Education • 13 min read
By Bitpanda
23.03.2026
On most blockchains, a confirmed transaction is final. No one can reverse it, block it or restrict access to it. This is a founding principle of the technology. But for a bank or an asset manager, it is a problem: how do you operate on a network where you cannot freeze a suspicious transfer or recover funds sent in error? Back in 2014, the creators of Stellar designed the network with an unusual philosophy for the crypto world: the blockchain remains irreversible, but the issuer retains control, much as a bank can freeze an account or reverse a wire transfer. This is partly what convinced the likes of Circle, PayPal and Société Générale to issue their digital dollars and euros on the network. This guide explains how Stellar works, the role of its native token XLM, and the fast-growing stablecoin ecosystem built on top of it.
Stellar is a blockchain network founded in 2014 by Jed McCaleb. McCaleb had previously co-founded Ripple, a project with similar ambitions but geared towards commercial banks. Disagreeing with that direction, he set out to build an open network focused on financial inclusion.
The project is run by the Stellar Development Foundation, or SDF, a non-profit organisation based in San Francisco. Stripe, the American payments giant, backed the project from the outset, and its CEO Patrick Collison still sits on the board.
Much like the Linux Foundation or Mozilla, the SDF does not seek to generate profits. Its mission is to develop open technology for the public good. As a result, when people refer to "Stellar", the term can mean different things:
The Stellar network: The blockchain itself, with its validators, its operating rules and its ability to transfer currencies.
XLM (pronounced "lumen"): The network's native cryptocurrency, used to pay transaction fees.
The Stellar Development Foundation (SDF): The non-profit that develops the protocol and funds the ecosystem. When the press writes "Stellar has signed a deal with Visa", it is usually referring to the SDF.
The Stellar network is maintained by roughly 80 validators. Among them, a core group of seven organisations forms the backbone of trust. These are companies and institutions with a direct stake in keeping the network running smoothly.
These validators receive no financial reward for their work. This is very different from Bitcoin, where miners are paid in newly created BTC, or from Ethereum, where validators earn a return in ETH.
Like any blockchain, Stellar relies on a consensus mechanism — the process by which the entire network agrees on which transactions are valid: who sent what, to whom, and in what order. Stellar uses its own, called the Stellar Consensus Protocol (SCP).
The protocol was devised by David Mazières, a computer science professor at Stanford. The principle is that each computer on the network (a validator) selects a group of other validators it trusts. The network reaches agreement once these overlapping circles of trust converge, and confirmation takes just three to five seconds.
Stellar runs on its native currency, XLM. All XLM tokens were created at launch: 105 billion in total. Then, in November 2019, the SDF reduced the supply to 50 billion by permanently destroying 55 billion tokens in a single operation, in order to reduce the risk of dilution for existing holders.
This has not changed the token's two core functions:
Paying transaction fees: Every operation on Stellar costs 0.00001 XLM. This is a fixed amount, which is sent each time to a keyless account and therefore permanently removed from the supply.
Maintaining an account reserve: Every account must hold at least 1 XLM to exist. This is an anti-spam mechanism designed to prevent the mass creation of fictitious addresses.
Stellar is valued for the negligible level of its transaction fees: 0.00001 XLM per operation, a fraction of a penny. The amount is fixed, regardless of the value being transferred. Sending £10 or £10 million costs exactly the same.
With fast, low-cost transactions, Stellar has established itself as a competitive network for payment settlement. But to bridge the gap between digital currency (cryptocurrency) and local currency (fiat), the network needed intermediaries with a presence in the physical world.
These are the Anchors — approved businesses that serve as gateways between the two worlds. A bank, for example, can act as a Stellar Anchor. It converts your euros or dollars into stablecoins on Stellar and, in the other direction, pays out local currency in exchange for your stablecoins.
In recent years, three Anchors have stood out:
MoneyGram
This American money-transfer specialist acts as a gateway through its 475,000 physical locations across 170 countries. An individual can deposit cash at a MoneyGram branch and receive USDC in their Stellar wallet, or withdraw local currency against their stablecoins.
Airtm
This mobile digital wallet is widely used by workers in Latin America and Africa. An employer sends stablecoins; the recipient converts them into local currency within minutes via bank transfer, mobile money or cash withdrawal.
Tempo
This European-based payment provider facilitates euro transfers to Africa using Stellar as its settlement rail.
Within the Stellar network, XLM serves several distinct functions.
This is Stellar's founding use case. The Anchors described above — MoneyGram, Airtm and others — all use the Stellar network to move money across borders.
The pattern is always the same: a sender converts local currency into stablecoins, the stablecoins travel across the network in seconds, and the recipient converts them back into local currency at the other end.
XLM also serves as a tool for converting funds from one currency to another. Sometimes no direct exchange is available between two currencies on the network — euros and yen, for instance. In that case, the system automatically uses XLM as a bridge asset: euros are converted into XLM first, then XLM into yen.
This is executed as a single operation, in a matter of seconds. Stellar describes it as an "atomic" transaction: it either completes in full or not at all. If any step fails, the entire operation is reversed and the funds are returned to the sender. There is no risk of euros being debited on one side without yen being credited on the other.
This is the use case that currently attracts the most institutional activity on the network. XLM is also used whenever a traditional financial asset is issued, transferred or redeemed in token form on Stellar. The more equities, commodities or bonds are tokenised on the network, the greater the demand for XLM.
The network currently hosts over $1.2 billion in tokenised assets. The most prominent example is Franklin Templeton's FOBXX money-market fund, which invests in cash and short-term government bonds. It was the first SEC-regulated fund to be deployed on a public blockchain.
Stellar is a payment network, so it is only natural that stablecoins occupy a central role. Any bank or institution can issue a stablecoin on Stellar. The most notable issuers are Circle (USDC and EURC), PayPal (PYUSD) and SG-FORGE (EURCV).
At the point of creation, the issuer sets the rules that will govern its digital dollar or euro: must the holder's identity be verified before they can receive it? Can funds be frozen or recovered in the event of fraud? These parameters are defined from the outset.
Good to know: As on other blockchains, a confirmed transaction on Stellar is final and cannot be erased. However, the issuer of a stablecoin does not lose all control. It can always, through a separate operation, freeze or recover tokens held in a given account. The original transaction remains on the ledger, but a corrective action can be triggered.
What is it? USDC is a digital dollar. Each token in circulation is backed by a real dollar, held in the form of bank deposits and US Treasury bills managed by BlackRock. The issuer, Circle, is a publicly listed American company. USDC can be redeemed for dollars on most major crypto exchanges.
Why on Stellar? USDC is issued on numerous blockchains, but Stellar offers a combination that few other networks can match: very low fees, settlement finality in seconds, and above all a network of Anchors enabling conversion into local currency in over 170 countries. USDC alone accounts for more than 90% of all stablecoins circulating on Stellar.
Use cases:
Visa settles card payments in USDC on Stellar through its partner Wirex, bypassing correspondent banks entirely.
MoneyGram enables conversion between cash and USDC at its exchange offices, and vice versa.
Companies pay globally distributed teams in USDC on Stellar, with conversion into local currency within minutes via the Anchors.
What is it? EURC is the European counterpart of USDC: a digital euro issued by the same company, Circle, and backed by euro reserves held in European bank accounts. The issuing entity, Circle Internet Financial Europe SAS, holds an electronic money licence granted by the ACPR, the French banking regulator. This makes it compliant with MiCA, the European regulatory framework for digital assets.
Why on Stellar? EURC addresses a need that USDC does not cover: operating in euros on the blockchain without exposure to dollar/euro exchange-rate risk. Its market capitalisation quadrupled in 2025, driven by demand from European institutions for regulated euro stablecoins.
Use cases:
Visa has integrated it into its stablecoin settlement network on Stellar, alongside USDC.
European businesses can pay suppliers or receive payments in digital euros, end to end, without converting into dollars.
It can be used within the network's decentralised finance protocols for lending and borrowing.
What is it? EURCV is also a digital euro. It is issued by SG-FORGE, the digital assets arm of Société Générale, and backed 100% by bank deposits and high-quality liquid assets. SG-FORGE holds a full suite of regulatory credentials: it is an investment firm under MiFID II, an electronic money issuer under MiCA, and a registered digital asset service provider (PSAN) in France.
What makes it notable? What sets EURCV apart is not so much the technology, which is similar to EURC, but what it represents: a systemically important European bank, supervised by the ECB, issuing a digital euro on a public blockchain. It is a significant precedent for the industry.
Use cases:
In January 2026, SWIFT itself used EURCV in a pilot for the settlement of tokenised bonds.
The 21X platform, which is preparing the first regulated secondary market for tokenised securities in Europe on Stellar, will adopt it as a natural settlement currency.
Buying XLM
XLM is available on the vast majority of regulated European exchanges, including Bitpanda. Purchasing it takes just a few clicks, by bank transfer or card, as with any other cryptocurrency.
Gaining exposure to XLM without holding crypto
For investors who prefer a more traditional financial product, there is a European index fund issued by WisdomTree and physically backed by XLM, under the ticker XLMW. This product makes it possible to invest in XLM through a standard investment account, without having to manage a crypto wallet.
Using the Stellar network
More experienced users can interact directly with the network through a wallet such as Lobstr or Freighter (a browser extension developed by the SDF). This is the entry point for holding stablecoins or accessing tokenised funds.
So far, we have described how Stellar works and the stablecoins that circulate on it. But beyond this particular network, the use of stablecoins on a blockchain offers tangible advantages over traditional financial channels.
Near-instant settlement
A conventional international wire transfer takes two to five days, as correspondent banks process the operation. A stablecoin transfer on Stellar settles in seconds, with full finality. This is what makes it possible to offer cash-to-stablecoin conversion in minutes, as MoneyGram does.
Very low transaction costs
Fees on Stellar amount to a fraction of a penny, regardless of the sum being transferred. Sending £50 or £5 million costs the same. In the banking system, international transfer fees range from 3% to 7% of the amount, which makes small remittances prohibitively expensive.
Round-the-clock availability
The network operates 24 hours a day, seven days a week, with no bank holidays or closing times. A worker paid in USDC via Airtm can receive funds at any time and convert them into local currency by bank transfer, mobile money or other available options.
Euro liquidity without dollar conversion
EURC and EURCV allow European businesses and investors to operate entirely in digital euros, without routing through the dollar. For a treasurer managing foreign exchange risk, this removes a layer of friction and cost.
Holding XLM as an investment and using Stellar as a payment infrastructure are two different things. For an investor, the primary risk relates to price. XLM remains a crypto asset whose value fluctuates constantly. Other risks include:
Competition
Ripple, the historic rival, has a market capitalisation 15 to 20 times larger and a broader set of banking partnerships. Solana competes with Stellar on speed and low costs, and has a more developed application ecosystem.
Stablecoin risk
A stablecoin is not a guaranteed bank deposit. Stablecoins backed by real bank deposits and reserves, such as USDC, EURC and EURCV, are structurally more robust, but the risk is never zero.
Centralisation around the SDF
The foundation controls roughly 34% of the total XLM supply, which it sells over time to fund protocol development. Analysts note, however, that Stellar has not raised capital from venture capital firms. There are fewer large holders sitting on blocks of tokens awaiting release — a common risk in the sector known as a "vesting cliff".
Regulatory risk
XLM has never been the subject of enforcement action by the US Securities and Exchange Commission, but the risk that a regulator might reclassify the token as a security is not negligible. The regulatory landscape is evolving rapidly, both in the United States and in Europe, and could affect the terms under which XLM and the stablecoins on the network may be used.
A limited number of validators
The network has only around 80 validators, of which seven are top-tier. By comparison, Ethereum has over a million. Decentralisation is therefore limited: if just three of these top-tier validators went offline simultaneously, the network would halt. That said, in twelve years of operation, the network has experienced only one significant outage.
A past technical incident
In 2017, a flaw in the protocol allowed the fraudulent creation of 2.25 billion XLM — 25% of the circulating supply at the time. The bug was patched and had no lasting consequences, but it serves as a reminder that even mature projects are not immune to vulnerabilities.
When investing in Stellar's XLM token, it is worth bearing in mind that it generates no passive yield. Unlike Ethereum's ETH, it cannot be locked in "staking" to earn a regular return.
The token's value is therefore closely tied to how widely the network is used. This makes it a long-term proposition that may not suit every investor profile. It is also why analysts pay close attention to the growth of stablecoins on Stellar.
Every stablecoin transaction on Stellar consumes and permanently destroys a small amount of XLM in fees. Since the XLM supply is fixed and no new tokens will ever be created, the more stablecoins circulate on Stellar, the greater the demand for XLM while the supply gradually shrinks.
Some analysts view this mechanism as a potential long-term support factor for the token. Others point out that it depends on sustained growth in network activity, which is far from guaranteed. Stablecoins could migrate to competing networks. Regulation could shift unfavourably. As with any crypto asset, caution and diversification are the two golden rules.
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