Crypto Across Borders: Explaining the Stellar Blockchain  

Despite the rise in digital finance, sending cross-border transactions still takes considerable time using traditional methods. Due to lengthy processes in different countries and institutions, wire transfers often don’t reach their final address for one to five business days—provided there aren’t any unexpected delays. For crypto developers, these slow transfer speeds represent a roadblock to economic activity that offers the opportunity to use blockchain for speedier, intermediary-free international transfers.

The Stellar Development Foundation (SDF) recognized this issue in 2014 and aims to lead the way in developing a decentralized infrastructure for fast, secure, and low-fee cross-border transfers. Using its Lumens (XLM) cryptocurrency, the SDF continues to work on a global software solution to make blockchain borderless. 

Stellar’s history

The crypto entrepreneur Jed McCaleb introduced the idea for Stellar in a 2014 whitepaper he co-wrote with the lawyer Joyce Kim. Before working on Stellar, McCaleb served as CTO of Ripple Labs, which focused on borderless bank transfers using the XRP cryptocurrency. Although Stellar shares Ripple’s focus on cross-border transactions and used XRP’s code as a starting base, McCaleb distinguished this new blockchain as a nonprofit, open-source network targeting individuals and businesses rather than a for-profit, closed system for financial institutions. 

The nonprofit Stellar Development Foundation (SDF) immediately began building the Stellar Network, and the financial services company Stripe led early-stage funding rounds to get Stellar off the ground. By July 2014, the Stellar mainnet launched as a split (or “fork”) from Ripple’s XRP blockchain. By 2015, however, Stellar introduced its Stellar Consensus Protocol (SCP) as an open-source alternative to the XRP model. 

In addition to Stripe, Stellar continues to build partnerships with other brands and companies to expand its cross-border ecosystem. For example, the financial services company TransferTo partnered with Stellar in 2018, expanding Stellar’s reach to 70 countries. Stellar has also worked with IBM, MoneyGram, and Deloitte to integrate its blockchain services further.

How does Stellar work?

Unlike other consensus algorithms, the SCP doesn’t rely on computing power or locking crypto onchain (aka staking) to validate transactions on a distributed payment ledger. Instead, computers (aka nodes) on the SCP download Stellar’s software and vote on agreements without crypto rewards. Stellar believes the goal of keeping the SCP operational is incentive enough for nodes with a financial stake in the protocol’s security. 

Another distinct feature of the SCP is that it doesn’t require every validator node to confirm every transaction. Instead, the SCP divides nodes into smaller, overlapping groups called “quorum slices,” which agree on the validity of broadcasted transactions and submit them for final processing. These subdivisions within the SCP provide the Stellar blockchain with reliably fast speeds and low transaction fees. 

The Stellar blockchain also works with financial institutions, exchanges, or banks that serve as go-betweens for onchain and offchain transfers. These “anchors” convert between fiat currencies (e.g., the U.S. dollar or Euro) and tokenized assets on the Stellar blockchain, including the native XLM cryptocurrency, stablecoins, or synthetic financial instruments. Anchors attempt to improve liquidity within the Stellar ecosystem and provide a way for individuals and businesses on the network to swap between crypto and fiat assets.

Stellar FAQs

What is the XLM coin? 

Also called “Lumens,” XLM is the native cryptocurrency in the Stellar blockchain, and it serves as the primary currency for converting between tokenized assets when making cross-border transactions. Traders on the Stellar blockchain also use XLM to open new accounts and pay transaction costs (aka gas fees) when sending payments. 

Although Stellar and XLM are different terms, traders often use them interchangeably when researching the Stellar coin price online. If traders search “Stellar price” on exchanges or crypto price aggregators, they’ll find the Stellar price chart highlighting XLM’s latest exchange rate. 

Do validator nodes stake XLM?

Stellar’s proprietary SCP consensus mechanism doesn’t rely on locking cryptocurrency onchain on Proof-of-Stake (PoS) chains like Ethereum (ETH) or Solana (SOL). Therefore, there’s no way to earn interest for transaction validation in the Stellar ecosystem.

What is the Stellar blockchain speed and cost? 

The Stellar Foundation estimates that a transaction takes five seconds to finalize on the Stellar blockchain, and the average cost per transfer is roughly 0.00005 XLM.

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