Why was Stellar Lumens (XLM) Invented?
If you are new to the cryptocurrency world but you have heard of Stellar Lumens, you might have asked yourself “What is Stellar Lumens about?” Good question. Stellar Lumens was established back in 2014 with a primary goal of providing a frictionless, international payments system for everybody . Unlike Ripple (XRP) which focuses firmly on banks and larger financial institutions, Stellar Lumens is geared towards individual consumers, allowing users to make cross-border money transfers at a cost of less than a dime.
- In-built inflation mechanism
- Multi-currency, cross-border transactions
- Transactions made within five seconds
- Strong partnerships with established Fintech companies
What is Stellar Lumens?
Some within the crypto space believe Stellar Lumens to be a hard fork of the Ripple protocol, but Stellar Lumens’ founder, Jed McCaleb has insisted that the two coins are entirely separate, despite their similar intentions.
The Stellar platform is designed to enable cross-border transactions, solving issues of exorbitant transaction fees and slow transaction times. Stellar Lumens (XLM) is the platform’s built-in currency, primarily acting as a mediator currency for various fiat currencies worldwide.
What is the Purpose of XLM?
The decentralised Stellar network facilitates cross-currency transactions, allowing a payer to transfer funds in their desired currency and the payee to receive the same payment value in their own desired currency. This can happen through a chain of currency conversions or by using Stellar Lumens as an intermediary currency.
With a supply of 100 billion XLM tokens, it is hoped that Stellar Lumens can become the norm for next-gen global money transfers.
The Team Behind Stellar Lumens
The figurehead behind Stellar Lumens is co-founder, Jed McCaleb. He also founded Ripple and Mt. Gox but left Ripple in 2015 to focus his efforts on the Stellar platform. McCaleb’s Mt. Gox was part of the world’s largest cyber-attack in the history of Bitcoin, losing more than half a billion US dollars’ worth of Bitcoin.
How does Stellar Lumens work?
For those keen to know how Stellar Lumens works, the Stellar platform is designed to process up to 1,000 transactions per second for a fraction of a penny per transaction. How do Stellar Lumens work to validate transactions? Instead of using Proof-of-Work (PoW), Stellar uses the Stellar Consensus Protocol (SCP) allowing payments to be made securely in less than five seconds. The SCP code also permits XLM to be used without requiring mining for operation.
How does Stellar Lumens Compare to Bitcoin?
While Bitcoin serves as a crypto medium of exchange for goods or services, or for storing value like silver or gold, how Stellar Lumens works is to act as an intermediary currency. Although XLM can also be used to pay for goods and services, it is primarily used to convert cross-border fiat currency transactions. In the main, Stella Lumens’ main competitor is Ripple rather than Bitcoin, with the latter operating in a slightly different space.
Is Stellar Lumens Real Money?
XLM is designed to act as the medium that facilitates international payment transfers between different fiat and cryptocurrencies. So, it certainly has both value and functionality. For all intents and purposes, XLM is as much a currency as any other.
How can you get Stellar Lumens?
There are several ways to get your hands on XLM as part of your cryptocurrency portfolio:
You can buy it
Given that there are over 20 billion XLM in circulation, it’s unsurprising that the value of XLM is just $0.69 at the time of writing. It’s therefore considered by many to be a great time to buy XLM, particularly if you want to make cross-border transactions cheaply yourself.
It is possible to buy Stellar Lumens and store it in a crypto wallet with plenty of regulated and reputable cryptocurrency exchanges. However, if you merely want to speculate on the value of XLM, you could consider using a contracts for difference (CFD) broker. Read our eToro review to discover what it’s like using a CFD broker to buy and sell the price of cryptos like XLM.
You can trade it
The volatility of altcoins like XLM makes day trading Stellar Lumens a distinct possibility. You could open a ‘buy’ or ‘sell’ position on XLM at the start of the day with someone like Binance and close it if the price moves in your direction within a matter of hours.
Get it for free!
A quick Google reveals there are plenty of Stellar Lumens faucets up for grabs to help you build a XLM portfolio, absolutely free!
How to Store Stellar Lumens
If you wish to buy XLM as an investment within your cryptocurrency portfolio, you’ll require a safe and secure cryptocurrency wallet to store it. Some wallets enable you to store cryptocurrencies offline, known as cold storage wallets, which are the safest option to keep valuable crypto coins away from the prying eyes of cyber-criminals.
Alternatively, you can avoid the hassle of setting up and using a crypto wallet by merely speculating on the price movements of Stellar Lumens using a CFD broker such as eToro or 24option.
Can Stellar Lumens be used Anonymously?
XLM was not designed to act as an anonymous payments system. It exists to allow for fast, low cost global transfers. This can be especially useful to the huge numbers of unbanked around the world today. Stellar is very much focussed toward mass adoption, targeting a customer base much larger than the niche minority who are passionate about anonymity. If privacy is what you are after, you may do well to consider other altcoins such as Monero, Zcash and Dash.
How Safe is Stellar Lumens (XLM)?
Stellar is one of the more successful cryptocurrencies on the market. The team behind it have a proven history working with hugely successful blockchain projects, such as Ripple. Many believe that XLM is far safer than some fiat currencies.
Stellar Lumens Price, Market Cap & Supply
At the time of writing (February, 2020), the price of Stellar Lumens is $0.70, with an available supply of 20.1 billion XLM and an overall market cap valued at $1.4 billion, ranking it 13th among the top cryptocurrencies.
XLM Transaction Fees and Charges
The transaction fees with Stellar are so low, they are almost none existent. The platform is aimed at helping the worlds unbanked on an individual level with their payment transfers. As such, low charges are a fundamental principal of this token.
Stellar Lumens Advantages & Disadvantages
√ Capable of processing up to 2,000 transactions a second
√ Transactions validated within five seconds
√ Minimal cross-border transaction costs
√ Burgeoning relationships with FinTech conglomerates
X Stiff competition against the Ripple (XRP) payment protocol
X Minimum of 20 XLM needed in wallet to access network
Should you Invest in Stellar Lumens or Not?
There are plenty of exciting developments in the Stellar platform. If Stellar can position itself as the everyday consumer’s cross-border payment platform ahead of Ripple, it could certainly have a bright future indeed. In the end, the choice to invest is your own. We would recommend that you closely watch the developments of any cryptocurrency that you are considering in order to make the most informed decision possible.
We hope that we have provided you with some insight into the mechanics of this very useful token, and helped you a little on your investment journey.
FAQ’s – Frequently Asked Questions about Stellar Lumens
What crypto wallets can hold XLM?
XLM’s broad appeal means there are plenty of cryptocurrency wallets to choose from, including Stellar’s own Desktop Client.
Is there a minimum Lumens account balance?
The Stellar network permits all accounts to have a minimum balance of 0.5 XLM to weed out unused accounts.
What determines the supply of XLM?
The supply of Stellar Lumens is fixed at a rate of 1% per year to guard against inflation.
What are the possibilities of the Stellar protocol?
The Stellar platform is already being used for merchant plugins, as well as mobile and trading clients.
Is Stellar Lumens available in other languages?
The Stellar platform has since been translated into Portuguese, Russian, German and Ukrainian.
- Opinion Articles
- Alternative crypto exchanges
- Exchange payment options
- Bitcoin trading guides
Featured image source: mkarco/Shutterstock.com