What is XLM?
Stellar (XLM) is a decentralized blockchain designed to connect financial systems worldwide by enabling fast, low-cost transactions and turning real-world assets into digital tokens.
- Built for finance – Focuses on cross-border payments and secure asset tokenization for institutions.
- Unique consensus method – Uses the energy-efficient Stellar Consensus Protocol (SCP) to finalize transactions in 3-5 seconds.
- Practical uses – Supports stablecoins, remittances, and regulated financial products through partnerships with companies like Visa and WisdomTree.
Deep Dive
1. Core Purpose & Value
Stellar’s goal is to link traditional finance with blockchain technology by offering affordable, near-instant global payments. Unlike general blockchains, Stellar is optimized for:
- Cross-border payments: Companies like MoneyGram use Stellar to send money internationally (Stellar.org).
- Tokenized assets (Real-World Assets or RWAs): Stellar hosts over $522 million in digital assets backed by real-world investments, including Franklin Templeton’s $380 million BENJI fund (CoinDesk).
- Financial inclusion: Helps people without bank accounts by working with regulated entities called anchors that convert regular money into digital assets.
2. Technology & Architecture
- Stellar Consensus Protocol (SCP): Instead of mining or staking, SCP uses a voting system where network participants agree on transactions quickly and efficiently.
- Speed & cost: Can handle over 1,000 transactions per second with fees as low as $0.000001 (Gate.io).
- Soroban smart contracts: A new Rust-based platform for building secure and scalable decentralized finance (DeFi) and business applications, introduced after Protocol 20 (Stellar.org).
3. Ecosystem & Use Cases
- Stablecoins: Supports regulated digital currencies like USDC and Société Générale’s euro stablecoin, EURCV.
- Institutional adoption: Visa uses Stellar for payment settlements, and WisdomTree tokenizes funds that track the S&P 500 index (The Defiant).
- Decentralized exchange (DEX): Built-in order books allow users to swap assets directly without middlemen.
Conclusion
Stellar serves as a blockchain foundation for regulated financial services, focusing on speed, compliance, and connecting different systems. While XLM is the network’s utility token used for transaction fees and liquidity, Stellar’s main strength is bridging traditional finance with decentralized technology. As the financial world moves toward digital solutions, Stellar’s emphasis on real-world applications may give it an edge over competitors focused mainly on speculative decentralized finance.