Stellar is an open-source, decentralised, peer-to-peer (P2P) payment network of servers (nodes) on the blockchain. Each node is interconnected but runs independently. Its native token, Lumen (XLM), was launched in 2014 to facilitate fast and cheap international transfers.
Note
Luno does not currently support sending or receiving XLM, but you can still buy or sell it like any of our other cryptocurrencies. This decision has been made in order to ensure there are appropriate controls in place to maintain the highest standards of investor protection. Learn more about why you can't send or receive XLM.
What makes Stellar different?
Unlike other blockchains, Stellar allows those using its service to transfer both fiat and digital currencies with Lumens, no matter where in the world they live. Lumens are used on Stellar’s network to pay transactions and fees. Simply put, Lumens serve as a universal currency translator.
The main distinction between Stellar and other blockchains is its consensus protocol. While some networks use proof-of-work or proof-of-stake, Stellar uses a proof-of-agreement consensus mechanism called Stellar Consensus Protocol (SCP). This protocol achieves consensus very quickly by checking that small groups of nodes (called quorum slices) agree with one another rather than waiting for the whole network.
The SCP doesn’t rely on a miner network of computers to approve transactions like Bitcoin does, making it faster, cheaper and much more energy-efficient.
How does Stellar work in the real world?
As a payment platform, Stellar connects banks, payment systems and individuals so that they can easily transfer funds around the globe at a fee of one ten-thousandth of a cent at unprecedented speed. At this extremely low cost, the platform eliminates the need for slow and expensive international money transfer services such as Western Union or MoneyGram.
To put this into perspective, banks and financial service providers can take up to five business days to fulfil transactions. Stellar transactions are processed seamlessly within five seconds.
Millions of people working in foreign countries send money home to support their families using these traditional exchanges that charge high fees. Stellar does not charge individuals or banks to use its network.
The fee charged by Stellar is merely a nominal barrier within Stellar’s distributed ledger used to track ownership of all accounts and to prevent bad actors from transaction spamming.
Stellar’s main focus is to reduce the cost and speed at which money is sent so that it reaches the recipients faster. This is achieved through its distributed exchange mode which automatically converts currencies. This means that a user in South Africa sending money in a specific currency (ZAR) to a recipient in France with a different currency (EUR) can withdraw the money sent in their currency equivalent at a bank.
Tip
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This information is not intended to be nor does it constitute financial, tax, legal, investment or other advice; nor is it a call to trade. The information is intended as general market commentary for information purposes only. Before making any decision or taking any action regarding your finances, you should consult a qualified Financial Advisor.