Stellar (XLM): Crypto's Answer to Traditional International Payment Problems

If​‍​‌‍​‍‌ Bitcoin was the one to invent scarcity digitally and Ethereum was the platform that gave us smart contracts, Stellar has a different goal: to make cross-border payments convenient for average users. Instead of trying to be everything to everyone, Stellar is focused on just one issue - the transfer of money to another country without the loss of a large portion of it due to fees, and the wait that seems to stretch on forever. CoinMinutes has been tracking payment-focused cryptocurrencies closely, and Stellar represents one of the most practical approaches to solving real financial problems.

It's worth knowing that "Stellar" is the network itself, while "Lumens (XLM)" is the cryptocurrency token that makes everything run.

Understanding Stellar Network & XLM Token

Before jumping into investment stuff, you need to understand what makes Stellar work.

Stellar’s network backbone and the XLM token

How Stellar Actually Works

First,​‍​‌‍​‍‌ you have to understand how the technology of Stellar generates value to determine if investing in Stellar (XLM) is worthwhile. The differences in network setup bring it a competitive advantage in global payments, and are also the main reason why financial companies are already adopting it.

Stellar bases its protocol on the Stellar Consensus Protocol (or SCP for short). While Bitcoin is very energy intensive due to proof-of-work, and Ethereum has already moved to proof-of-stake, Stellar’s approach focuses on speed and efficiency.

Basically: consensus means that the computers (nodes) have to agree on the correctness of transactions without the help of a central authority. Stellar accomplishes this through a federated Byzantine agreement - nodes selecting the trusted partners that will help them in transactions verification (quorum slices). Trust relations in the system not only enable it to keep secure but also to be able to perform transactions at a high speed. 

The most distinctive feature of the Stellar community is the fact that anybody is allowed to run a validator node. One does not need to meet the minimum stake requirement or own mining gear. Although the participation prevents power from being concentrated in a few hands, the Stellar Development Foundation still holds the power to direct the network. I am not a particular fan of this type of setting - when I was having a conversation with two validator operators last month, they told me that they were also very anxious about the foundation's control, and hence they felt a need to be cautious too.

Along with that, Stellar supports the network with "anchors" - trustworthy entities that serve as a bridge between Stellar and the currencies. These anchors (usually financial institutions) create the on/off ramps needed for adoption beyond crypto enthusiasts.

Why Does XLM Token Exist & How Does It Work

XLM token is a perfect example of how the Stellar world is a two-way street. First off, the token serves as network spam prevention by asking for transaction fees. The fee for each operation is about 0.00001 XLM - just an ultra-small portion of a cent according to the current XLM market cap but enough to make a spam attack costly.

On top of that, XLM is used in multi-currency transactions. For example, if someone wants to trade Mexican pesos for Nigerian naira but there is no market that directly trades these two currencies, the network will employ XLM to facilitate the trade. Thus this will create a demand for XLM that is driven by its functionality rather than purely ​‍​‌‍​‍‌speculative.

In​‍​‌‍​‍‌ order to have accounts on the network, people need to have a minimum of 1 XLM in their account. This step, albeit small in terms of its value in dollars, is the cause of both the demand and the deterrence of empty accounts which could potentially make the system very slow.

Supply Dynamics & Token Economics

How Stellar’s supply changed after the 2019 burn

At the time of its birth in 2014, Stellar was fitted with 100 billion XLM. In addition to that, the protocol had an inflation rate of 1% allotted for the network's development. However, in 2019, the community of Stellar made a decision to do away entirely with the inflation by burning the half of the supply up to 50 billion XLM.

The change of XLM economics resided in moving from an inflationary to a deflationary model. Presently, each XLM action results in a burn (100 Stroops, or 0.00001 XLM), hence the supply is getting smaller gradually. While the burning rate is very low, the pressure on XLM may become quite significant if the network continues to expand.

According to CoinMarketCap, Stellar's circulating supply was around 30.87 billion XLM up until October 2024. It is also very important to remember that the circulating supply (i.e., tokens that can be traded) should not be mistaken for the XLM total supply (i.e., all tokens that exist). The Stellar Development Foundation is holding some tokens that they will be distributing according to their plan, in order to fund network development and adoption. You can track those distributions by looking at their transparency reports - which is something that I do before making an investment decision.

Technology Innovation & Development

While the news about other networks were grabbing all the attention, Stellar was quietly upgrading its platform with new tech. I personally found the launch of smart contracts very interesting as it totally changes the kind of applications that can be created on the network.

By the activation of Soroban, the platform for smart contracts, Stellar has broadened its reach. Although Soroban is only just beginning to gain traction while the Ethereum smart contract ecosystem is already well-established, the expansion marks a real progress for Stellar’s sustainability. Hosting the DeFi applications means future use of XLM goes far beyond just a payment method. That being said, I have my doubts whether the developers will opt for Soroban over other alternatives, as the problem of getting developers to switch platforms is known to be very challenging in this field.

Market Analysis & ​‍​‌‍​‍‌Valuation

Allow​‍​‌‍​‍‌ me to change the topic and look into the numbers. Knowledge of market metrics will provide you with the background necessary for making investment decisions besides merely the technical capabilities.

Price History & Where We Stand Now

XLM’s long slide from its 2018 peak to 2025 levels

Stellar XLM all time high got to $0.938 in January 2018 during the crypto bubble. The price range of $0.22-$0.24 is a huge fall from that point; however, there is background to be taken into account. The 2017-2018 price hike was a reflection of the overall market frenzy and not of Stellar-specific reasons.

Recently, XLM has been supported by maintenance levels. The price has been kept above 20-week and 50-week moving averages around the $0.22-$0.24 zone, which indicates that a support level has been established. This is a period of consolidation after the announcements of institutional adoption made during the past year and which seemed to have changed the market sentiment.

If we consider the current price along with the circulating supply, the market cap of Stellar puts it in one of the top-tier projects, but still a step away from market leaders Bitcoin and Ethereum. Market cap is an indicative measure of investor trust and liquidity - factors crucial for institutional investors when deciding on the size of their positions and when planning their exit strategies. 

Volatility & Risk Numbers

Stellar​‍​‌‍​‍‌ XLM had a volatility range between 28-42% in September according to the CCData Volatility Index report. Its price fluctuations were more than the volatile of a portfolio of stocks with a range of 15-20% or bonds with a range of 5-10%, but less than most of the altcoins in the market. Such a volatility risk profile is very important when you are deciding on the size of your position.

In order to get a comprehensive picture of Stellar XLM and the most recent market data, it is a good idea to check the figures with various sources. CoinMarketCap and CoinGecko are two very nice tools for measuring your metrics, while Binance, Coinbase, and Kraken exchanges are good trading data sources. The CoinMinutes editorial team also regularly monitors these platforms to provide accurate market updates and analysis. If you want deep and precise insights into on-chain metrics, the Stellar Expert blockchain explorer is absolutely indispensable. The average prices of the XLM token do not differ much from one exchange to another because of its liquidity, but at times of market volatility, these differences can become quite noticeable.

Real-World Adoption & Use Cases

The value of Stellar beyond the changes in price and the technical aspects is mostly dependent on the network's utility and user base. Actually, these applications are the main indicators of whether the network is a solution to the existing problems or simply provides more trading ​‍​‌‍​‍‌opportunities.

Cross-Border​‍​‌‍​‍‌ Payment and Remittance Solutions

From days to seconds: Stellar’s payment advantage

Amongst all Stellar's use cases, one of the most important ones is the cross-border​‍​‌‍​‍‌ payments, which corresponds to a huge potential customer market. An international transfer through the SWIFT network usually takes 3-5 business days and the sender pays a fee which varies from $30 to more than $100 per transaction. On the other hand, Stellar carries out such transactions in a matter of seconds and the cost is less than one cent.

Currently, MoneyGram's collaboration is the major milestone for Stellar in terms of user adoption. People are now able to go to any of the 350,000+ MoneyGram locations with their cash and convert it to USDC stablecoin on the Stellar network. Recipients at MoneyGram locations can easily exchange their digital assets for cash - thus solving the 'last mile' issue which has been a challenge for crypto adoption.

Big Companies That Are Using It

One​‍​‌‍​‍‌ of the most powerful arguments for Stellar was definitely its institutional usage. As a case, the main relationships were:

In an openly shared plan, WisdomTree revealed to the world its intention of tokenizing stock index funds on the Stellar platform. Being the very first major fund to utilize the Stellar framework for securities tokenization, thus, a powerful Stellar endorsement, it would be.

Circle's decision to create USDC on the Stellar network and also enable cross-chain interoperability made the Stellar network the most suitable one for stablecoin-related operations.

Competitive​‍​‌‍​‍‌ Positioning: Stellar vs. Alternatives

Stellar is only one of numerous cryptocurrencies. Evaluating its performance against competitors is very informative for making an investment decision.

Stellar vs. Ripple: Why They're Different After ​‍​‌‍​‍‌All

Investors oftentimes put Ripple and Stellar side by side. As they have similar histories and both are payments-centric, therefore, the comparison is logical. Nevertheless, these two networks have distinctive characteristics. ​‍​‌‍​‍‌

Ripple​‍​‌‍​‍‌ and Stellar fundamentally differ in terms of their strategies. These two different strategies do not only reflect the different origins of the companies but also their different governance structures. As a non-profit, Stellar operates through the Stellar Development Foundation. The Stellar network is a decentralized network with the main focus being on individual financial inclusion and at the same time providing the underbanked with the network. There is less friction for retail users, and the blockchain technology's efficiency is the connection of the financial systems are the focus of the ​‍​‌‍​‍‌design.

Stellar for users, Ripple for institutional rails

The​‍​‌‍​‍‌ difference between these two could also be traced back to their founders: Jed McCaleb, who created Stellar, was also the CTO of Ripple but left due to a conflict with the company's vision. While Ripple is more focused on becoming the backbone of the banking system, Stellar wants to make it possible for people to have easy access to the financial rails.

In fact, their networks are quite similar technically. As a result, transaction times, and the corresponding fees are almost the same. A higher market cap of XRP than XLM has not been stable as the difference has fluctuated quite a bit due to the regulatory developments. The difference in supply is as follows: after the removal of its inflation mechanism, Stellar has changed to a fixed supply model (~50 billion XLM), while Ripple still has 100 billion XRP with different escrow release mechanisms.

The Broader ​‍​‌‍​‍‌Competition

Stellar, besides the competition from Ripple, is facing competition from the likes of traditional financial infrastructure providers such as SWIFT and newer blockchain platforms that are in the process of developing their payment capabilities. Central bank digital currencies (CBDCs) represent another competitive challenge with projects such as China's digital yuan and the EU's digital euro that might affect the demand for independent blockchain payment ​‍​‌‍​‍‌​‍​‌‍​‍‌networks.

Whether Stellar maintains its competitive edge will largely depend on execution and adoption rates. While the technology is solid, the payments space is becoming increasingly crowded, and success often comes down to partnerships and real-world implementation rather than just technical superiority. That's why we at CoinMinutes continue monitoring these developments closely - the difference between a good technology and a successful investment often lies in these practical adoption metrics that emerge over time.

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