The Perfect Beginner’s Guide on Stellar Lumens!

The Perfect Beginner’s Guide on Stellar Lumens!

Stellar Lumens

In the period it takes for a single Bitcoin transaction to be processed, another coin known as Stellar Lumens can process anywhere between 120 to 200 transactions within the same amount of time.

After reading this guide, you will better understand Stellar Lumens and its uses. You will also get a better sense of security features and potential uses for the coin.

We’ll start by discussing some of the basic features of the coin. So, let’s begin!

Read also: The Perfect Beginners Guide on How to Make Money With Bitcoin!

What are Stellar Lumens?

You may have come across it before, but up until you begin reading, you might still be asking yourself the question, “what are Stellar Lumens?”

In 2014, the launching of Stellar Lumens happened to narrow the gap between cryptocurrency and the financial world. Since its launch, Stellar Lumens has gotten into several partnerships with a number of the biggest companies in finance and tech. The partnerships include Deloitte, Stripe, and IBM and at least a dozen financial institutions and payment processors in Asia and Europe.

Stellar’s main objective is to become a global digital payment rail by connecting payment systems, banks, and people. It permits you to transfer funds to anyone, anywhere, securely and quickly, with a transaction cost of less than a pennyThis fee alone may run Western Union out of the market.

Some claim that Stellar crypto began as a hard fork from the Ripple protocol. Interestingly, the founder of Stellar Lumens, Jed McCaleb, also founded Ripple. Nonetheless, McCaleb says that the two tokens ARE NOT A FORK and have different codes on his Twitter handle. You can spend the whole day debating about this, but the past won’t reveal to you the exciting future Stellar coin has in days to come.

If Stellar isn’t a Ripple fork, what is it?

The significant difference between the two coins is that Ripple targets financial institutions, including some of the biggest banks worldwide, while Stellar Lumens targets individuals.

To gain perspective, the target users for Stellar are everyday people, like Islanders in the South Pacific who are fueling retail payments using XML cryptocurrency. Ripple, on the flipside, targets some of the largest financial institutions globally, like Bank of America, Santander, and HSBC.

Stellar is not a fork of Ripple. It is an entirely different code.

Jed McCaleb, November 22, 2017

Also, the Stellar coin is different from Ripple because of the type of business that drives the coin, like the Stellar Foundation – a non-profit organization. This implies that there are no shareholders, no dividends, and they receive tax exemptions – only expenses and salaries.

Stellar Lumens also utilizes a different protocol than the one for Ripple, which I will share more in detail after I talk about some of the similarities between Stellar and Ripple.

Read also: The Perfect Beginner’s Guide on Litecoin!

Background of Stellar Lumens

Jeb McCaleb, the co-founder of Stellar, also founded Mt. Gox and Ripple, but he left Ripple in 2015. His departure is difficult to confirm since different sources share different information.

In a famously criticized, 15,000-word article in the New York Observer, the narrative was positioned to pass the message that McCaleb was compelled to leave due to his negative reputation following the Mt. Gox hack.

Just in case you are not in the know, the Mt. Gox hack was the biggest hack in the history of Bitcoin until this year when Coincheck was hacked for over half a billion USD. The Mt. Gox hack incurred losses of over $460 million worth of Bitcoin.

At that time, Mt. Gox was the most significant exchange globally and accounted for over 70% of all Bitcoin transactions. McCaleb had developed the website close to a decade before the attack as a Magic: The Gathering online trading platform (Mt. Gox denoting Magic: The Gathering Online eXchange)

After the Mt. Gox Hack

After the attack, Wells Fargo froze all accounts involved in clearing funds for crypto companies, including those companies’ operating bank accounts, leaving owners of those companies stranded. Among the companies was the Ripple Labs account, which had a two-decade working relationship with the bank before closure.

At the same time, the CEO of Ripple Labs, Chris Larsen, was informed that McCaleb should no longer be linked with the company. Despite having left Ripple to stay on as a board member then, his little engagement as a board member still drove negative publicity for Ripple because of his link to Mt. Gox.

After that, lots of drama followed between McCaleb and Ripple’s CEO. At some point, McCaleb had requested Larsen’s departure, which ended with a board decision of 5 – 1, in favour of Larsen remaining as the company’s CEO (the neigh vote was, of course, McCaleb). That request most likely made for an awkward exchange at the office’s coffee station.

Read also: The Perfect Beginner’s Guide on How to Buy Ethereum!

McCaleb’s Breakthrough

Soon after that, McCaleb received help for Stellar Lumens through a 3-million-dollar investment from Stripe, the Irish-based payment processor. Given the investment’s proximity to Wells Fargo shutting down the Bitcoin taskforce, Stripe had to maintain public distance from Stellar due to its relationship with Wells Fargo. However, now the partnership is in full force with public disclosure.

HoweverMcCaleb had spoken with Coindesk to dismiss most of these claims. He said the story published in the New York Observer was one-sided and included many false statements. One such point that McCaleb dismissed was the story’s focus on Stellar’s Executive Director, Joyce Kim, who left Ripple to work on Stellar with McCaleb.

The story made Kim seem like McCaleb’s crony, and it alleged that Kim was given access to privileged conversations she shouldn’t have seen. As I said, though, many of the points in the New York Observer’s story were dismissed by McCaleb later on as he said the points seriously lacked accurate information and were filled with bias.

Despite the doubts of McCaleb’s reputation within the blockchain community, Stellar has become one of the most famous cryptocurrencies, with partnerships from IBM and other tech giants!

Stellar’s development team is filled with industry leaders, including board members and advisors at places like Stanford University and WordPress. But we’ll talk more about the tight-knit team in a little bit.

For now, let’s jump into the practical and global uses for Lumens.

How can Stellar Lumens be Utilized?

You can picture Stellar Lumens as a more stable and faster cousin to Bitcoin that doesn’t require mining. Stellar can be traded anywhere globally within 3 to 5 seconds, which is excellent for cross-border payments (i.e., overseas transactions). Globally, fast and cheap transactions from your desktop, tablet, or mobile can be handy if you are secluded location without access to banks.

With Stellar, you won’t have to incur an expensive fee from companies such as Western Union. This implies that when you receive or send money from someone abroad, you won’t have to pay 10% or 20% as a transaction fee. On the contrary, you would pay around 0.00001 Stellar, which is currently less than $0.01.

Stellar has an in-built exchange on which you can trade coins such as Stellar’s own Repocoin, Ethereum, or Bitcoin. Also, you can trade Lumens on the exchange. Stellar’s exchange is advantageous if you want to exchange XLM cryptocurrency to EUR (Euro), then give it to a family member or friend on a transfer site like

Between January and August of 2017, Stellar witnessed the platform’s Initial Coin Offerings skyrocketing over 1.3 billion within those eight months alone! ICOs like Mobius (which raised slightly under 40 million dollars) settled for Stellar over more famous blockchains because of Stellar’s consensus protocol and scalability.

ICOs on the Stellar Lumens network are customizable and include several features – including the infamous Lightning Network that you’ve likely heard being linked to Bitcoin. The customization of ICOs is stretched to several behaviours, including collateralized debt, inflation, bonds, issuing dividends, and escrows.

There are many excellent uses of Stellar! Let’s explore how Stellar can facilitate over a thousand transactions in a second.

Read also: The Perfect Beginner’s Guide on Smart Contracts on Blockchain!

How do Stellar Lumens Transactions Work?

Stellar can process a maximum of 1,000 transactions per second, each costing a fraction of a penny. The fee is primarily utilized in preventing the network from encountering attacks. You can transact cross-border payments anywhere globally using Lumens.

As opposed to Bitcoin, Stellar does not utilize Proof of Work. On the contrary, it uses what is known as Stellar Consensus Protocol (SCP). Stellar’s SCP permits payments to be made securely and quickly with anyone anywhere in the world.

Moreover, Stellar’s SCP code permits Lumens to be used without mining, which is necessary for operations. A few people argue that Stellar Lumens is less secure and less decentralized than Bitcoin without mining. Nonetheless, Stellar has nodes or computers all across the world. For this reason, a few people consider it to be semi-decentralized.

For you to acquire Stellar Lumens coins without mining, you’d have to buy them from a cryptocurrency exchange. The safest ways to do this, by popular opinion, are going to Simplex and Coinbase. While the former isn’t an exchange, it gives you an option of buying Stellar coins using a debit or credit card in a secure and fast way!

Once purchased, it is recommended that you keep the coins in a reliable and safe crypto wallet – the Ledger Nano S is the go-to option for many people out there.

Outside of the coin’s current value, there are many other promising directions that Stellar will take soon.

What is the Potential of Stellar Lumens?

Stellar Lumens is especially useful in the South Pacific, where it is anticipated to account for 60% of cross-border payments in the retail exchange corridor. IBM and Stellar are developing banking infrastructure in some of the most isolated islands in the entire world, which lack access to the financial services that most of us might be enjoying – opening a bank account with little or no money.

This global area was selected due to its positioning outside of major trading corridors and included a mix of mature and developing economies, ranging from Vanuatu to global power Australia. The enterprise is new, so it can grow outside of the area once it covers more ground. IBM is applying Lumens to drive this initiative, and it may be the first of many.

Renewable energy is another possible way Stellar Lumens may expand in the future. At the moment, Irene Energy is conducting a crowd sale on Stellar’s internal exchange. Irene utilizes artificial intelligence and blockchain to allow users to select which producer of energy they would like to receive energy from, and the alternatives include your neighbour.

You can picture it as Tinder for energy sources – you can scroll up and down to select which source best fits you. Irene Energy is also building features that permit a futuristic level of transparency in energy supply chains.

Stellar Lumens can be at the forefront as the blockchain community warms up for more fiat-to-crypto trading pairs. A model of a fiat-to-crypto trading pair would be using the Kenyan Shillings to purchase the XML equivalent. FairX, a mysterious upcoming crypto exchange currently operating in stealth, will be powered by Stellar’s network, and the company will bring the one bringing trading pairs to Stellar’s network.

Read also: The Perfect Beginner’s Guide on Dogecoin!

What are the Pitfalls of Stellar Lumens?

Stellar’s potential can be tampered with if confidence is lost in the management team; the development team controls the rest of the coins that will be distributed in the future. For instance, if the co-founder, Jared McCaleb, finds himself in another lawsuit such as the ones he found himself in after attempting to dump his Ripple coins after leaving the company. If confidence is lost in McCaleb, this can be unfortunate news for Stellar Lumens.

Another point of concern is the size of the team at Stellar, which is made of only ten employees, three board members, and eight advisors. Nonetheless, to address concerns about the size of the team, it is made of industry experts and leaders like the President of Y Combinator, the CEO of Stripe, and the founders of WordPress and Angelist.

Once more, this team of developers includes the person who founded Mt. Gox, which oversaw a hack worth 460 million dollars. Nonetheless, his reputation within tech has earned him support from some of the best brains within the tech and blockchain communities.

Even though he founded Mt. Gox, McCaleb and his colleagues keep marching forward, and his reputation has been improving with time. And to McCaleb’s credit, he most likely had no hold over the hack despite being linked with it as a founder of the site, and he didn’t even run the site at the time of the attack.

As luck would have it, Stellar’s internal exchanges and the site have never been hacked. Let’s take a more detailed look into the different security aspects of XML cryptocurrency.

Are Stellar Lumens Secure?

Stellar Lumens has an almost clean security slate, and the Stellar network and the exchange have never experienced any attacks. Nonetheless, there was a time when Lumens were stolen from an online wallet website, but that was beyond the control of XML – it was a fault in the wallet, not Stellar’s technology.

The wallet in the spotlight was; its security was tampered with after an attacker injected code into user accounts with over 20 XML. This attack was relatively modest, resulting in an equivalent of over $400,000 being stolen. Once again, though, this is not a picture of poor security on Stellar’s side, but rather, the’s wallet.

The minimal fee that you incur with every Stellar transaction is spent on preventing Denial of Service (DDoS) attacks. These kinds of attacks typically happen when servers are flooded. Therefore, by charging a small fee, overloading the system becomes expensive for hackers to accomplish.

Bear in mind that Stellar is secure enough to be trusted right at this moment as a partner in IBM’s global blockchain initiative. This reality alone pronounces a little about its level of security. Do you think IBM would want to be associated with an unsecured scam coin?

Read also: The Perfect Beginner’s Guide on Ethereum Coins!

Can Stellar Lumens be Abused?

With more regulations being released, misusing the cryptocurrency system is becoming harder. Like any other currency or token, misuse can happen within the system. Asset hiding, laundering, financial fraud, and insider trading can occur using cryptocurrencies such as Stellar Lumens.


Among all the cryptocurrencies that I have researched and studied, this coin tends to receive the least number of negative criticisms. It has a stable team and a substantial count of advantages over similar projects.

If you have been following this beginner’s guide on Stellar Lumens by now, you should know the story behind it and how transactions are done using Stellar Lumens. You should also be knowing how the future looks like for the project.

But, now that you know what Stellar Lumens is, what do you think?

Join the discussion



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