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Stellar

6.0/10

Nonprofit-governed payment network strong on stablecoins and remittances, but lagging in DeFi and broader ecosystem growth.

Updated: February 16, 2026AI Model: claude-4-opusVersion 1

Overview

Stellar launched in 2014, forked from the early Ripple codebase, and evolved its own Stellar Consensus Protocol (SCP). The Stellar Development Foundation (SDF), a nonprofit, stewards the network. Stellar gained prominence through a high-profile IBM World Wire partnership (since wound down) and its role as a preferred rail for USDC issuance, with Circle designating Stellar as a primary chain.

The network targets financial inclusion, remittances, and tokenization of real-world assets in developing economies. Unlike Ripple, which targets large financial institutions with top-down sales, Stellar has focused more on the underbanked and smaller remittance corridors. This grassroots positioning, combined with its nonprofit governance, gives Stellar a distinct identity in the payments space.

The philosophical difference between Stellar and XRP is significant: Stellar aims to be public infrastructure for financial inclusion, while Ripple aims to be enterprise software for banks. Both use similar Federated Byzantine Agreement consensus mechanisms but serve very different market segments and have very different governance models. This distinction matters for long-term sustainability: Stellar's nonprofit model is less dependent on token price appreciation for operational viability.

Technology

Stellar uses the Stellar Consensus Protocol, a variant of Federated Byzantine Agreement that enables 3-5 second finality with minimal fees (approximately 0.00001 XLM per operation). The network supports multi-asset issuance natively, with a built-in decentralized exchange (SDEX) and path payments that automatically find optimal exchange routes between different assets on the ledger.

Soroban, Stellar's smart contracts platform launched in 2024, adds programmability via a WebAssembly-based VM with a Rust-based SDK. However, Soroban adoption remains early and the developer ecosystem is a fraction of Ethereum's or Solana's. Throughput is approximately 1,000 TPS in practice. The Turrets system for off-chain computation and the Stellar Anchor framework for fiat on/off-ramps are underappreciated infrastructure innovations that make Stellar particularly well-suited for regulated financial applications. Stellar is well-engineered for its payments use case but lags in programmability and composability compared to modern L1s. The Soroban smart contract expansion aims to close this gap, but the developer tooling and ecosystem remain nascent compared to established platforms.

Security

Stellar has operated since 2014 with no consensus-level exploits, demonstrating a strong track record over a decade. SCP's quorum-slice model means the network halts rather than forks under adversarial conditions, a safety-first design that prioritizes correctness over liveness. The limited smart contract surface (pre-Soroban) meant fewer attack vectors historically.

Soroban introduces new risk surface that remains relatively untested at scale. Validator diversity has improved but the SDF's influence on recommended quorum sets remains notable. The 2019 incident where the network briefly halted demonstrated SCP's liveness trade-off in practice. While no funds were at risk, the halt showed that the network's safety margin comes at the cost of availability in edge cases.

Stellar's overall security posture is strong for its design goals. The network has processed trillions of operations since inception without a loss-of-funds event. However, the Soroban smart contract expansion needs more battle-testing and independent audit coverage before it can be considered fully production-hardened for high-value DeFi applications.

Adoption

Stellar's adoption is respectable but uneven. It is a primary chain for USDC, with billions in stablecoin volume processed. MoneyGram launched Stellar-based remittance access, enabling cash-to-crypto conversion at MoneyGram locations. Several African and Southeast Asian fintech companies (Flutterwave integration pilots, Cowrie in Nigeria, Click Pesa in East Africa) use Stellar rails for payment settlement.

However, the IBM World Wire partnership, once Stellar's crown jewel, was quietly shelved, dealing a significant blow to institutional credibility. DeFi TVL on Stellar remains modest. The developer community is active but small relative to top-tier ecosystems. Stellar's brand recognition significantly trails XRP in the institutional payments space, despite arguably better decentralization and governance.

The MoneyGram integration and African fintech partnerships represent real but geographically concentrated traction. The question is whether these regional successes can scale to a global network effect or whether Stellar will remain a niche payments rail for specific corridors. Compared to XRP's 300+ institutional partners, Stellar's adoption footprint is smaller but arguably more organic and grassroots.

The Stellar ecosystem also includes a growing number of real-world asset tokenization projects. The network's native multi-asset support and regulatory-friendly Anchor framework make it attractive for tokenizing bonds, real estate, and other traditional financial instruments.

Decentralization

Stellar is more decentralized than XRP but still moderately centralized. SDF holds significant XLM reserves after burning 55 billion tokens in 2019, reducing total supply from 105 billion to roughly 50 billion. The validator set is open and growing, with over 20 organizations running full validators, but SDF nodes remain influential in quorum configurations. Governance is driven by the Foundation with community input but no formal on-chain governance mechanism exists.

The nonprofit model reduces profit-driven centralization concerns but concentrates strategic direction in SDF's hands. Unlike Ripple, SDF is not a for-profit company and does not have shareholders, which aligns incentives more clearly with the ecosystem. However, SDF still exerts significant influence through developer grants, partnership decisions, and the protocol roadmap. Development is not as community-driven as projects like Bitcoin or Monero.

Tokenomics

The original 105 billion XLM supply was nearly halved to roughly 50 billion via a community-approved burn in 2019, one of the largest token burns in crypto history. SDF holds approximately 30 billion XLM for ecosystem development, grants, and operations. There was a modest 1% annual inflation (directed to the fee pool), though this was effectively disabled by validator vote, making the XLM supply static.

The large SDF holdings create sell pressure concerns, though SDF has been transparent about disbursement plans via quarterly reports. XLM's utility as a bridge currency and fee token gives it fundamental demand, but the token struggles to capture value beyond transaction fees. Without staking, DeFi yield, or significant gas demand, XLM's value accrual mechanism is weaker than many modern L1 tokens. The token primarily derives value from payment corridor utility and speculative positioning on the financial inclusion narrative.

Risk Factors

  • SDF dependency: The network's growth strategy heavily relies on SDF grants, partnerships, and ecosystem direction.
  • IBM fallout: The World Wire wind-down signaled institutional hesitancy about Stellar's enterprise readiness.
  • Stablecoin competition: Circle's multi-chain USDC strategy means Stellar competes with Ethereum, Solana, Base, and others.
  • Soroban risk: Smart contract expansion is early and largely unproven in production.
  • Token value capture: XLM's economic model makes it hard for the token to capture meaningful value from network activity.
  • Geographic concentration: Heavy reliance on emerging market adoption exposes Stellar to macro and regulatory headwinds.
  • Developer ecosystem: Small developer community limits application diversity and innovation velocity.

Conclusion

Stellar is a technically sound, well-governed payment network with genuine adoption in stablecoins and remittances. Its nonprofit model is refreshingly aligned with financial inclusion goals. The MoneyGram partnership and African fintech traction validate the mobile-payments thesis. However, the loss of the IBM partnership, modest DeFi traction, and limited token value accrual weigh on its long-term competitiveness. Stellar is best suited for regulated financial infrastructure rather than speculative crypto ecosystems, and its success depends on whether emerging-market payments can scale into a sustainable moat.

The Soroban smart contract platform represents both an opportunity and a risk: if it attracts meaningful developer activity, Stellar could evolve beyond payments into a broader financial infrastructure platform. If it fails to gain traction, it may be a distraction from Stellar's core competency in simple, fast payment settlement.

Sources

  • Stellar.org documentation and network statistics
  • Stellar Development Foundation annual reports and transparency pages
  • Circle USDC multi-chain deployment announcements
  • MoneyGram x Stellar partnership details
  • Soroban developer documentation and ecosystem tracker
  • Messari Stellar research profiles
  • SDF GitHub repositories and quarterly financial reports
  • Stellar Expert network explorer and analytics
  • Anchor Directory for fiat on/off-ramp integrations
  • SCP consensus protocol whitepaper by David Mazieres