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Is XLM Eco Friendly (Explained)

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The public is becoming increasingly concerned about the effect of cryptocurrencies on global warming and their environment impact. This conversation typically revolves around Bitcoin,

Fortunately, there are multiple eco-friendly BTC alternatives. Stellar Lumens (XLM) is one such cryptocurrency that has been around since 2014.

It offers most of the features you can get with Bitcoin but much more efficiently and cost-effectively.

Is XLM eco-friendly?

Stellar Lumens cryptocurrency is one of the most environmentally-friendly digital assets currently in the market.

It was created in 2014 as a fork of its older sibling XRP by Ripple. So, it offers more or less the same financial solutions as Ripple—a cross-border payments settlement blockchain.

Stellar consumes less energy to create and maintain the XLM ledger than the Bitcoin ledger does.

Bitcoin currently uses about 2,265 kilowatt-hours of energy to process a single transaction. In comparison, the Stellar network uses 0.222 Wh to process one transaction or 24.6 kW across the entire network.

Stellar achieve such low energy consumption figures thanks to its proprietary Stellar Consensus Protocol (SCP).

In the PoW Bitcoin mining process, miners are incentivized to dedicate an ever-increasing amount of energy and hardware to maintain the network. The more powerful a miner, the higher the chances that it will solve an arbitrary puzzle and get rewarded with brand new coins.

SCP, on the other hand, avoids mining in favor of a federated approach where independent nodes can join the network and vote.

This system is called a Federated Byzantine Agreement System, and the consensus is reached once every 3-5 seconds.

It’s extremely energy-efficient to vote on a ledger version than it is to compete in an increasingly difficult puzzle.

Additionally, SCP doesn’t require highly specialized computers. Any decent computer can participate in the federated voting system and later repurposed if needed, which consequently extends its useful lifespan.

Also read: Is XRP Eco Friendly?

What is XLM used for?

Stellar is a Fintech blockchain enabling easy, fast, and cheap payments globally. Some of its applications include:

  • Integrations with ecommerce payment companies;
  • P2P lending and finance;
  • Micro savings;
  • Microinsurance;
  • Cash transfers;
  • Donations and charity;
  • Mobile payments;
  • Loyalty point programs.

XLM coins facilitate these value transfer processes that rely upon the Stellar blockchain.

What is the impact of XLM on the environment?

Stellar Lumens (XLM) are extremely eco-friendly, and the Stellar blockchain achieves this in three ways:

Pre-mining

Stellar Lumens has a max supply of 50 Billion tokens, all of which were minted at the network’s launch in 2015.

Pre-mining saves energy that would have otherwise been used to introduce new tokens into circulation.

It’s worth noting that only about half of these tokens are currently in circulation.

Consensus mechanism

Stellar uses the proprietary SCP consensus mechanism, allowing validators to participate in a federated voting.

This method of achieving consensus and maintaining the blockchain is both energy-efficient and fast as opposed to mining or even Proof of Stake (PoS) staking.

Eco-friendly – not only does SCP save energy, but it also does not require specialized equipment to run the Stellar blockchain. Thus, if the hardware used to validate transactions on Stellar needs replacement, they can be repurposed, thereby elongating their lifespan.

What are the pros of XLM?

  • The Stellar network is fast, cheap, and efficient.
  • Stellar Lumens are easy to store, send, receive and trade as the cryptocurrency is widely supported by some of the leading wallets and trading platforms;
  • The project is eco-friendly;
  • Stellar blockchain uses the SCP consensus mechanism, which can easily scale.

What are the cons of XLM?

Stellar is highly centralized as the network depends heavily the Stellar Development Foundation (SDF) to run and maintain the community;

The network faces a lot of competition from traditional companies such as Visa, MasterCard, and SWIFT and other blockchain projects, including its older sibling Ripple.

Is XLM a good eco-friendly alternative to Bitcoin?

Stellar’s XLM performs more or less the same functions that Bitcoin, i.e., to facilitate digital payments. It does that cost-efficiently, fast, and with fewer adverse effects on the environment.

Also read: Is Shiba Inu Eco-friendly?

Unlike Bitcoin’s mining algorithm, which consumes a lot of energy, Stellar’s SCP consensus protocol uses negligible amounts of energy.

It also relies on normal computers to validate transactions meaning they can be repurposed once they need replacement.

Is XLM more eco-friendly than Algorand?

Algorand uses the increasingly popular proof of stake (PoS) consensus mechanism whose proponents claim to be energy-efficient and eco-friendly.

like Stellar’s Consensus Protocol, PoS avoids arbitrary puzzles to determine who gets to create the next block. Therefore, significantly less energy is wasted.

However, PoS uses more energy than SCP since the consensus covers the entire network. In contrast, in Stellar, only a select group of validators need to agree to confirm transactions. Therefore, Stellar (XLM) is more eco-friendly than Algorand.

Also read: Is BNB Coin Eco Friendly?

Final thoughts

Stellar might be competing in a crowded market, but it has a lot to offer. It’s scalable, energy-efficient, eco-friendly, and cost-effective making it one of the best options for individuals and enterprises to use in making cross-border payments.