What is Stellar blockchain and how it works: A beginner’s guide

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Blockchain has evolved from being one of the most misunderstood and ambiguous terms in the technology world to a common term. Its use has become ubiquitous across industries, from banking to healthcare to supply chain management. This widespread adoption demonstrates blockchain’s potential to improve traditional business models and the potential to create new ones. Bitcoin blockchain’s huge growth has inspired many other projects to follow suit. Stellar blockchain has proven itself as a worthy successor to Bitcoin in the crypto market, attracting the attention of market players. If you are searching for information on Stellar blockchain, this blog post provides an introduction to the Stellar blockchain and all the important aspects of it.

What is Stellar Blockchain?

Stellar is a fully accessible network designed for asset release and transactions. Stellar allows users to create, transmit, and transfer all kinds of value digitally, including U.S. dollars, Argentine pesos, cryptocurrency, and property investments. Through a single platform, it enables unrestricted communication between every banking market globally.

The Stellar platform is an open-source, decentralized platform that facilitates fast, secure, and low-cost cross-border transactions. It enables individuals and organizations to move money quickly and cheaply across borders, thereby promoting financial access and inclusion. Stellar blockchain provides a secure and efficient way to transfer money between different countries, allowing users to save time and money. It also provides a secure and transparent way to store and trade digital currencies. Stellar operates on the same principle as tokens. In addition to trading these tokens, the money can also be withdrawn if necessary. As a result, international remittances have become more convenient and faster than before.

Stellar is a distributed ledger that links banks, payment systems, individuals, and other organizations. Using this architecture, cross-asset value transfers can be facilitated at low costs.

What is Stellar Lumens?

The Stellar network is open to all forms of money and cryptocurrency, but it does have its own currency called lumens, or XLM. Usually, Lumens are used to pay transaction fees on Stellar. Additionally, lumens facilitate quick trades for Stellar users by serving as the intermediate currency.

Money sent through Stellar is automatically converted to lumens and then to the desired coin through a built-in protocol. For example, Stellar converts a U.S. dollar payment into lumens for a recipient in Mexico, who then receives the payment in pesos. A complete conversion takes only seconds, so money can be sent and received anywhere in the world quickly.

History of Steller

Jed McCaleb and Joyce Kim founded Stellar in 2014. Formerly, McCaleb worked on the Ripple payment protocol and co-founded Mt. Gox, the first Bitcoin exchange. The goal was to create an open-source, decentralized, and blockchain-based cross-border payment platform that would be more accessible and efficient.

  • Stellar’s genesis block was created in 2015, with 100 billion Lumens (XLM) being created.
  • Stellar and IBM formed a partnership in 2016 to explore the use of blockchain technology for cross-border payments.
  • Through this partnership, the Stellar network grew and was adopted by IBM Blockchain World Wire, a cross-border payment platform built on Stellar.
  • Stellar’s network continued to expand and grow over the next few years. Stellar Lumens (XLM) airdrops were launched to promote financial access and inclusion in partnership with Deloitte, Stronghold, and Tempo.

Currently, Stellar is one of the largest decentralized platforms for cross-border payments, with a growing community of users, partners, and developers. In addition to facilitating international money transfers, it also promotes financial access and inclusion for people around the world.

How does Stellar blockchain work?

Unlike proof of work (PoW) and proof of stake (PoS), Stellar uses a consensus algorithm created by its native organization, called Stellar Consensus Protocol (SCP), to validate transactions on its network. A key feature of SCP is that it is fast, secure, and energy-efficient. With Stellar, fast and reliable transaction processing is not dependent on proof-of-work or proof-of-stake but on federated Byzantine agreement (FBA).

Its native cryptocurrency is Lumens (XLM), which facilitates transactions on the network. XLM is designed to be a bridge currency between fiat currencies and cryptocurrencies. When sending money from the US to Europe, Stellar cryptocurrency, XLM can be used to convert US dollars to euros and send them to the recipient.

Important features of Stellar blockchain

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  • Stellar’s database is decentralized and open-source – two critical characteristics of a true blockchain.
  • Due to its consensus mechanism, the confirmation time for transactions is 3 to 5 seconds.
  • The system is capable of supporting thousands of transactions per second.
  • Multi-signatures and smart contracts are possible with it.
  • Inflation is fixed at 1% a year.

Stellar blockchain use cases

Cross-border payments

Fast, secure, and low-cost transactions make Stellar ideal for cross-border payments. Lumens (XLM) is used as a real-time currency bridge for quick currency conversions, which allows users to send and receive money in their preferred currencies wherever they are located.

Transfers of funds

Using Stellar, you can send money from one country to another or process remittances. People and families who want to send money to loved ones overseas benefit from its low transaction costs and fast transaction times.

Small-scale finance

Stellar offers financial services to underbanked and unbanked populations. Because of its low transaction costs and support for smart contracts, it makes it possible to automate complex financial transactions.

Supply chain management

With Stellar, suppliers, manufacturers, and distributors can manage supply chains quickly, securely, and at a low cost. With its support for smart contracts, complex supply chain transactions can be automated on the network, such as purchase orders and invoices.


The Stellar network can tokenize assets, including stocks, real estate, and commodities, making them tradeable. It enables fast, secure, and low-cost trading and transfer of asset ownership, which opens up new opportunities for investment and financial inclusion.

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Benefits and drawbacks of Stellar blockchain

Transactions are quick and efficientLimited scalability
Smart contracts are supportedFewer use cases at present
Easy cross-currency conversions and an affordable option for international paymentsLiquidity of the platform may still be limited in certain regions or currencies
A more secure, censorship-resistant, and meddle-free systemCentralizations risks

How is Stellar blockchain secured?

The Stellar blockchain operates on a decentralized, public ledger, as do other blockchain networks. Stellar’s network renders information extremely private and nearly impossible to hack.

A Stellar platform can be joined by anyone as a certified server, so it is completely decentralized and safe. Additionally, the initiative implemented a small fee for each attempt, which eliminates the primary problem that plagues many negligible blockchain applications.

The importance of consensus in a decentralized payment system cannot be overstated. By spreading transaction verification and approval over numerous unique nodes (computers), it avoids dependence on one restricted, centralized location. In order for every ledger to achieve the same condition, every node should update the ledger the same way. Businesses or individuals can operate nodes. Blockchain security depends on consensus, which prevents dual attacks and enables nodes to concur securely.

Stellar blockchain: The future outlook

The future of Stellar Blockchain looks bright despite the challenges. With companies such as IBM, Deloitte, and Stripe using the network for their payment systems, the network has already gained significant traction in the financial industry. With more people becoming aware of the benefits of Blockchain technology, Stellar and other Blockchains are expected to gain traction in the coming years.

Stellar is also implementing a new protocol called StellarX, which allows users to trade a wider range of assets on the network. In light of traditional financial systems’ challenges and limitations, we expect a closer integration between Stellar and traditional financial institutions. As a result, the financial system could be more accessible and efficient.

OpenXcell can help you build solutions on Stellar blockchain

We provide Stellar blockchain solutions as part of our comprehensive blockchain development services. Whether you need Stellar blockchain development or integration or even a completely new app built from scratch, feel free to get in touch with us. With the help of our blockchain experts, we will determine your requirements and what you need to accomplish your business’s technology goals.

Our custom blockchain development company combines comprehensive technical knowledge with proven problem-solving capabilities, allowing you to experience frictionless and quick transactions. Through our Stellar-based blockchain solutions, we make it easy for you to make cross-border payments by establishing a direct connection with a network of fully authorized fiat distribution and acceptance partners. We help you digitize traditional securities and create new financial instruments by providing a Stellar-based asset management system that overcomes the problems associated with traditional remittances.

Our team of blockchain developers can also assist you with integrating the Fiat on/off ramp requirements for your DAPP, which will increase your number of transactions and reach. We can also help you in building digital currency using Stellar. Let us push the limits of your business with our blockchain innovations!

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Niha Parmanandani

A dynamic content writer with a degree in Mass Communication and Journalism, she specializes in writing for web and social media.  It is her passion to play with words and keep up with technology trends. Her passion for reading drives her to create engaging, educational, and inspiring content.


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