The Stellar network was made to support digital representations of any currency, but it also has its own native token called the lumen (XLM). The lumen fulfills a special role in the network. By design, the Stellar network requires that each account hold a small number of lumens at all times.
This lumen requirement is modest — a few is more than enough for most accounts. The full technical details are covered in the Stellar developer docs, but, below, we explore some high-level concepts.
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.
Since the Stellar network is a universal system for digital money, we could’ve allowed people to pay these costs in dollars, pesos, yuan or anything else. But we felt none of these were appropriate. First, we didn’t want the network to “prefer” any particular national currency—if the network used dollars, say, then network prices would stay fixed for Americans but float for everyone else. And, even more, we wanted to create a digital-first asset that embraces the openness of the internet and is independent of economic and political factors.
To solve this, we needed to introduce just the slightest bit of friction to deter bad or frivolous actors. Imposing a minimum balance on each account and a very small per-transaction fee were chosen as these deterrent costs. Right now, the minimum balance is 1 lumen and the minimum per-transaction fee is 0.00001 lumen. These are small enough to keep the Stellar network widely accessible, but big enough to discourage large-scale bad behavior.
So, we gave the network its own currency, intended solely for denominating network requirements. That currency is “the lumen.”
Minimum per-transaction fee
There are now over 7.5 million Stellar accounts, and each of them uses lumens to meet minimum balance requirements and pay transactions fees.
A natural, pleasant, byproduct of having a network token is that it eases the movement of money between users. Because everyone has and needs lumens, lumens can always be a medium of exchange between otherwise illiquid assets.
Unlike the tokens of other blockchains, lumens aren’t mined or awarded by the protocol over time. Instead, 100 billion lumens were created when the Stellar network went live, and for the first 5 or so years of Stellar’s existence, the supply of lumens also increased by 1% annually, by design.
That inflation mechanism was ended by community vote in October 2019. And in November 2019, the overall lumen supply was reduced. Now there are about 50 billion lumens, total, in existence, and no more lumens will be created.
Nearly 20 billion lumens are out in the open market, and the Stellar Development Foundation retains the other 30 billion or so to develop and promote the growth of the Stellar network, per its mandate. Those lumens will enter the public markets over the next few years. Anyone who wants a complete accounting for all lumens in existence should visit our Lumen Accounting guide for detailed explanations of major lumen metrics and instructions on calculating supply details from the ground up using the Stellar network’s APIs.
Lumens can be acquired on many exchanges, some of which are listed here. Note that lumens provide utility on the Stellar network. The price of lumens, however, can be volatile. Your lumens could lose significant value relative to fiat currency or other digital currencies.
For storing lumens and for easy access to network features like payments and peer-to-peer sends, a list of some hardware or digital wallets is available here.
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