The history of Stellar (XLM): who is behind the popular cryptocurrency?

Jed McCaleb

Stellar (XLM) is a top-20 coin with a market cap of $1.6bn and a great potential of growth. As the price continues to increase, it’s worth looking back to 2014 to discover who created this remarkable coin – and why.

Lumens (XLM) deserves much more attention than it gets in the crypto media. First of all, it’s cheap: while Bitcoin and Ethereum charge up to $5 per transaction, the fee for sending XLM is just a fraction of a cent. Second, it’s several times faster than Ethereum. And finally, it has a very interesting consensus protocol – the first one to implement the so-called Federated Byzantine Agreement model.

In spite of these advantages, Lumens has long lagged behind other major cryptos. But in 2020, XLM finally made a breakthrough, growing by over 17%. Even if you’ve never been interested in lumens before, now is the time to take a close look at this coin.

Drama at Ripple Labs

To understand what makes Stellar so different from other top coins, we have to talk about its founder, Jed McCaleb.

McCaleb first became famous as the founder of Mt. Gox – a bitcoin exchange that collapsed in 2014, long after he’d left it. His second cryptocurrency project was the decentralized protocol Ripple, together with the cryptocurrency XRP. Ripple was first released in 2012 and is mostly geared at financial institutions.

McCaleb left Ripple in 2013, but why he did it is a bit of a mystery. A detailed report published in the New York Observer claims that the problem was his personal relationship with lawyer Joyce Kim. He brought her onto the team and made one of the top executives at Ripple Labs. This created problems with the CEO Chris Larsen. Eventually McCaleb tried to oust Larsen from the company – but lost the vote and had to leave himself.

Another reason is that Jed McCaleb had many ideas for Ripple that the board wouldn’t accept. He needed a project of his own to implement those ideas – and that’s why he went on to develop Lumens together with Joyce.

McCaleb founded the non-profit Stellar Development Foundation together with Patrick Collinson, CEO of the famous payment company Stripe (which also provided $3m in funding). The official launch date is July 31, 2014.

The original version of Stellar was very similar to Ripple – so much so that many called Stellar a fork of XRP. There were only 2 real differences:

1) The coin code was open-source from the beginning (Ripple made its source code public in September 2013);

2) Stellar Foundation is a non-profit, while Ripple Labs is a for-profit company.

Soon after launch, the team of Lumens began work on a new version of the source code, completely different from that of XRP. In April 2015, the Foundation released a new White Paper and a brand-new consensus algorithm, called simply SCP (Stellar Consensus Protocol). It was created by the Stanford researcher David Mazières.

In November 2015, the updated network went live. The crypto’s ticker was also changed from STR to XLM. By the way, some people still mistakenly call XLM a fork of XRP. This is incorrect: the coin was a fork at the very beginning, but now it’s a different blockchain.

Early growth and future potential

Stellar was first listed on an exchange on August 6, 2014, at the price of $0.0026. Back then, the market cap was about $860k. The price remained virtually unchanged for two years, while the capitalization grew to $25 million by April 2017. By that time, Stellar had already signed a number of important partnerships, including with Deloitte. The biggest breakthrough came in October 2017, when it announced a collaboration with IBM to enable cross-border payments in the South Pacific. At that point, the price was already above $0.02 – an almost 10x increase since launch.

Since then, Lumens has been through a lot. During the grandiose cryptocurrency rally in Dec 2017 – Jan 2018, the price surged to $0.6 – only to sink to $0.04 by the start of 2020. This year, as we’ve said, the coin has made an impressive recovery: as of December 2020, the price fluctuates around $0.15.

Stellar price chart

Now you know how Stellar started – initially as a very close imitation of Ripple, then as a fully independent cryptocurrency with different objectives. And while Stellar’s market cap is just about one-sixth of XRP’s, it’s just as interesting from an investor’s perspective. In fact, some analysts predict that the price will soon rise above $0.11. And this means that XLM is definitely a coin you should be following.

About Jamie Martinez 37 Articles
Jamie is a graduate MBA from the UCLA Anderson School of Management and now is engaged in cryptocurrency analytics and forecasts. She also writes extensively on blockchain, cryptocurrency, and the modern digital technologies for business.