Stellar (XLM) for Cross-Border Payments

What Stellar Is and Why It Matters

Stellar is a public blockchain built to move money and digital assets quickly and cheaply across borders. It matters because it reduces reliance on slow, multi-step banking rails, offering near-instant settlement and lower fees for remittances, merchant payments, and tokenized assets.

How the Stellar Network Processes Transactions

Stellar Core: The Engine of the Network

The network operates on software called Stellar Core, which is run by a global network of computers (nodes). These nodes collaborate to validate transactions and maintain a shared, public ledger. Every few seconds, they reach an agreement on the next batch of transactions to add, keeping the network fast and in sync. While anyone can use the network, running a node helps secure it and gives you a voice in protocol upgrades.

Stellar Consensus Protocol (SCP)

Instead of using energy-intensive mining, Stellar uses a unique approach called the Stellar Consensus Protocol (SCP). With SCP, validators choose a trusted set of peers to agree with. When enough of these trusted sets overlap across the network, consensus is reached, and transactions are confirmed. This design allows the network to confirm transactions in about 5–7 seconds while consuming very little energy.

Key Platform Features

Soroban: A Modern Smart Contract Platform

Soroban is Stellar's smart contract environment. Contracts are typically written in Rust and compiled to WebAssembly (Wasm) for efficient execution across different environments. Unlike accounts that require fixed minimum reserves, Soroban introduces a rent-style model: contracts pay for the storage they use and how long data is kept. That helps developers build lending apps, asset-management tools, and other programmable finance features while keeping resource use predictable.

Anchors: The Bridge Between Fiat and Crypto

Anchors are regulated entities—banks, payment firms, or fintech providers—that accept deposits in fiat, issue matching tokens on the Stellar ledger, and redeem those tokens back into local currency. By acting as on- and off-ramps, anchors make it straightforward to move value between bank accounts and the blockchain, enabling fast cross-border transfers.

Practical Use Cases

Stellar's architecture is optimized for moving value, making it ideal for several applications:

• Cross-Border Payments: Settle international payments in seconds, not days, for a fraction of the cost of legacy systems.
• Asset Tokenization: Represent real-world assets like bonds, real estate, or stocks as digital tokens that can be easily traded and managed.
• Stablecoins: Issue fully-backed stablecoins on the network for reliable payments and settlement.
• Micropayments: Send tiny payments for things like content tipping or pay-as-you-go services, which are not feasible with high transaction fees.
• Financial Inclusion: Provide access to essential financial services like savings and payments in developing regions through mobile wallets connected to the network.

The Role of the XLM Token

The network's native asset, the lumen (XLM), serves several key functions:

• Bridge Currency: XLM can act as an intermediary when two currencies lack a direct trading pair, improving transaction efficiency.
• Transaction Fees: A small fee (paid in XLM) is required for every transaction to prevent spam and abuse of the network.
• Minimum Balances: Every account must hold a small minimum balance of XLM, which helps secure the network. This reserve increases slightly for each new asset or contract the account interacts with.
• Smart Contract Rent: On Soroban, XLM pays for storage costs tied to contract data.

XLM Supply and Distribution

Stellar was launched with 100 billion XLM. An initial inflation mechanism was voted out by the community in 2019. Later that year, the total supply was reduced when approximately 55 billion XLM were burned.

This left a total supply of about 50 billion XLM, with no plans for future issuance. As of August 2025, around 31.3 billion XLM are in public circulation. The remaining 18.4 billion are held by the Stellar Development Foundation (SDF), a non-profit organization that supports the growth and development of the ecosystem.

Summary

Stellar stands out by combining a high-speed, low-cost consensus protocol with a network of trusted anchors that link directly to the traditional financial world. The introduction of Soroban smart contracts expands its capabilities from simple payments to a full suite of programmable financial services, making it a powerful platform for building the future of finance.