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What is Stellar? XLM and its payment network

Stellar is an open source payment network, and XLM is its native token. XLM pays the network's small fees and moves value between currencies.

Vahe HakobyanEditor-in-chief Updated Oct 6, 20263 min readFact-checked

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What is Stellar and XLM?How does Stellar work?Who created Stellar?What is Stellar used for?What legal issues has Stellar faced?FAQ

Key takeaways

Jed McCaleb and Joyce Kim launched Stellar in 2014.
Validators use the Stellar Consensus Protocol, not mining.
The Stellar Development Foundation is a nonprofit that manages the project.

Short answer

Stellar is an open source payment blockchain, and XLM (lumens) is its native cryptocurrency. XLM pays transaction fees and carries value across currencies and assets.

The Stellar Development Foundation says the project aims to connect banks, payment providers and ordinary users, and to widen access for people who lack banking services.

What is Stellar and XLM?

Stellar at a glance

What it is: Open-source, decentralized network
Native token: XLM
Launched: 2014
Managed by: Stellar Development Foundation
Goal (foundation says): Link banks, payment systems, and individuals

Stellar is an open source, decentralized network for moving value between currencies and assets. XLM is its native cryptocurrency. People use XLM to pay transaction fees and to carry value on the network. The software also uses XLM to find exchange paths.

How does Stellar work?

Stellar does not use mining. Validators run the Stellar Consensus Protocol, and the foundation says each validator chooses a trusted group of other nodes to agree with. Stellar says transactions become final in seconds and cannot be reversed.

Stellar and Bitcoin compared
Criterion	Stellar	Bitcoin
New coins	Community voted to stop creating new XLM	Miners earn new bitcoin
Validation	Stellar Consensus Protocol	Mining

Who created Stellar?

Jed McCaleb and Joyce Kim co-founded Stellar in 2014. The Stellar Development Foundation, a nonprofit, manages the project.

What is Stellar used for?

People use Stellar for cross-border payments and to issue digital assets. Stellar says its built-in exchange lets users trade assets without intermediaries.

Cross-border payments and remittances
Stablecoins
Tokenized real-world assets
Peer-to-peer lending

What legal issues has Stellar faced?

US regulators have not announced a public enforcement action against Stellar over XLM sales. The SEC sued Ripple over XRP sales in December 2020, and in July 2023 a judge ruled that XRP sold on exchanges was not a security. That case is about XRP, not XLM.

Frequently asked questions

No. They are separate networks with separate ledgers, though Jed McCaleb co-founded both. The Ripple case over XRP does not decide how XLM is treated.

No. Stellar has no mining. The community voted to stop creating new XLM automatically.

No court has ruled in a public case that XLM is a security. US regulators generally ask whether buyers expected profits from others' efforts.

It is the nonprofit that manages the Stellar project.

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Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.