What You Need to Know

The Stellar Development Foundation (SDF) is a nonprofit organization dedicated to creating equitable access to the global financial system through blockchain technology. SDF develops resources and tooling on the Stellar network. SDF also provides grants, investments, funding, and other awards to builders and organizations. SDF is not a financial institution, money remitter, money transmitter, or money service business. SDF’s operations do not require any money or money transmitter licenses under U.S. law.

Blockchain is a type of digital technology that records information in a secure, transparent, and tamper-resistant way. For financial services, blockchain can modernize how transactions are recorded, verified, and settled. Blockchain protocols differ in how information is recorded on the ledger.

Tokenization creates a digital representation of a real-world asset via a digital token so that assets can be issued, sent, and recorded on the blockchain.

Creating a digital representation of a financial asset on the blockchain can streamline issuance, trading, and management. Tokenizing financial assets offer opportunities to streamline operations, eliminate intermediaries, reduce credit and settlement risks, and automate processes, all of which supported a reduction in operational cost. Tokenization can also extend product reach into new markets. For example, tokenization enables fractional ownership of many assets at a low cost.

The Stellar network is an open-source, decentralized, public blockchain purpose-built for financial products and services. The network is faster, cheaper, and more energy-efficient than most blockchain systems. Stellar is optimized for financial transactions, featuring native asset controls, a built-in decentralized exchange, and smart contract functionality. In 2024, the network processed 2.6 billion in total operations with a corresponding payment volume of $32 billion.

The Stellar network is purpose-built for financial services, featuring tools that address regulatory considerations, mitigate operational risk, and facilitate near-zero-cost transactions. Regulated financial institutions, such as Franklin Templeton and WisdomTree, chose Stellar because:

• Native asset controls, such as the clawing and freezing of assets, are core features of the network
• A number of AML/KYC compliance requirements and external tools are supported
• Thousands of transactions can be processed for less than a cent
• Validators provide their identifying information on public record
• Validators operate without on-chain financial incentives built into the protocol
• A built-in decentralized exchange can facilitate the exchange of Stellar assets
• Smart contract functionality is built with Rust, a trusted programming language designed for safety and speed

The table below highlights some of the key differences between Stellar and other blockchains.

The Stellar network uses the Stellar Consensus Protocol (SCP) to validate transactions. The SCP is a proof-of-agreement system with no on-chain financial incentives that utilize a federated Byzantine agreement (FBA) protocol. This design is intended to overcome the limitations of incentive-based mechanisms, such as proof-of-work (PoW) and proof-of-stake (PoS).

Key features include:

• Trusted and known quorums: Unlike PoW and PoS blockchains, a validator knows the identity of other validators they agree with. And unlike traditional Byzantine fault tolerance systems that require a universally known set of validators, SCP allows each validator to choose its own trusted set of other validators (called a "quorum slice"). This creates a structure where different participants can have different trust assumptions while still working together to validate transactions.
• Safety and liveness: SCP favors safety over liveness. This means that the network won't confirm contradictory statements over continued operation. The system processing will stop until contradictory statements are resolved. This differs from other blockchains that will create two chains each with a different statement. Network validators must agree on a canonical chain and the dropped statement must be resubmitted. Other consensus mechanisms can also be undermined or continue to make progress even if a significant number of validators are unavailable.
• Energy efficient: SCP is not computational intensive so it requires minimal energy to process transactions quickly. A PwC study suggests the Stellar network emits the annual CO2 equivalent of 33 U.S. homes’ electricity use.

Settlement on Stellar is fast, deterministic, and secure. Records written to the ledger, which happens roughly every five seconds, are irreversible and guaranteed to be final. For transactions involving the exchange of two assets on-chain, settlement occurs on a gross basis, and the exchange is atomic.

The Stellar network has a 99.99% uptime record since its creation in 2014. In the history of Stellar, the network has only halted once–for 67 minutes on May 15, 2019. When it happened, multiple validators, including SDF, noticed immediately, contacted one another, convened a war room using public channels. After that halt, which was caused by validator configuration issues, SDF worked with other network participants to clarify best practices for validator configuration, formalize communication channels, set expectations for what it means to be a “Tier 1” validator (see above), and come up with a response plan in case of any future incidents.

As of June 17, 2025, Stellar’s maximum theoretical TPS is 2,032 and its max TPS (per 100 blocks) is 176. (Source)

There are 94 validators on Stellar, with 64 publishing complete archives of the network’s history. Asset issuers can also be validators, as in the case with Franklin Templeton, which means they have a vested interest in the network’s security. For more information on Stellar validators, visit https://stellarbeat.io/.

Because Stellar favors safety over liveness, the network will halt if an issue arises and allow the organizations that run validators to resolve the issue before processing new transactions. This coordination is possible because Stellar validators are not anonymous. Validators have individual teams that communicate and respond to network incidents. Since Stellar is designed to halt when there is an issue, there is a low likelihood of a loss of assets. Even so, asset issuers can clawback any assets unaccounted for in a breach.

Stellar validators run open-source software called stellar-core to keep the blockchain state, add transactions, and maintain network history. For minor releases, SDF’s core engineering team periodically releases new versions to a testnet environment before sharing it to validators to install on their local instances. For major releases, validators will communicate to discuss and vote on the change. If voted on, any validator running a previous version will halt and be required to upgrade to rejoin the network.

Yes, Stellar supports smart contract functionality through Soroban, a smart contract platform integrated into Stellar’s core protocol. Soroban has comprehensive tooling, like production-ready software development kits and open-source sandbox environments that support rapid deployment.

There are two token types on Stellar:

• Classic assets leverage asset-issuance and control features built into the network. Classic assets can be used in smart contracts via their built-in Stellar Asset Contract (SAC) implementation.
• Contract tokens are created and managed entirely through smart contracts on Stellar. These require all logic to be explicitly programmed.

The smart contract platform on Stellar–both the Stellar Asset Contract for classic Stellar assets and contract tokens–offers comprehensive tooling, including production-ready, open-source development environments. Stellar’s smart contract platform benefits from the scalability, performance, and cost-effectiveness of Stellar.

For the vast majority of use cases, classic Stellar assets can meet business needs. Where extensive asset control customization is needed for regulatory or commercial purposes, contract tokens are recommended for full programmability.

Stellar has a different approach to smart contracts compared to Ethereum and other EVM-based blockchains. Smart contracts on Stellar are written in Rust and are compiled into WebAssembly (Wasm) for deployment.

Wasm and Rust were chosen to promote interoperability. Unlike Ethereum’s EVM and Solidity, which were purpose-built for Ethereum, Wasm is a widely adopted runtime used across web and blockchain environments, and Rust is a general-purpose language known for safety, performance, and versatility. This approach makes Stellar smart contracts easier to integrate with existing systems and compatible with a wide range of existing developer tools.

To ensure long-term scalability, Stellar has a smart contract storage model called state archival. Each piece of contract state on the ledger has a rent balance, and, if that balance runs out, the state is archived in a separate database and can be restored if needed. This model helps keep validator costs low, improves network performance, and helps keep the system scalable.

The current base operation fee, the fee required per operation for a transaction, is 0.00001 XLM¹. Stellar’s fee structure is based on a minimum fee and a surge pricing model but is designed to stay low even in times of high network activity because validators are not financially compensated for approving transactions.

The base fee specifies the maximum amount an entity is willing to pay per operation for a transaction, but the entity will be charged the lowest amount needed for the transaction to be submitted. Fees on Stellar exist to discourage spam transactions and make the system more efficient.

^{1XLM closed on 5/29/25 at 0.2789 cents.}

In addition to a base transaction fee, smart contracts also require a resource fee. The resource fee depends on the contract’s use of resources, such as the number of instructions, transaction size, and a dynamic storage pricing model.

Users also need to maintain a minimum balance of lumens (XLM), the Stellar native token, in their account, which is calculated by the current base reserve of 0.5 XLM. The minimum balance is two base reserves (i.e., 1 XLM) and each subentry requires an additional base reserve and increases the account’s minimum balance. Changes to the base reserve are uncommon and must be voted on by validators.

Minimum account balances and fees can also be sponsored by another account.

Use of the Stellar network does not require prior approval from U.S. federal or state regulators. Financial entities use Stellar to issue assets regulated by the U.S. Securities and Exchange Commission, New York Department of Financial Services, Reserve Bank of Australia, the Mexican Ministry of Finance, the UK’s HM Treasury, and the Monetary Authority of Singapore, among other global financial services regulators.

Stellar Ecosystem Proposals (SEPs) are publicly created, open-source documents that standardize interactions on Stellar that can be used to minimize operational and counterparty risk. For example, SEP-8 standardizes the identification of regulated assets and SEP-9 standardizes a list of AML/KYC fields.

In addition to asset clawback and freezing, issuers also have other configurations that give control over their assets. Issuers can enable “authorization required” to only allow approved accounts to hold an asset; issuers set the criteria for approval. Similarly, issuers can also opt-in to revoke an account’s ability to hold an asset.

Stellar also has a native multi-signature feature that requires transactions to be signed by more than one signatory.

Stellar is integrated with Merkle Science’s and Elliptic’s suite of compliance products to provide blockchain analytics and illicit activity detection. Public blockchain explorers like StellarChain also show real-time network activity. Stellar is also supported by publicly available on-chain data aggregators like Dune and Artemis.

The Stellar network is trusted by a number of institutions. Franklin Templeton and WisdomTree have tokenized a number of their funds on Stellar. Banking institutions like ABN Amro have issued a tokenized digital bond on Stellar. Stellar is also trusted by blockchain-native institutions like Circle, Paxos, and Ondo Finance to launch their digital dollars.

Digital wallets do not hold assets or funds, despite their nomenclature. Digital wallets store a user’s private key, which is needed to authorize both sending and receiving transactions. Private keys prove ownership of funds and are required to access a user’s funds.

A custodial wallet, a third party controls the private keys and manages funds on behalf of the asset owner. A non-custodial wallet grants owners sole control over their private keys and supports non-intermediated direct ownership. Custodial wallet providers are subject to various federal and state licensing and registration requirements. Non-custodial wallet providers are generally determined to be software providers and are not regulated as a financial service provider.

Depending on the custodial arrangement, assets in a custodial wallet may be held on the custodian’s balance sheet, although a previous SEC accounting bulletin requiring this has been rescinded. Assets in a non-custodial wallet are always directly owned by the asset holder and never held on the provider’s balance sheet.

Custodial wallet providers are regulated financial entities that collect certain personal and financial information that is typically stored off-chain. This information is subject to the same type of vulnerabilities and risks as other online data. Some custodial wallets increase privacy protection by custodying user funds in an omnibus account, which eliminates the need to reveal individual wallet addresses.

Non-custodial wallet providers are service providers that typically collect less personal information. They generally do not conduct KYC and are often unable to link on-chain transactions to real-world identities.

Issuers can distribute tokenized assets from their digital wallet.

On and off-ramping is a regulated activity and can only be provided by licensed providers in supported jurisdictions. To purchase tokenized assets, users typically acquire stablecoins in the open market through a centralized exchange; users can also purchase tokenized assets by linking their bank account. Off-ramp solutions will depend on the wallet and stablecoin. Depending on the stablecoin, solutions include withdrawal in fiat, stored-value cards, ACH bank transfers, and P2P transfers.