What is Stellar (XLM)?

By CMC AI
23 September 2025 08:45PM (UTC+0)

TLDR

Stellar (XLM) is a decentralized blockchain network designed to facilitate fast, low-cost cross-border transactions and financial inclusion through its open-source infrastructure and native utility token, XLM.

  1. Purpose: Bridges traditional finance and blockchain by enabling global payment systems and tokenizing real-world assets (RWAs).

  2. Technology: Uses the energy-efficient Stellar Consensus Protocol (SCP) for 3-5 second transaction finality and supports smart contracts via Soroban.

  3. Token Utility: XLM acts as network "gas" for fees and liquidity, with a capped supply of 50 billion (55% burned in 2019).

Deep Dive

1. Purpose & Value Proposition

Stellar aims to connect global financial systems by streamlining cross-border payments and enabling institutions to tokenize assets like stablecoins, bonds, and commodities. Partnerships with Visa, IBM, and Franklin Templeton (tokenizing $445M in U.S. Treasuries) highlight its focus on real-world financial integration. Unlike pure payment coins, XLM serves as a bridge currency and anti-spam mechanism rather than a direct competitor to fiat.

2. Technology & Architecture

Stellar’s Proof-of-Agreement (PoA) consensus relies on a network of identifiable validators instead of miners or stakers, prioritizing transparency and low energy use. The 2024 Protocol 20 upgrade introduced Soroban, a Rust-based smart contract platform optimized for financial applications. Soroban supports 5,000+ transactions per second with sub-5-second finality and compliance tools for regulated institutions.

3. Tokenomics & Ecosystem

  • Supply: 50 billion XLM total (31.8B circulating), with no inflation.
  • Use Cases: Transaction fees (0.00001 XLM), liquidity for cross-currency swaps, and governance participation.
  • Ecosystem: Anchors like MoneyGram and Circle enable fiat on/off-ramps, while projects like WisdomTree’s tokenized funds and PayPal’s PYUSD stablecoin leverage Stellar’s infrastructure.

Conclusion

Stellar is a blockchain tailored for institutional-grade financial infrastructure, prioritizing speed, cost efficiency, and compliance. Its hybrid approach—combining decentralized architecture with enterprise-friendly tools—positions it as a bridge between traditional finance and crypto. Could Stellar’s focus on regulated RWAs make it a backbone for mainstream blockchain adoption?

CMC AI can make mistakes. Not financial advice.