Stellar XLM/Lumens are the native digital currency of the Stellar network. XLM functions as the intermediate currency for operations and it is also used to pay transaction fees on the Stellar network. ^[1][2][3][4]

Overview

The need for lumens arose out of the fundamental design of the Stellar network’s ledger system. Simply put, it’s 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. ^[7]

Supply

100 billion XLM were issued during the network launch in 2014 and for the first 5 years of Stellar’s existence, the supply of lumens increased by 1% annually, by design. The inflation mechanism was terminated by a community vote in October 2019, resulting in a decrease in the total lumen supply in November 2019. There are about 50 billion lumens total in existence, and no more lumens will be created. ^[5]

Technology

Mining of XLM is not supported on Stellar. Stellar adopts a consensus system called Stellar Consensus Protocol (SCP) in which transactions are approved by using a portion of its network. It is built around the proof of stake model. ^[5]

Utility

Transaction Fees

Stellar requires a small fee for all transactions to prevent ledger spam and prioritize transactions during surge pricing. Transaction fees are paid in lumens. ^[6]

Base Reserves

This is a unit of measurement used to calculate an account’s minimum balance. One base reserve is currently 0.5 XLM. Validators can vote to change the base reserve, but that’s uncommon and should only happen every few years. ^[6]

Minimum Balance

Stellar accounts must maintain a minimum balance to exist, which is calculated using the base reserve. An account must always maintain a minimum balance of two base reserves (currently 1 XLM). Every subentry after that requires an additional base reserve (currently 0.5 XLM) and increases the account’s minimum balance. Subentries include trustlines (for both traditional assets and pool shares), offers, signers, and data entries. An account cannot have more than 1,000 subentries. ^[6]