The Stellar network is an open-source, distributed, and community-owned system used to ease cross-asset transfers of value. Its aim is to help facilitate these transfers at a fraction of a penny while trying to be an open financial system that offers people of all income levels access to affordable services.
Using the platform’s intermediary currency, Lumens (XLM), an individual can send any currency they own to anyone else in a different currency. Stellar is also a payment system that aims to connect financial institutions and significantly reduce the cost and time needed for cross-border transfers.
Benefits of XLM
Stellar aims to be a blockchain network that provides financial access to people in all regions of the world, more so those in the unbanked and underbanked areas. The major benefits of XLM are the low transaction fees, fast transaction speeds for cross-border transfers, and tight security.
Is XLM a Fork of XRP (Ripple)?
Because of the similarities between these two cryptocurrencies, some people assume that XLM is a fork of XRP (Ripple’s token). However, the consensus protocol of the two networks is rather different – while Ripple relies on voting, with transactions approved by over 80 percent of the nodes, XLM allows its nodes to become validators.
Moreover, the two differ in their target audience. XRP is known for offering services to banks and other financial institutions, while XLM focuses on providing transfer services to individuals.
How Does XLM Work?
XLM runs on the Stellar Consensus Protocol, which is a decentralized network of peers that operate independently. The decentralized servers system on the blockchain syncs and reaches consensus, creating the network and enabling the ledger to be divided evenly and as widely as possible.
The Stellar Consensus Protocol allows the network to reach better speeds and be more efficient in comparison to most blockchains operating on Proof-of-Work (PoW) consensus protocols.
Stellar uses what we know as ‘anchors,’ which are entities that people trust to take care of their deposits and distribute credits into the blockchain for the deposits made. The anchors operate as bridges between various currencies and the Stellar blockchain. All the transactions carried out on the Stellar network, besides XLM transactions, are performed in the form of a credit issued by the anchors.
The anchors on the blockchain help with currency transfers; for instance, if you want to send USD for EUR and there are no available trading pairs, the network will trade the USD for XLM and then trade the XLM for EUR. If this option is difficult to process, the network will consider another option – it could exchange the USD for Bitcoin (BTC), then the BTC for XLM, and then the XLM for EUR. Overall, the network always finds the friendliest and fastest way to facilitate the transfers.
How to Buy and Store Lumens (XLM)
To use the Stellar network, you need XLM. Fortunately, the crypto coin can be purchased from various cryptocurrency exchanges and is also available for trade directly on the Stellar blockchain.
After buying XLM, we don’t recommend you to keep them on the cryptocurrency exchange because such platforms are relatively vulnerable to attacks. Rather, you can store them on hot or cold wallet storage units such as Ledger or Trezor. After storing your XLM, make sure you keep your private keys safe so that you don’t lose access to your wallet permanently.
The Bottom Line
Stellar Lumens (XLM) is one of the top cryptocurrencies by market capitalization. It is a popular digital asset that helps facilitate cross-border transfers. Still, unlike Ripple, which focuses on banks and other financial institutions, the Stellar network offers its services to individuals. The Stellar network also facilitates rapid and safe cross-border transfers with low transaction fees.