Stellar (XLM): What Is It? Definition & Explanation

Stellar is one of crypto's most established projects. Its focus is not on being a DeFi powerhouse or a smart contract platform; rather, it aims to create a "settlement layer" that connects global payment systems — one that lets individuals, especially in developing countries, send money quickly and cheaply.

What Is It and Who Founded It?

Stellar was founded in 2014 by Jed McCaleb, one of the co-founders of Ripple. After leaving Ripple, McCaleb set out under the non-profit Stellar Development Foundation (SDF) to build a more open and inclusive payment network.

Stellar was initially forked from the Ripple protocol, but over time it developed the Stellar Consensus Protocol (SCP) — a fully original consensus mechanism.

Stellar Consensus Protocol (SCP)

Rather than Proof of Work or Proof of Stake, Stellar uses SCP, which is based on Federated Byzantine Agreement (FBA):

• Each node defines its own trust network (quorum slices) composed of groups of nodes it trusts.
• Network-wide consensus is achieved through the agreement of overlapping quorum slices.
• This structure delivers global consensus with very low latency (3–5 second finality).

Stellar SCP quorum slices — diagram showing network nodes reaching consensus through overlapping trust groups

XLM Token: Supply and Use Cases

• Initial supply: 100 billion XLM (in 2019, the SDF burned ~55 billion XLM)
• Current total supply: ~50 billion XLM
• Circulating supply: ~28–30 billion XLM (as of June 2026)
• SDF reserve: A significant amount of XLM remains under SDF control, used for grants, adoption, and ecosystem support

Ecosystem and Partnerships

Stellar has a rich history of institutional partnerships:

Risks and Considerations

• SDF centralization: The Stellar Development Foundation controls a large amount of XLM, which raises concerns about distribution fairness and market pressure.
• Ripple competition: Direct competition with XRP and RippleNet exists, particularly in enterprise payments.
• Limited DeFi ecosystem: Stellar's DeFi and NFT ecosystem is quite limited compared to Ethereum, Solana, or BNB Chain.
• Payment volume: Despite institutional partnerships, actual payment volume on Stellar has fallen short of expectations.

COINOTAG Perspective

Stellar is technically strong and has a clear value proposition as global payment infrastructure. USDC being issued on Stellar is a meaningful confidence signal; Franklin Templeton's tokenized fund initiative is a concrete example of the institutional tokenization trend taking shape on Stellar. That said, XLM has yet to reflect ecosystem growth in price performance. The SDF's XLM distribution strategy and the speed at which institutional partnerships translate into real transaction volume will be decisive.