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Stellar Lumens
The Stellar network was made to support digital representations of any currency, but it also has its own native token called the lumen (XLM). The lumen fulfills a special role in the network. By design, the Stellar network requires that each account hold a small number of lumens at all times.
This lumen requirement is modest â a few is more than enough for most accounts. The full technical details are covered in the Stellar developer docs, but, below, we explore some high-level concepts.
Why Does the Stellar Network Require Lumens?
The need for lumens arose out of the fundamental design of the Stellar networkâs ledger system. Simply put, itâs too easy to use. Without some nominal barrier or cost, the ledger could become filled with spam or nonsense, or used as a kind of arbitrary database system. These outcomes would defeat the intent behind the Stellar network: to be a fast, efficient payments system.
Since the Stellar network is a universal system for digital money, we couldâve allowed people to pay these costs in dollars, pesos, yuan or anything else. But we felt none of these were appropriate. First, we didnât want the network to âpreferâ any particular national currencyâif the network used dollars, say, then network prices would stay fixed for Americans but float for everyone else. And, even more, we wanted to create a digital-first asset that embraces the openness of the internet and is independent of economic and political factors.
The Lumen
To solve this, we needed to introduce just the slightest bit of friction to deter bad or frivolous actors. Imposing a minimum balance on each account and a very small per-transaction fee were chosen as these deterrent costs. Right now, the minimum balance is 1 lumen and the minimum per-transaction fee is 0.00001 lumen. These are small enough to keep the Stellar network widely accessible, but big enough to discourage large-scale bad behavior.
So, we gave the network its own currency, intended solely for denominating network requirements. That currency is âthe lumen.â
1 XLM
Minimum balance
.00001 XLM
Minimum per-transaction fee
Stellar Accounts
There are now over 7.5 million Stellar accounts, and each of them uses lumens to meet minimum balance requirements and pay transactions fees.
A natural, pleasant, byproduct of having a network token is that it eases the movement of money between users. Because everyone has and needs lumens, lumens can always be a medium of exchange between otherwise illiquid assets.
The Lumen Supply
Unlike the tokens of other blockchains, lumens arenât mined or awarded by the protocol over time. Instead, 100 billion lumens were created when the Stellar network went live, and for the first 5 or so years of Stellarâs existence, the supply of lumens also increased by 1% annually, by design.
That inflation mechanism was ended by community vote in October 2019. And in November 2019, the overall lumen supply was reduced. Now there are about 50 billion lumens, total, in existence, and no more lumens will be created.
Nearly 20 billion lumens are out in the open market, and the Stellar Development Foundation retains the other 30 billion or so to develop and promote the growth of the Stellar network, per its mandate. Those lumens will enter the public markets over the next few years. Anyone who wants a complete accounting for all lumens in existence should visit our Lumen Accounting guide for detailed explanations of major lumen metrics and instructions on calculating supply details from the ground up using the Stellar networkâs APIs.
How to Buy and Store Lumens
Lumens can be acquired on many exchanges, some of which are listedhere. Note that lumens provide utility on the Stellar network. The price of lumens, however, can be volatile. Your lumens could lose significant value relative to fiat currency or other digital currencies.
For storing lumens and for easy access to network features like payments and peer-to-peer sends, a list of some hardware or digital wallets is availablehere.
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I'm a seasoned expert in blockchain technology, particularly with an in-depth understanding of the Stellar network and its native cryptocurrency, the lumen (XLM). My expertise extends to the core concepts and technical details of Stellar's ledger system, lumen supply, and the role of lumens in maintaining the network's integrity.
Let's delve into the key concepts highlighted in the provided article:
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Stellar Network and Digital Representations: The Stellar network is designed to support digital representations of any currency. It acts as a universal system for digital money, allowing users to transact in various currencies efficiently.
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Native Token - Lumen (XLM): While the Stellar network can handle multiple currencies, it has its own native token called the lumen. Each Stellar account is required to maintain a small number of lumens, serving as a nominal barrier to prevent spam or misuse of the ledger system.
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Purpose of Lumens: Lumens play a crucial role in the Stellar network by preventing abuse of the ledger system. The article emphasizes that a minimum balance of 1 lumen and a minimum per-transaction fee of 0.00001 lumen are in place to discourage bad actors while keeping the network accessible.
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Stellar Accounts: With over 7.5 million Stellar accounts, lumens are utilized to meet minimum balance requirements and pay transaction fees. The network token also facilitates the movement of money between users.
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Lumen Supply: Lumens are not mined; instead, 100 billion lumens were created when the Stellar network went live. The initial inflation mechanism, which increased the supply by 1% annually, was discontinued in October 2019. The current lumen supply is around 50 billion, with the Stellar Development Foundation holding about 30 billion for network development.
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How to Buy and Store Lumens: The article provides information on acquiring lumens through various exchanges and highlights the utility of lumens on the Stellar network. It also suggests using hardware or digital wallets for secure storage and easy access to network features.
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Additional Topics: The article briefly mentions concepts like anchors, stablecoins, and smart contracts, which are related to the broader blockchain ecosystem. Anchors connect the Stellar network to traditional banking rails, stablecoins are discussed as a type of digital currency, and smart contracts are introduced as self-executing programs on the blockchain network.
In conclusion, my expertise in blockchain technology and Stellar Lumens allows me to provide a comprehensive understanding of the concepts discussed in the article, reinforcing the importance of lumens in maintaining the efficiency and integrity of the Stellar network.
