Stellar Lumens is the virtual cryptocurrency linked to the Stellar blockchain, which was developed and released to facilitate cross-asset transfers of value, including but not limited to payments.
Unlike true cryptocurrencies, such as Bitcoin and Bitcoin Cash, Stellar’s Lumen was not created to become an alternative to fiat currencies.
Lumens (One lumen (XLM) is a unit of digital currency, like a bitcoin) are essential to the Stellar network, as they contribute to Stellar’s ability to move money around the world and to conduct transactions between different currencies quickly and securely.
Stellar is the key driver behind Lumens. Stellar is described as a decentralized fully open-source hybrid blockchain that connects banks, payments systems, and people.
Each transaction is verified by an equivalent process to mining, by way of consensus, with the majority of network required to agree that a transaction took place before it can be verified and entered into Stellar’s ledger.
In the process, lumens are used to facilitate multi-currency transactions through a chained conversion. Lumen is considered to be an intermediary currency.
For example, when looking to send U.S Dollars to a UK Sterling bank account, the Stellar network will find the best available offer, which can be a direct U.S Dollar to UK Sterling conversion, or via a chain, US Dollar to EUR to Swiss Franc to UK Sterling.
As an intermediary currency, Lumen is the pairing with each of the fiat currencies involved in the chain conversion.
In addition to being a part of chain conversions, Lumens are also used to pay for transaction fees and to make accounts on the Stellar network.
The Stellar network was launched in 2014 and Lumens were originally called Stellars. There are a finite number of Lumens, totaling 100 billion.
Stellar is operated by non-profit organization Stellar.org, founded by Jed McCaleb, who also co-founded Ripple that is also a cross-border payment platform.
Some distinct characteristics of Stellar Lumens include:
- There are no physical Lumens, only virtual.
- There are a finite number of Lumens that were made available upon launch of the Stellar network.
- The very nature of decentralized blockchain means that the payment system runs 24-hours a day, with no downtime and has no restrictions on where and to whom payments can be sent.
- Transaction times are between 2-5 seconds.