Introduction to Stellar (XLM): Technological Innovation and Application Prospects of a Decentralized Payment Network

The Origins and Core Positioning of Stellar

Stellar (XLM) is the native token of the Stellar Network, co-founded by Jed McCaleb and Joyce Kim in 2014. Often regarded as a “decentralized upgrade” of Ripple (XRP), the Stellar Network aims to connect financial institutions with individual users through blockchain technology, reducing the cost and time of cross-border payments while focusing on providing inclusive financial services to the unbanked. Jed McCaleb’s background adds technical credibility to the project—not only was he a co-founder of Ripple, but he also established Mt. Gox, the world’s first Bitcoin exchange. Initially developed based on the Ripple protocol, Stellar later charted its own technological course by adopting the Federated Byzantine Agreement (FBA) to achieve a higher degree of decentralization.

Technical Architecture and Consensus Mechanism

At the heart of the Stellar Network lies the Stellar Consensus Protocol (SCP), designed by Stanford professor David Mazières. SCP achieves consensus through a “trust network” mechanism where each node autonomously selects a set of trusted nodes (known as “quorum slices”), eliminating the need for miners or centralized validators. SCP’s advantages include high efficiency and low energy consumption, with transaction confirmation taking only 2–4 seconds and energy usage being a millionth of that of Bitcoin. Its Byzantine fault tolerance allows the network to withstand up to one-third of nodes acting maliciously or failing, ensuring security. Compared with Ripple, Stellar’s decentralized nature is more pronounced—while the Ripple network is controlled by a consortium of enterprises, Stellar permits any institution or individual to participate in validation, reducing the risk of single points of failure.

Stellar also supports smart contracts and asset tokenization, allowing users to issue stablecoins or custom financial instruments on the network. This flexibility enables its expansion beyond cross-border payments to include lending, insurance, and other DeFi applications.

Token Economic Model and Market Circulation

The total supply of Stellar (XLM) has been adjusted several times:

• In 2014, an initial issuance of 100 billion XLM was made, with an annual inflation rate of 1%;
• In 2019, following a community vote, the inflation mechanism was canceled and the total supply was reduced to 50 billion, with 20 billion in circulation and the remaining 30 billion managed by the Stellar Development Foundation (SDF) for ecosystem building.

Within the ecosystem, XLM plays multiple roles, including preventing spam transactions (each account must hold at least 1 XLM as collateral), acting as a cross-chain bridge (supporting multi-currency exchanges), and serving as a fee payment token (each transaction costs only 0.00001 XLM).

As of March 2025, XLM’s market cap is approximately USD 3.8 billion, ranking it among the top 30 cryptocurrencies. Its price is notably affected by strategic partnerships; for example, after IBM partnered with Stellar to establish a South Pacific payment channel in 2017, XLM’s price soared over 500% in a single month. Investors can track XLM’s price in real time via JuCoin and use on-chain data to assess ecosystem progress.

Application Scenarios and Future Challenges

Stellar’s practical applications focus on cross-border payments and financial inclusion. Its cross-border payment system, developed in collaboration with IBM, now covers 60% of cross-border transactions in the South Pacific, supporting fiat channels in currencies such as USD and AUD. Additionally, its built-in decentralized exchange (DEX) allows users to trade multiple assets without registration. The Stellar Development Foundation (SDF) continuously pushes for technical upgrades; the smart contract functionality added in 2023 has further expanded its application scenarios.

However, Stellar still faces multiple challenges. On the regulatory front, countries like China have at times classified XLM as a “pyramid scheme token” and taken action against it. In terms of market competition, Ripple (XRP) has higher penetration among banks, while emerging blockchains like Solana offer faster transaction speeds. Looking ahead, Stellar plans to consolidate its position by integrating with traditional financial systems (such as SWIFT) and expanding into Africa’s mobile payment market. Its combination of technical innovation and a vision for financial inclusion gives it a unique position in the payments space, but success depends on overcoming both regulatory and technological hurdles.