Stellar: what it is and how it works with Trezor

Stellar is an open-source, decentralized network for fast, low-cost payments and asset transfers. Its native currency is Lumens (XLM).

Some things work differently from most networks. In Stellar, every account must hold a minimum XLM balance, transactions to exchanges may need a Destination tag (memo), and classic tokens need activating before you can receive them.

How Stellar works

Stellar settles transactions in about 5 seconds using the Stellar Consensus Protocol (SCP). Fees are typically a fraction of a cent, paid in XLM. The smallest unit of XLM is 0.0000001 XLM.

Unlike Bitcoin or Ethereum, Stellar has no mining or staking. The total supply is 50 billion XLM. At launch, 100 billion were created, but the supply was later reduced through a community vote.

Fees go into a protocol fee pool, where they stay locked and unused.

Stellar and Ripple

Stellar was started in 2014 by a co-founder of Ripple, who left to set up the non-profit Stellar Development Foundation. The two networks share similar technology (fast settlement, base reserves, destination tags) but differ in governance.

Ripple Labs is a for-profit company focused on banking. The Stellar Development Foundation is a non-profit focused on open, low-cost cross-border payments.

Base reserve

Every Stellar account must hold a minimum balance called the base reserve. A new account needs 1 XLM to exist (two base reserves of 0.5 XLM each). This 1 XLM is locked and can't be spent unless you close the account.

Each additional item your account holds (a trustline, an open offer, or an extra signer) adds 0.5 XLM to the required reserve. For example, if you activate three classic tokens, your minimum reserve becomes 2.5 XLM (1 XLM base + 3 × 0.5 XLM). Contract tokens don't add to the reserve.

Destination tags (memos)

When sending XLM to an exchange or payment processor, you may need to include a destination tag (also called a memo). The tag identifies which customer account the payment belongs to. Sending without a required tag can result in lost funds.

When receiving XLM into your Trezor, destination tags are not required. Contract token transfers can't include a memo.

Tokens on Stellar

Any Stellar account can issue a token, with no approval needed. Tokens range from stablecoins like USDC and tokenized assets to spam.

Stellar has two kinds of token: classic tokens, issued by a Stellar account, and contract tokens, run by a smart contract. Stellar added smart contracts, called Soroban, in February 2024. The same upgrade let classic tokens be used by smart contracts too.

Classic tokens

Classic tokens are issued by a Stellar account. On most blockchains, you can receive any token at any time. On Stellar, your account needs a trustline before it can hold a classic token. A trustline is your account's permission to hold a token from a specific issuer.

Creating a trustline increases your required reserve by 0.5 XLM and costs a small network fee (typically 0.002 XLM or less). In Trezor Suite, this process is called "activating" a token.

If someone sends you a classic token you haven't activated, the transaction fails and the sender keeps their tokens. Using a classic token in a smart contract doesn't change this: you still hold it through a trustline.

Contract tokens

Contract tokens are run by a smart contract instead of an issuing account. They follow a shared token standard, SEP-41, so wallets can read and send them the same way.

Contract tokens do not need a trustline, and holding one doesn't add to your base reserve. Your balance is read from the token's contract. In Trezor Suite, you still activate a contract token before it shows in your account.

Classic and contract tokens compared

Supported devices

XLM is supported on all Trezor Safe devices and Trezor Model T.