Stellar and XLM, explained from the ground up

Stellar Lumens (XLM) is the native digital asset of Stellar, an open-source public blockchain built for payments and for issuing digital versions of money and other assets. Lumens pay the network’s transaction fees and fund the small minimum balance every account has to keep. Stellar launched in 2014, was co-founded by Jed McCaleb and Joyce Kim, and is supported by the Stellar Development Foundation (SDF), which describes itself as a non-profit with a mission of “creating equitable access to the global financial system”.

So what is XLM, in one line? It is the fuel and the security deposit of the Stellar network. Every operation costs a sliver of a lumen, every account must hold at least 1 XLM, and lumens can act as a bridge when one currency is converted into another inside a single payment. Nobody mines XLM and nobody stakes it. For the market side of the story, head to the live XLM price page; this page is about what the thing actually is.

Stellar vs Stellar Lumens: the network and the asset

People use “Stellar”, “Stellar Lumens” and “XLM” as if they were the same word, and in casual chat that is fine. Technically they are two different things. Stellar is the network: the open-source protocol, the shared ledger and the validators that keep it in agreement. It handles accounts, payments, a built-in exchange and the issuance of new assets. Stellar Lumens are the asset native to that network, traded under the ticker XLM. On Korean exchanges the coin is listed as 스텔라루멘 and in Japan as ステラルーメン, but it is the same lumen everywhere.

A useful way to picture it: Stellar is a payments rail, and lumens are both the toll and the deposit you leave to use it. Anything else that travels on the rail, from Circle’s USDC to tokenized money market funds, is a separate asset issued by a separate company. To hold one of those, an account opens a trustline, and each trustline locks another 0.5 XLM in reserve. That is why even someone who only cares about digital dollars needs a few lumens in the account. Our guide to stablecoins on Stellar lists the main ones, and the Stellar glossary explains terms like trustline and anchor in a sentence each.

Who created Stellar Lumens? A short history

Stellar went live on 31 July 2014. Its founders were Jed McCaleb, who had founded the Mt. Gox exchange and co-founded Ripple, and Joyce Kim, a former lawyer. Payments company Stripe provided US$3 million in seed funding and received 2% of the initial 100 billion units, Fortune reported at launch. The SDF was set up the same year and given authority over the XLM supply to grow the network.

The first version ran on a consensus algorithm derived from Ripple’s, although Stellar was never a fork of the Ripple network itself. That changed when Stanford professor David Mazières wrote the Stellar Consensus Protocol paper, which introduced Federated Byzantine Agreement. The upgraded network went live in November 2015, and the mainnet still identifies itself with the passphrase “Public Global Stellar Network ; September 2015”. If you want to know how this shared ancestry compares with Ripple’s today, our XLM vs XRP comparison lays it out side by side.

2019 was the year the token economics were reset. Validators voted to switch off Stellar’s 1% annual inflation on 28 October 2019, and a week later the SDF sent about 55.4 billion lumens to an account with no signers, burning them permanently, per the SDF’s lumen documentation. Total supply fell from roughly 105 billion to roughly 50 billion. The same year Denelle Dixon, formerly Mozilla’s chief operating officer, became CEO of the foundation, as CoinDesk reported. The full supply picture lives on our XLM tokenomics page.

The 2020s brought institutions. USDC went live on Stellar in February 2021, MoneyGram announced its partnership with the SDF in October 2021, and Franklin Templeton began running a tokenized US government money fund on the network the same year. Smart contracts followed in February 2024. Our partnerships and adoption timeline covers the deals year by year.

How does Stellar work? The Stellar Consensus Protocol explained

Every blockchain needs a way for computers that do not trust each other to agree on one version of the ledger. Bitcoin uses mining; Ethereum uses staked capital. Stellar uses neither. The Stellar Consensus Protocol (SCP) is a construction of Federated Byzantine Agreement, described in SDF’s developer documentation: each validator picks its own quorum set, meaning the other validators it trusts, plus a threshold for how many of them must agree. The combinations that meet that threshold are its quorum slices. When those trust choices overlap enough across the network, everyone converges on the same result.

Each round has two stages. In the nomination phase, validators propose candidate transaction sets. In the ballot phase, they prepare and then commit to one. SCP deliberately favours safety over liveness, so if validators cannot reach agreement, the network halts rather than forking into two competing histories. For users that trade-off has a pleasant consequence: once a ledger closes, its transactions are final, with no waiting for extra confirmations. SDF says consensus “generally takes about 5 seconds”, and the average close time over 200 recent ledgers was 5.0 seconds when we checked the public Horizon API.

Because nothing is mined or staked, validators collect no protocol rewards. Grayscale’s annual filing for its Stellar trust puts it neatly, describing the model as “similar to proof-of-stake but does not include staking rewards or incentives” (SEC filing). On capacity, mainnet allows 1,000 classic operations and 2,000 smart-contract transactions per ledger, per SDF’s fees and limits page. Treat headline TPS numbers with care: theoretical capacity and what the network actually processes on a normal day are very different figures.

Validators, Tier 1 and the role of the SDF

Anyone can run a Stellar validator, but the network leans on a core group known as Tier 1. According to the Tier 1 requirements, each organisation runs three full validators with their own history archives, spreads them geographically and targets 99.9%+ uptime. Existing Tier 1 organisations decide whether to include a newcomer; the SDF does not decide alone. The Obsrvr Radar crawler listed ten organisations in the top tier at our latest check, including the SDF, Franklin Templeton, MoneyGram, LOBSTR and Blockdaemon, and counted 103 active validators across 22 organisations. That is a third-party view rather than an official roster.

Validators also govern upgrades. A new protocol version takes effect when validators vote it in, which is how inflation was switched off in 2019 and how smart contracts arrived in 2024. The same coordination can be used in emergencies. In February 2026, after an attacker drained about US$10.2 million from a community-run lending pool, Tier 1 validators refused the attacker’s transactions and effectively quarantined roughly 48 million XLM, according to Blockaid. Some see that as responsible stewardship; others see a reminder that a small group of institutions can act together. Both readings are fair.

The SDF itself is the network’s biggest single holder. Its mandate page shows about 14.5 billion XLM spread across four accounts for development, growth, product and liquidity, roughly 29% of total supply. The foundation sells lumens from its development account on exchanges to cover operating costs. That supply overhang is worth knowing about if you hold XLM, and our safety and regulation guide puts it in context with other risks.

Pan-chan says

The SDF is influential, but it cannot change the rules by itself. Upgrades need validators to vote them in.

Lumens vs stroops: fees, reserves and the fee pool

Lumens divide into seven decimal places. The smallest unit is the stroop: one stroop equals 0.0000001 XLM. Fees are quoted in stroops, and the base fee is 100 stroops, or 0.00001 XLM, per operation, per SDF’s fee documentation. When more transactions arrive than a ledger can hold, surge pricing ranks them by what they bid, and everyone included pays the lowest winning bid up to their own maximum. At our latest check of Horizon’s fee statistics, the most common fee actually charged was still 100 stroops; the median was higher because smart-contract calls pay for computing resources too.

Smart-contract transactions add a resource fee on top of the inclusion fee, covering CPU, ledger reads and writes, transaction size, events and storage rent. The unused part of the rent, events and return-value fees is refunded. Where does the money go? Not to validators. Fees flow into a locked fee pool that, in SDF’s words, is “not given to or used by anyone”. It held about 11 million XLM when we last looked.

Then there are reserves. The base reserve is 0.5 XLM, and every account must hold two of them, so 1 XLM, before it can exist on the ledger. Each extra entry, such as a trustline, an open offer or an extra signer, locks another 0.5 XLM. So an account holding two trustlines and one open offer needs 2.5 XLM. That is why exchanges ask you to send at least 1 XLM to a brand-new wallet. Try the numbers yourself in the calculator on our send XLM fees and speed page.

What is Stellar Lumens used for?

Lumens themselves have a narrow, practical job: paying fees, filling reserves and bridging currencies. In a path payment, a sender can pay in one asset while the recipient receives another, with the network routing through its order books and liquidity pools, sometimes via XLM. Lumens are also widely traded, and they can be lent and borrowed in Stellar’s lending apps.

The bigger story is what the network carries. Regulated businesses called anchors connect Stellar to bank accounts and cash, which makes it useful for remittances; see our cross-border payments guide. Stablecoins such as USDC and PayPal’s PYUSD move across it. Asset managers including Franklin Templeton, Spiko and Ondo issue tokenized funds on it, covered in our real-world asset tokenization guide. And since 2024, developers can deploy smart contracts. Most of that activity uses XLM only for fees, which is worth remembering when people link network growth directly to the coin’s price.

Protocol upgrades: from Soroban to Protocol 29

Stellar upgrades in numbered protocol versions, each voted in by validators. Earlier milestones include Protocol 12, which disabled inflation in October 2019, and Protocol 18, which added native liquidity pools in November 2021. The modern era begins with Protocol 20, which introduced Soroban, Stellar’s smart contract platform. Contracts are written in Rust and compiled to WebAssembly. The table below draws on SDF’s software versions page.

The next version, Protocol 30 “Bell”, was scheduled but not yet live at our latest check. SDF’s Bell upgrade guide lists post-quantum signature verification for smart contracts and millisecond ledger timestamps, while noting that Bell does not by itself make ledgers close faster than about five seconds. Developers can dig into the details in our Soroban smart contracts guide.

Common misconceptions about XLM

“There is a fixed cap of 50 billion XLM.” Not quite. Inflation is switched off and supply sits around 50 billion after the 2019 burn, but there is no hard-coded maximum, and CoinGecko shows no maximum supply. “You can stake XLM for rewards.” Not at the protocol level. Any yield on lumens comes from DeFi apps or exchange programmes with their own risks, which our staking and earning guide explains.

“The SEC ruled that XLM is not a security.” There was no ruling. What happened is that a March 2026 joint SEC and CFTC interpretive release listed Stellar (XLM) among its examples of digital commodities. That is guidance, and the SEC said it may revise it. “Stellar is just a copy of Ripple.” The two share a founder and an early consensus design, but Stellar replaced that design with SCP in 2015 and is run by a non-profit foundation rather than a company. Read the full XLM vs XRP breakdown if you want the details, or learn how to buy Stellar Lumens once you are ready to hold some.

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