Lumens (XLM) are the foundational digital asset of the Stellar network, designed to power transactions, support account operations, and maintain network integrity. As the only token on Stellar that doesn’t require an issuer or trustline, XLM plays a unique and essential role in enabling fast, low-cost cross-border payments and decentralized financial services.
Whether you're building on Stellar, investing in XLM, or simply exploring blockchain ecosystems, understanding how lumens function is crucial. This guide dives into the core mechanics of XLM — from transaction fees and reserves to supply metrics and real-world utility.
How Lumens Power the Stellar Network
At its core, the Stellar network relies on lumens to facilitate secure and efficient operations. Every action on the blockchain — sending assets, creating offers, or deploying smart contracts — requires XLM. This ensures network stability by preventing spam and incentivizing responsible usage.
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Transaction Fees
To prevent abuse such as spam attacks or denial-of-service attempts, Stellar imposes minimal transaction fees, all paid in lumens. These fees are not meant for profit but to maintain ledger health. Each transaction carries a base fee of just 100 stroops (0.00001 XLM), making Stellar one of the most cost-effective blockchains available.
During periods of high network demand, priority is given to transactions with slightly higher fees — a mechanism known as surge pricing. However, even under peak load, costs remain negligible compared to other platforms.
Smart contract interactions follow a more nuanced fee model. In addition to inclusion fees, they account for resource consumption, including data storage and execution time. This ensures fair usage while supporting complex decentralized applications (dApps).
For developers and users alike, predictable and transparent fees enhance usability and trust in the network.
Base Reserves and Minimum Balance Requirements
To preserve ledger efficiency, Stellar enforces minimum balance requirements through a system called base reserves. Each base reserve is currently set at 0.5 XLM, and this value can be adjusted by validator consensus — though such changes are rare and typically occur only once every few years.
Every Stellar account must hold a minimum balance equivalent to two base reserves (1 XLM) just to exist on the network. Beyond that, each additional subentry increases the required balance by another 0.5 XLM.
Subentries include:
- Trustlines (for holding assets like stablecoins or tokens)
- Offers (buy/sell orders in the decentralized exchange)
- Signers (for multi-signature setups)
- Data entries (custom metadata stored on-chain)
Additionally, certain ledger entries — such as claimable balances and liquidity pool positions — also consume reserve units.
Example: Calculating Minimum Balance
Consider an account with:
- 1 trustline
- 2 active offers
- 1 claimable balance with one recipient
This account would require:
- 2 base reserves for the base account = 1 XLM
- 3 subentries × 0.5 XLM = 1.5 XLM
- 1 ledger entry × 0.5 XLM = 0.5 XLM
Total minimum balance: 3 XLM
When subentries are removed, their associated reserve is released back into the available balance. However, accounts must always meet their own minimum unless another party sponsors the reserve via Sponsored Reserves — a feature that enables third parties to cover reserves for users, lowering barriers to entry.
Rent for Smart Contract Data
Unlike traditional accounts, smart contracts on Stellar do not rely on base reserves. Instead, they pay rent to store data on the ledger. This model supports scalable dApp development without bloating the network.
Rent is determined by:
- Size of the data entry
- Duration it remains active before archival
Stellar supports three storage types with varying rent policies:
- Persistent: Long-term storage with periodic rent payments
- Temporary: Short-lived data that expires automatically
- Instance: Contract-specific runtime data
This flexible approach allows developers to optimize costs based on application needs. For more details, refer to Stellar’s State Archival documentation.
Lumen Supply Metrics: Transparency and Distribution
One of Stellar’s distinguishing features is its transparent and fixed supply model. Unlike proof-of-work blockchains that issue new coins via mining, all lumens were created at genesis — there will never be more than what was initially minted.
The current supply dynamics are publicly tracked through the SDF Dashboard API, providing real-time insights into key metrics:
{
"originalSupply": "100000000000",
"inflationLumens": "5443902087.3472865",
"burnedLumens": "55442115112.9537534",
"totalSupply": "50001786974.3935331",
"upgradeReserve": "259580243.9842749",
"feePool": "4690537.8610771",
"sdfMandate": "20761482987.7713113",
"circulatingSupply": "28976033204.7768698"
}Let’s break down what these figures mean:
Original Supply
Exactly 100 billion lumens were created when the Stellar network launched. This forms the foundation of all supply calculations.
Inflation Lumens
For the first five years, Stellar applied a 1% annual inflation mechanism to distribute XLM and encourage participation. This program ended via validator vote on October 28, 2019, having issued ~5.44 billion additional lumens.
Burned Lumens
Over 55.4 billion lumens have been permanently removed from circulation, primarily due to a strategic reduction by the Stellar Development Foundation (SDF) in 2019. These funds were sent to an inaccessible address (GALAXYVOID...), effectively burning them.
Total Supply
The current total supply — approximately 50 billion XLM — reflects the net result after accounting for burns and inflation.
Upgrade Reserve
A legacy reserve of ~259 million XLM set aside during a network upgrade in 2015. It acts as an escrow for old token holders, though redemption activity is minimal today.
Fee Pool
All transaction fees accumulate here. Since no entity controls this pool, these lumens are non-circulating but still part of total supply.
SDF Mandate
Funds allocated to the Stellar Development Foundation (~20.76 billion XLM) for ecosystem growth through development grants, partnerships, marketing, and distribution programs.
Circulating Supply
Estimated at ~28.98 billion XLM, this represents lumens actively held by the public and used across exchanges, wallets, and applications.
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Frequently Asked Questions (FAQ)
Q: Can new lumens be mined or minted?
A: No. All lumens were created at launch. There is no mining or staking reward mechanism that generates new XLM.
Q: Why did SDF burn so many lumens?
A: In 2019, SDF reduced its holdings to align with a decentralized vision and promote organic market dynamics. The move signaled confidence in community-driven growth over centralized control.
Q: How can I check current lumen supply metrics?
A: Visit the official SDF Dashboard API for live updates on supply distribution.
Q: What happens if my account falls below the minimum balance?
A: The account cannot perform any operations until the balance is restored. If it drops too low due to fees or withdrawals, it may become unusable until funded again.
Q: Are transaction fees refunded if a transaction fails?
A: Yes. Even if a transaction fails due to invalid conditions, the base fee is still deducted because resources were consumed during processing.
Q: How does sponsored reserves work?
A: Sponsored Reserves allow organizations or individuals to cover the minimum balance requirements for other accounts, enabling frictionless onboarding — ideal for apps distributing free wallets or assets.
Final Thoughts
Lumens are far more than just a transferable asset — they are the lifeblood of the Stellar network, ensuring security, scalability, and accessibility. From micro-fees to smart contract rent and reserve mechanics, XLM enables a robust infrastructure for global financial inclusion.
As decentralized finance evolves, understanding native token utility becomes increasingly important — both for developers building next-gen applications and investors evaluating long-term potential.
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