Stella (ALPHA) currency circulation

Stellar's (XLM) circulation, vital for the network's operation and value, is influenced by factors such as initial distribution, burned tokens, and investor demand.

Dec 24, 2024 at 08:50 pm

Key Points:

• Understanding the Concept of Stellar (XLM) Circulation
• Factors Influencing XLM Circulation
• Measuring XLM Circulation
• Distribution of XLM Circulation

Understanding the Concept of Stellar (XLM) Circulation

Stellar (XLM) is the native cryptocurrency of the Stellar network, a decentralized blockchain platform designed for cross-border payments and financial services. XLM is central to the operation of the network, serving several functions:

• Transaction Fees: XLM is required as a transaction fee to prevent network spam and incentivize validators.
• Secure Network: XLM holders can participate in the network consensus mechanism, earning rewards and strengthening network security.
• Bridge Currency: XLM acts as a bridge currency in asset exchanges, facilitating the conversion between different currencies and assets on the network.

XLM circulation refers to the total amount of XLM in circulation, excluding lost or unspendable tokens. This circulating supply directly impacts the value and liquidity of XLM in the market.

Factors Influencing XLM Circulation

Several factors influence the circulation of XLM:

• Initial Distribution: The initial distribution of XLM during the ICO (Initial Coin Offering) determined a significant portion of the circulating supply.
• Burned Tokens: Some XLM has been intentionally burned or removed from circulation, reducing the total supply and potentially increasing the value of remaining tokens.
• New Issuance: New XLM may be created and released into circulation for various purposes, such as network development, rewards for validators, or project funding.
• Lost Tokens: A portion of the XLM circulation may be lost or unspendable due to factors such as lost private keys or hardware failures.

Measuring XLM Circulation

To estimate the XLM circulation, various methods can be used:

• Circulating Supply: The number of XLM that is not locked, staked, or otherwise restricted is referred to as the circulating supply. This metric provides a snapshot of the XLM available for trading and use.

• Total Supply: The total supply of XLM represents all the XLM that has ever been created, including circulating and non-circulating tokens. The total supply serves as a benchmark against which the circulating supply is compared.

  • Maximum Supply: Stellar's maximum supply is capped at 50 billion XLM. This limit ensures that XLM remains scarce and prevents excessive inflation.

Distribution of XLM Circulation

The XLM circulation is distributed among various stakeholders in the Stellar ecosystem:

• Investors: Individuals or institutions who participated in the ICO or purchased XLM from exchanges hold a portion of the circulating supply.
• Developers and Builders: Teams and individuals building applications and services on the Stellar network may hold XLM for development purposes or as a store of value.
• Validators and Node Operators: Validators and node operators who participate in the consensus mechanism and secure the network hold XLM to qualify for rewards and demonstrate their commitment.
• Businesses and Merchants: Businesses and merchants accepting XLM as payment or utilizing the Stellar network for financial services hold XLM for operational purposes and as an investment.
• Network Reserve: A portion of the XLM supply is held in reserve by the Stellar Development Foundation (SDF) to support network growth, development, and ecosystem initiatives.

FAQs

How is XLM distributed?
XLM is distributed through various channels, including the ICO, exchanges, and network rewards. Stakeholders include investors, developers, validators, businesses, and the Stellar Development Foundation.

What is the difference between circulating supply and total supply?
Circulating supply refers to the number of XLM that is freely available for trading and use, while total supply includes all XLM ever created, including locked or restricted tokens.

What factors affect XLM circulation?
Factors influencing XLM circulation include initial distribution, burned tokens, new issuance, lost tokens, and market demand for Stellar services.

How is XLM circulation measured?
XLM circulation can be estimated by measuring the circulating supply and comparing it to the total supply, using data from block explorers and exchanges.

Why is the maximum supply of XLM capped?
The maximum supply is capped to ensure scarcity, prevent excessive inflation, and maintain the value of XLM over time.