How the Stellar Lumen (XLM) Network actually works
How the Stellar Lumen (XLM) Network actually works

What is Stellar Lumen (XLM)?

Stellar (XLM) wants to connect banks, payment providers and people worldwide and across national borders with its payment platform and make money transfers faster, cheaper and more transparent. Stellar is often compared to Ripple. But unlike Ripple, Stellar is a non-profit organization with an "open source" approach, so it sees itself more in the service of the general public. Ripple instead sees itself in the service of banks. Stellar wants to open up the markets to those who previously had no access to the financial world due to a lack of infrastructure. This is the philosophy behind Stellar.

Stellar was created in the year 2014 as a fork from Ripple and continues this tradition even after the further developments of the following years. Regarding the objective, Stellar sees itself as a counter or rather a new design. Not only is the decentralization of the network very important, but above all the "Unbanked", that is to say, the people who could not previously participate in the cashless payment system, should be given the opportunity to use electronic currencies.

How works the Stellar Network?

From a technical point of view, Stellar is a hybrid between a peer-to-peer network, as it is known from other cryptocurrencies, and providers of electronic payment transactions on the internet, such as PayPal. What is unusual is primarily their own terminology, which names various aspects of the system.

Stellar is basically designed as a system for the transfer of payments (largely independent of the currencies used). Lumens are only used for internal billing in the network. The nodes in the Stellar network are called Anchor. They are the entities that accept currency from participants and manage it as credit, similar to a bank or PayPal. If, for example, a money transfer is to be made to another country with a different currency, the Stellar network calculates the original value in the original currency in lumens and at the same time searches for a suitable request to exchange the target currency to which the first order is placed. If there is no equivalent payment order, Stellar determines a chain of transfers through a series of exchanges until the transaction can proceed as desired. Wherever possible, the cheapest courses are searched for and used.

All transactions are managed in Stellar's Ledger, the accounting book. This is essentially the blockchain of the system, but the SDF avoids using the term blockchain in its publications, perhaps in order to stand out more clearly as a transfer system for currencies. The verification of transactions takes place through a consensus mechanism (as usual with blockchains), in the course of which the anchors coordinate the correctness and completeness of the ledger.

The Lumens, the system's tokens, also play a small but significant role in securing Stellar: each Stellar transaction costs a fee of 0.00001 XLM (that's one hundred thousandths of a lumen). While this amount is practically negligible in regular payments, it adds up to significant sums in the event of frequent attacks on the network. DDos attacks, such as botnets, which are otherwise characterized by the fact that they do not incur any costs in the area of resources or money for the attacker, are significantly less likely.

Where can I get Stellar (XLM)?

Stellar Lumens (XLM) is one of the best known and most established cryptocurrencies on the market. I recommend Coinbase to buy and manage Stellar (XLM). At the moment you can also earn up to 50$ in XLM by taking part in the legendary Coinbase Earn Airdrop.

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