Frequently Asked Questions About Lumens
One lumen (XLM) is a unit of digital currency, like a bitcoin.
What are lumens?
One lumen (XLM) is a unit of digital currency, like a bitcoin.
Lumens are the native asset of the Stellar network.
Native means that lumens are built into the network. Asset is how the network refers to an item of value that is stored on the ledger.
One lumen is a unit of digital currency, like a bitcoin.
While you can’t hold a lumen in your hand, they are essential to the Stellar network—they contribute to the ability to move money around the world and to conduct transactions between different currencies quickly and securely.
Where did lumens come from?
In 2014 the Stellar network launched with 100 billion stellars, the original name of the network’s native asset.
In 2015, with the launch of the upgraded network, the name of the native asset changed from stellar to lumen to distinguish it from 1) the Stellar network itself and 2) Stellar.org, the nonprofit organization that contributes to development of the network.
Why does the Stellar network need a native asset?
The Stellar network offers the innovative features of a shared public ledger on a distributed, global database—often referred to as blockchain technology. The Stellar network’s built-in currency, the lumen, serves two purposes:
First, lumens play a small anti-spam role.
Lumens are needed for transaction fees and minimum balances on accounts on the Stellar network in order to prevent people from overwhelming the network and to aid in prioritization.
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 serve as a security measure that mitigates 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 0.5 lumens. This requirement incentivizes users to declutter the ledger by eliminating abandoned accounts, thereby that ensuring that all accounts are likely to have economic utility on the network.
Second, lumens may facilitate multi-currency transactions.
Lumens sometimes facilitate trades between pairs of currencies between which there is not a large direct market, acting as a bridge. This function is possible when there is a liquid market between the lumen and each currency involved.
What is XLM?
XLM is shorthand for lumen. Most currencies have 3-letter codes (USD, EUR, AUD, BTC) as an international standard.
The technical term for these shorthand codes is ISO 4217. Learn more about ISO codes.
Who governs lumen creation?
Lumen supply is determined by fixed, protocol-level rules. The number of lumens created at genesis was 100 billion. Every year, there is a 1% inflation rate. New lumens cannot be generated arbitrarily by anyone.
While somebody could theoretically push a proposal to change the protocol to change the rule around lumen creation, validators on our network are very unlikely to accept and ratify it. The decentralization of the protocol prevents us from unilaterally controlling any changes — if we tried to force a change, people would lose trust in Stellar.org, refuse to accept the changes, and keep using the original protocol with the original rules. Therefore, we will never do it.
Getting and Using Lumens
Do I need lumens to use the Stellar network?
The Stellar network software is open-source and available to the general public.
Users will need to have lumens to pay transaction fees and make accounts on the live Stellar network.
There are two special values used to calculate fees:
- The base fee (currently 100 stroops) is used in transaction fees.
- The base reserve (currently 0.5 XLM) is used in minimum account balances.
The fee for a transaction is the number of operations the transaction contains multiplied by the base fee, which is 100 stroops (0.00001 XLM).
Transaction Fee = (# of operations × base fee)
For example, a transaction that allows trust on an account’s trustline (operation 1) and sends a payment to that account (operation 2) would have a fee of 2 × base fee = 200 stroops.Extremely Low Cost
By design, transactions and accounts on Stellar are very low cost. As of April 2018 at $, $1.00 USD will cover about 400,000 transactions. Each account currently costs 0.5 lumens, or approximately $0.15.
Where can I get lumens?
Lumens are available on several licensed exchanges.
Please be aware of the risk associated with all digital currencies and make sure to safeguard your private keys to prevent loss or theft. While lumens will always have utility value for transactions and accounts in the Stellar network, the price of lumens denominated in fiat currencies may fluctuate and result in a complete loss of value.
Digital currencies are very innovative, but not insured by regulatory bodies such as the FDIC.
Before purchasing lumens, consult the Consumer Advisory brief by the Consumer Protection Finance Board (CPFB) on the potential risks associated with digital currencies. You should also read this educational document from the CFTC: “Customer Advisory: Understand the Risks of Virtual Currency Trading.”
What is the price of lumens?
Please consult the available exchanges for the latest lumen price.
What is the base fee? Who profits from those lumens?
There is a nominal fee, referred to as a base fee, associated with each operation in a transaction. The sender of the transaction incurs the fee.
The fee functions as a deterrent: Though nominal, it discourages users with malicious intentions from flooding the network (otherwise known as a DoS attack).
The base fee is currently set to .00001 XLM. The fee will increase if the system suspects an account is submitting transactions with the malicious intent to bring down the network.
No one profits from the base fee. The ledger collects those funds and redistributes them in the process of inflation (see the next question, below).
How does inflation work with lumens? Why is there inflation?
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. Read more about inflation.
Lumen Distribution and Giveaways
How are lumens distributed?
Stellar.org intends to distribute the initial 100 billion lumens as follows:
- 50% given away to individuals:
- A small (50-300 XLM) amount of lumens will be given to each unique individual who signs up through an invitation link. You may get an invitation from one of our partners or by attending one of our meetups.
- 25% given away to partners:
- Lumens will be given to businesses, governments, institutions, or nonprofit organizations that contribute to the growth and adoption of the Stellar ecosystem.
- 20% given away to bitcoin and XRP holders:
- Stellar.org distributed lumens to holders of bitcoin and XRP (19% for bitcoin holders and 1% for XRP holders). This giveaway was completed in two rounds: one round was completed in October 2016 and another was completed in August 2017. Stellar.org does not intend to conduct another round of lumen giveaways for bitcoin or XRP holders.
- 5% reserved for Stellar.org operational expenses
For more information on this breakdown, please refer to Stellar.org’s mandate.
Why is Stellar.org giving away lumens?
To achieve a more inclusive digital economy. Per our mission, Stellar.org works to connect people to low-cost financial services. Giving away lumens for free is an invitation to communities to design the services they need. Our hope is to eventually have global citizens own and use XLM, in both developing and developed economies.
To expand the reach of the network. The availability and active use of lumens on the network will increase the network’s utility by many orders of magnitude.
As of January 2018, we have now given away over 8 billion lumens.
Why should I buy lumens if you are giving them away for free?
As an integrator or anchor (an integrator that is trusted to accept deposits and honor withdrawals, usually a licensed money service business), you may need a large quantity of lumens to cover base fees for transactions on the network, to create and use sophisticated smart contracts, and for account creation. As a money transfer operator or market maker, you may buy and use lumens as a bridge asset to facilitate trades of different asset trade pairs on the network.
As a developer or entrepreneur, you may buy and use lumens to learn about cryptocurrency, experiment with operations, and build innovative applications on the Stellar Network.
In the future, after we have given away all the lumens—which will happen over the next 10 years—everyone will need to procure lumens from third parties.
What is the lumen auction and how does it work?
The Stellar.org mandate reserves 5% of the original 100 billion lumens to support the operations of Stellar.org.
Stellar.org covers its own operational costs via its own lumens in the following ways:
- Auction: We periodically offer portions of the reserved lumens at auction. We refer to this public process as the lumen auction. We will only use licensed intermediaries, e.g. ItBit, to conduct the auction. As an ethical safeguard, no one formally associated with Stellar.org—e.g., Stellar.org employees, consultants, or board members—will participate in the auction.
- Batches: We may sell larger batches of the reserved lumens to private parties interested in supporting the Stellar.org mission. We will use ItBit as an intermediary.
If you’re interested in acquiring a larger batch of lumens from the Stellar.org reserve, contact the foundation directly.
How many lumens have been given away?
For up-to-date statistics on the number of lumens given away, see the Stellar.org dashboard.