Stellar is a platform that connects banks, payments systems, and people.
It is built on a completely decentralized consensus platform and is designed to support any type of currency.
A decentralized network consists of peers that can run independently of each other. This means that the Stellar network does not depend on any single entity. The idea is to have as many independent servers participate in the Stellar network as possible, so that the network will still run successfully even if some servers fail.
Like a traditional ledger, the Stellar ledger records a list of all the balances and transactions belonging to every single account on the network. A complete copy of the global Stellar ledger is hosted on each server that runs the Stellar software. Any entity can run a Stellar server.
These servers form a decentralized Stellar network, allowing the ledger to be distributed as widely as possible. The servers sync and validate the ledger by a mechanism known as consensus.
Stellar uses the Stellar Consensus Protocol (SCP) rather than Proof of Work. The Stellar Consensus Protocol (SCP) is a protocol that achieves optimal safety against ill-behaved participants. Basically, it aims to be more secure and offer better protection against malicious parties.
The Stellar servers communicate and sync with each other to ensure that transactions are valid and get applied successfully to the global ledger.
For example, if you want to send $5 to a friend on the network, a list of trusted servers will begin a process to agree on the validity of your $5 payment to your friend. The majority of these servers will have to agree that you do in fact own $5 worth of credit on the network before they will mark the transaction as valid.
This entire process of coming to consensus on the Stellar network occurs approximately every 2-5 seconds.
Lumens is the name given to the token of the Stellar network. They were originally called stellars back when the Stellar network launched in 2014, but with the launch of the upgraded network in 2015, the name of the token changed from stellar to lumen.
The Stellar network’s built-in currency, the lumen, serves two purposes:
Each transaction has a minor fee—0.00001 lumens—associated with it. This fee prevents users with malicious intentions from flooding the network (otherwise known as a DoS attack). Lumens work as a security token, mitigating DoS attacks that attempt to generate large numbers of transactions or consume large amounts of space in the ledger.
Similarly, the Stellar network requires all accounts to hold a minimum balance of 20 lumens. This requirement ensures that accounts are authentic, which helps the network maintain a seamless flow of transactions.
At the genesis of the Stellar Network, 100 billion lumens (XLM) were created as specified in the protocol. As part of its custodial mandate, the Stellar Development Foundation (SDF) is entrusted to oversee that the vast majority, 95 billion, of the lumens are distributed to the world.
The Stellar network has a built-in, fixed inflation mechanism. New lumens are added to the network at the rate of 1% each year. The network also collects a base fee for each operation in a transaction. The funds from base fees are added to the inflation pool.
As a balancing measure for the ecosystem, anyone who holds lumens can vote on where the funds in this pool go. Each week, the protocol distributes these lumens to any account that gets over .05% of the votes from other accounts on the network.
Resources
Stellar website https://www.stellar.org/
SCP whitepaper https://www.stellar.org/papers/stellar-consensus-protocol.pdf
Blog https://www.stellar.org/blog/
Article posted at http://boxmining.com/stellar-lumens-nutshell/
