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What are Lumens

Lumens are the native asset of the Stellar network. Native implies that they are built into the network and asset is how the network refers to an item of value that is stored on the ledger. One lumen is a unit of digital currency, like a bitcoin for example. Although you cannot physically see lumens, they are essential to the Stellar network. They contribute to the ability to move money around the world and to conduct transactions between different currencies quickly and securely. First, lumens play a small anti-spam role. Each transaction has a minor fee – 0.00001 lumens – associated with it. This fee prevents users with malicious intentions from flooding the network (otherwise known as a DoS attack). Lumens work as a security token, mitigating DoS attacks that attempt to generate large numbers of transactions or consume large amounts of space in the ledger. Similarly, the Stellar network requires all accounts to hold a minimum balance of 20 lumens. This requirement ensures that accounts are authentic, which helps the network maintain a seamless flow of transactions. Second, lumens may facilitate multi-currency transactions. Lumens sometimes facilitate trades between pairs of currencies between which there is not a large direct market, acting as a bridge. This function is possible when there is a liquid market between the lumen and each currency involved. XLM is shorthand for lumen. Most currencies have 3-letter codes (USD, EUR, AUD, BTC) as an international standard.

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Reference: Stellar.org

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