Stellar: A Blockchain-Based Solution for International Finance

A global financial system’s most significant challenge is the complexity of international payments. Traditionally, transferring money from one country’s currency to another can take several days because numerous banks and intermediaries are involved in the settlement process. The process is costly, slow, and difficult for many people to access, especially those living on the financial periphery of developing countries. The Stellar project aims to address these barriers—through an open-source blockchain network that makes international money transfers faster, cheaper, and accessible to everyone.

The Vision and Foundations of Stellar

The idea of Stellar emerged in 2014 when Jed McCaleb (co-founder of the Ripple project) and Joyce Kim decided to create a more open and democratic financial infrastructure. Their goal was not just to develop a technological solution but to launch a social movement that brings financial services to those previously excluded. This mission is embodied by the nonprofit organization Stellar Development Foundation (SDF), which is responsible for network development, ecosystem growth, and promoting financial inclusion.

Stellar differs in several ways from Bitcoin or Ethereum. While Bitcoin revolves around decentralization and the principle of “no one needs to trust,” and Ethereum focuses on building applications driven by smart contracts, Stellar is explicitly designed for practical payment applications. Its core objectives are low costs, fast transactions, and openness to institutions—these embody the fundamental goals of Stellar.

The Heart of Stellar Infrastructure: Stella Core and the Consensus Mechanism

The operation of the Stellar network is based on Stella Core software and the Stellar Consensus Protocol (SCP). The network is maintained by nodes, or validators, running Stella Core. These nodes collaborate closely: validating incoming transactions, determining their order, and synchronizing the shared ledger approximately every five to seven seconds. This process is significantly faster than the roughly ten-minute block generation time typical of the Bitcoin network.

SCP is based on the Federated Byzantine Agreement (FBA) consensus model, an innovative approach compared to traditional Proof of Work (PoW) and Proof of Stake (PoS) mechanisms. In the FBA model, each validator selects a trusted set of peers called a quorum set. When there is sufficient overlap among different validators’ quorum sets, consensus is reached—meaning the nodes agree on which transactions to include in the next block.

This architecture offers three main advantages. First, it is energy-efficient: there are no resource-intensive mining competitions, and nodes do not need to lock up large amounts of tokens. Second, it is open and inclusive: anyone can operate a node without significant initial investment. Third, it is relatively fast: transactions can be finalized within seconds. Naturally, SCP prioritizes consistency and security, so in rare cases—such as brief pauses while validators reach consensus—there may be short interruptions.

Extending Stellar Functionality: Soroban Smart Contracts

Although Stellar was originally focused on payments, the addition of smart contracts has opened new possibilities. Soroban, the smart contract platform running on Stellar, supports contracts written in Rust, which are compiled into WebAssembly (Wasm) for execution.

Soroban introduces an interesting economic model compared to the traditional Stellar account reserve system. In the basic system, users must maintain a minimum XLM balance to prevent inactive accounts. Soroban operates on a rental model: contracts pay fees based on storage size and active duration. This flexible approach allows developers to create lending platforms, asset management applications, and other complex financial instruments while efficiently managing resources and leveraging Stellar’s fast, low-cost infrastructure.

The Stellar Ecosystem: Institutions and Bridge-Building

Stellar cannot operate without the participating financial institutions that support it—such as banks, fintech companies, and payment providers. These institutions serve as entry and exit points to the Stellar network. The principle is simple: a participating institution accepts fiat currencies (USD, EUR, etc.) and issues corresponding tokenized assets on the Stellar network. These tokens can then be transferred across the network in seconds and redeemed for the original fiat at any participating institution.

This bridge model enables Stellar to provide practical solutions to global financial issues. It replaces traditional banking intermediaries’ long processing times and high fees with a fast, transparent, and low-cost system.

Practical Uses of Stellar

Stellar offers a wide range of applications beyond simple money transfers:

• Fast cross-border payments: Transactions occur within seconds at low cost, ideal for small remittances and global settlement.

• Asset tokenization: Supports digital representations of securities like bonds, ETFs, commodities, and other assets, which can be managed via digital wallets and traded on multiple exchanges and payment platforms worldwide.

• Stablecoin issuance: Various fiat-backed stablecoins—such as USDC—operate on Stellar, suitable for payments and account transfers.

• Microtransactions: Minimal fees enable tiny transfers, useful for tips, donations, or payment models in digital services.

• Financial inclusion: Regions with limited or no bank access can use mobile wallets and participating institutions to access essential digital financial services.

The XLM Token: The Fabric of the Ecosystem

Lumens (XLM) is the native utility token of the Stellar protocol, serving several critical functions:

• Bridge currency: XLM acts as an intermediary between two currencies that lack a direct trading pair, enabling efficient currency exchanges with reduced conversion costs.

• Transaction fees: Every transaction requires a small XLM fee, preventing network spam and ensuring transaction ordering during high activity.

• Account minimums: Accounts must hold a small amount of XLM to remain active. The required balance increases as accounts add trustlines or offers.

• Smart contract fees: On Soroban, fees for storing smart contract data on the ledger are paid in XLM.

The Economic History of XLM

When Stellar launched in 2014, 100 billion XLM tokens were created at genesis. Over the following years, inflation was implemented, increasing supply by about 1% annually, but in 2019, the community voted to remove inflation. That same year, the SDF decided to burn approximately 55 billion tokens, reducing the total supply to around 50 billion without creating new tokens in the future. As of early 2026, about 31.3 billion XLM are in circulation, with the SDF holding roughly 18.4 billion tokens to support network development and ecosystem growth.

The Future of Stellar: On the Horizon

Stellar occupies a unique position in the blockchain landscape. Unlike Ethereum, which is driven by a community of developers building decentralized applications, or Bitcoin, which adheres to strict decentralization principles, Stellar takes a pragmatic, results-oriented approach: unlocking financial services for those who currently lack access or find existing options too costly. With the introduction of Soroban smart contracts, Stellar is expanding beyond traditional finance, enabling developers to build applications and programmable financial services within its ecosystem.

Stellar’s compelling value proposition is simple and powerful: reshape the international financial system to be faster, cheaper, and accessible to all. While many blockchain projects focus on theoretical futures, Stellar aims to solve real-world problems and already supports a global network of partners and users.