Frequently Asked Questions About Lumens
One lumen (XLM) is a unit of digital currency, like a bitcoin.
What are lumens?
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 all of the innovative features of a shared public ledger on a distributed 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.
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 1 lumen. This requirement ensures that accounts are authentic, which helps the network maintain a seamless flow of transactions.
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.
Getting and Using Lumens
Do I need lumens to use the Stellar network?
The Stellar network is free to use. The code is open source, with an Apache license.
If you plan to transact on the live network, you’ll need lumens to cover the base fees for those transactions. By design, transactions on Stellar are very low cost. As of 2016, one lumen will cover 100,000 transactions.
You may choose to purchase lumens as a supporter of the Stellar.org mission.
Lumens are also available for purchase on markets and exchanges (see below).
Where can I get lumens?
Lumens are available for purchase on several known markets and exchanges.
Please be aware of the risk associated with all digital currencies, including 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.
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 Auction and Distribution
What is the lumen auction and how does it work?
The Stellar.org mandate reserves 5% of the original 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.
The initial auction launched in March 2015 on Poloniex, Kraken, and Haste. Lumens entered these exchanges at the 30-day trailing average price.
The current auction began December 2015 on the Kraken exchange. We offer lumens in small amounts at the market price on the exchange at time of placement.
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 periodically auction larger batches of the reserved lumens to parties interested in supporting the Stellar.org mission.
If you’re interested in acquiring a larger batch of lumens from the Stellar.org reserve, contact the foundation directly.
What is the lumen giveaway?
95% of the lumens created when the Stellar network began will be given away to the world. 5% remains with Stellar.org for operational costs.
Stellar.org designed the giveaway program to ensure that lumens are given away to diverse groups:
- 50% to individuals who want lumens
- 25% for nonprofits to reach underserved populations
- 20% to bitcoin holders
For more information on this breakdown, see the Stellar.org 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.
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.
We have learned quite a bit about how to give away lumens effectively. Our first attempt gave lumens away to individuals—a different amount per user—but resulted in some abuse. In that time we gave away 1,694,618,200 lumens.
We are working on a new prototype for the lumens giveaway, slated to launch soon.
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 services provider), you may need lumens to cover base fees for transactions on the network.
As a supporter or community member, you may wish to support the work of Stellar.org and invest in our future success.
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 exchanges.
How many lumens remain to be given away?
For up-to-date statistics on the number of lumens given away, see the Stellar.org leaderboard.