Stellar operates on the Stellar Consensus Protocol (SCP), which is fundamentally different from Bitcoin’s Proof-of-Work (PoW) mechanism. Bitcoin relies on miners solving complex mathematical problems to validate transactions, which consumes significant energy and results in slower transaction speeds.
In contrast, Stellar’s SCP is an energy-efficient, federated consensus model where trusted validator nodes reach agreement on transactions in just a few seconds. This system eliminates the need for mining, drastically reducing transaction costs and enabling near-instant finality.
Due to its speed and efficiency, Stellar is ideal for financial applications such as cross-border payments and tokenized asset transfers. The difference in consensus mechanisms is one reason why Stellar transactions are faster and cheaper compared to Bitcoin, influencing the XLM price and adoption rates.