. However, this feature has since been discontinued and there won't be any new XLM entering the total supply for the foreseeable future (unless there's another change to the Stellar protocol).


Stellar Lumens (XLM) climbed in the top 10 public cryptocurrencies ladder by market capitalization and it has managed to stick around for a long time now. Its all-time high was back during the first days of January 2018, XLM was trading at around $0.93 apiece with a market cap of $16 billion. 

Should you consider investing in this high-profile blockchain, don't limit your research to this article, but make sure you have a broader understanding of the Stellar Foundation, their vision, and their business model before parting your hard-earned fiat and/or other cryptocurrencies. 

In any case, you shouldn't consider this article as an endorsement or a piece of financial advice, as it was meant only to lay down the basics behind the popular cryptocurrency to those struggling to understand what it is about.

by Ross Peili

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