The importance of XLM Coin to the Stellar Network: Must Know!

Bittime - XLM Coin, or Lumens, is the native currency of the Stellar network designed to facilitate fast and low-cost transactions around the world. XLM coin serves as a means of payment for all transaction fees, fund leases, and to fulfill minimum balance requirements on the network.

With the aim to increase global financial accessibility, Stellar seeks to connect financial institutions and individuals, enabling more efficient and affordable transfers of value.

One of the key features of the XLM coin is its extremely low transaction fees, which are designed to prevent spam on the ledger and ensure transaction prioritization during spikes in demand. These fees are paid in Lumen, and every transaction on the Stellar network requires a small fee to maintain system integrity and efficiency.

With affordable transaction fees, Stellar has the potential to reach more users, especially in developing countries where access to financial services is still limited.

Read also: What is Stellar Soroban? Stellar Network Smart Contract?

XLM Coin Functions in the Stellar Network

The XLM coin has several important functions within the Stellar network. First, Lumen is used to pay transaction fees, which help maintain the security and smooth operation of the network.

Every account on Stellar must maintain a minimum balance calculated based on the base reserve, which is currently 0.5 XLM. This ensures that the account remains active and can participate in the Stellar ecosystem.

In addition, the XLM coin also serves as a tool to fulfill the minimum balance requirement. Every account must have at least two base reserves (1 XLM) to exist.

If the account has subentries, such as trustlines or offers, the minimum balance will increase, and users must ensure that they have enough Lumen to fulfill the requirement. In this way, the XLM coin plays an important role in maintaining the stability and sustainability of the Stellar network.

Stellar Network Sustainability and Growth

Stellar is designed to be a sustainable and efficient network, with all Lumen ever created when the network launches.

Unlike many other digital assets that use a mining process, all XLM coins already exist from the start, which helps to reduce environmental impact. Additionally, Stellar has an inflationary mechanism that ends in 2019, which allows for a gradual growth in Lumen supply over the first five years.

With more than 50 billion Lumen in circulation today, the Stellar network continues to grow and attract the attention of various financial institutions and companies.

The XLM coin serves as a bridge between traditional and digital assets, allowing users to make transactions quickly and efficiently. With a focus on financial inclusion and accessibility, Stellar strives to create a more equitable and sustainable ecosystem for everyone.

Also read: Stellar (XLM) Price Prediction December 23, 2024: Analysis and Projections for Early 2025

Conclusion

The XLM coin plays a very important role in the Stellar network, serving as a means of payment for transaction fees and meeting minimum balance requirements.

With its low fees and sustainable design, Stellar has the potential to change the way we interact with digital assets and financial services. As the network continues to grow and adoption increases, XLM Coin will remain a key component in the wider Stellar ecosystem.

FAQ

What is XLM Coin and what does it do?

XLM Coin, or Lumens, is the native currency of the Stellar network. Its functions include paying transaction fees, meeting minimum balance requirements, and supporting transactions across the Stellar network, which aims to increase global financial accessibility.

Why are transaction fees on Stellar so low?

Transaction fees in Stellar are designed to prevent spam in the ledger and ensure prioritization of transactions during spikes in demand. With very low fees, Stellar can reach more users, especially in developing countries where access to financial services is still limited.

How does the minimum balance work on the Stellar network?

Every account on the Stellar network must maintain a minimum balance calculated based on the base reserve, which is currently 0.5 XLM. Accounts must have at least two base reserves (1 XLM) to exist, and the minimum balance will increase if the account has subentries such as trustlines or offers.

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References

developers.stellar.org, Lumens (XLM), accessed December 23, 2024.

Author: AWW