Last updated on February 23rd, 2018 at 01:22 pm
Stellar provides a decentralized, international network for blockchain payments, which enables fast transactions with low fees. The network is designed to make international payments and currency transfers swift and painless. Staggeringly, confirmations can happen within 3 seconds, and thousands of transactions occur every second.
If you’ve even been keeping a sideways glance on the cryptocurrency market, then you may be thinking that this information sounds quite familiar. Ripple continues to make sweeping headlines as its market cap astounds, and XRP (its native token) bounces around between $1 and $3.
How does this notoriety apply to Stellar? Stellar’s cryptocurrency XLM is effectively a fork of Ripple. Of course, things have developed since the 2014 fork, but direct comparisons are still easy to see.
Stellar now mainly aims to bring cross-border payments and micropayments to retail and service businesses, as well as the average person. This goal differs from Ripple, which is looking for banks to use its payment network.
The network’s native tokens are called lumens. Having been fully pre-mined and airdropped to qualifying individuals, there are now around 20 billion coins in circulation. That’s a huge figure, especially compared to Bitcoin’s maximum of 21 million. Originally, 100 billion lumens were created, and the Stellar Foundation currently holds the remaining supply.
Therefore, it is important to understand how the Stellar network operates, including how it affects lumens before investing. Generally, cryptocurrencies try to solve international payments by allowing users to convert them into the digital currency, so they send them as assets. But Stellar and Ripple do not strictly follow this practice.
To make a payment using Stellar, users must work with a network anchor, which is simply a trusted intermediary that holds and converts funds. Fiat is exchanged for digital credit (such as dollars and euros), then sent to another anchor that’s trusted by the receiving party.
For example, I might need to send you funds in USD, but I only have Euros. Then I send Euros to an account with my local anchor. The anchor would then credit my account with digital Euro tokens. Next, I would simply send digital credit to you by exchanging Euros to USD.
So where do lumens come in? There is no explicit relationship between the Stellar network and the lumen token. That said, you are not able to participate in the network without holding some tokens. To send payments, users must have an account balance of at least 20 lumens. In addition, blockchains generally need native currency to help fight spam. Transactions carry a small fee, in order to stop large-scale spam attacks by a fraction of a penny, which is only payable in lumens.
If you are looking at Stellar Lumens as an investment, take an extra look at this protocol. It will draw the same criticisms as Ripple and its native token. Of course, transactions can be made by using lumens, but it still feels somewhat forced. It is also important to note that it is really an intermediary currency, which people are unlikely to hold for large periods of time.
Eventually, the liquidity may be excellent, and the supply may be plentiful. But the price will never hit the lofty standards set by Bitcoin.
Buying Stellar Lumes in 3 Steps
Step 1: Get a Stellar Wallet
In a competitive market, there is no doubt that Stellar now enjoys impressive success. Its coin has broken into the Top 10 on Coinmarketcap. And at times, it has held over $10 billion in investments. There is growing support for this direct rival to Ripple, although wallet support could be improved.
Stellar Hardware Wallets
Ledger is a notable market leader that allows for lumens to be held in its hyper-secure hardware wallet. If you’re looking for a wallet that hold lumens (along with other currency, including Bitcoin, Ether, and Ripple), you won’t find many better options than the Ledger Nano S. This pocket-sized hardware wallet is basically un-hackable, and its user-friendly nature makes for a happy crypto life.
Stellar Destkop Wallets
Stellar Desktop Client is an option for anyone wanting a desktop wallet that can send, receive, and trade lumens. Of course, it won’t be as secure as a hardware wallet. And you’ll want to keep the security tight on your computer, as the wallet’s private keys save to your hard drive.
Stellar Mobile Wallets
Stellar is keen on making a payment mobile, and Lobstr offers a neat package. It is a functional, user-friendly mobile wallet that’s available on Android and iOS. You’ll be up-and-running in a couple of touches, but once again, security is not optimal on mobile devices.
Step 2: Buy Stellar Lumens
Lumens carry the ticker XLM, which was recently changed from STR. Some exchanges may not have updated this situation, so check for both when looking to trade.
The easiest way to trade Stellar Lumens would be through eToro’s Stellar trading platform. It’s important to make a distinction between actual exchanges that will allow you to buy and hold your own Lumens and platforms like eToro that only let you speculate on the price (i.e. you don’t get to actually withdraw the coins).
with eToro you can only buy/sell Lumens for fiat currency (i.e. Dollars, Euros, etc.). Also, this method is only valid if you live outside of the US.
IMPORTANT! If you use eToro you don’t actually need a Stellar wallet as they don’t supply you the actual coins. Also, Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. So keep in mind that your capital is at risk.
If you want to actually buy and hold your own Lumens you can try most major altcoin exchanges, which include the following:
- Binance is a super-low fee-trading exchange with an abundance of features and functionality.
- Bittrex is a US-based exchange, which carries a decent reputation for regularly sitting in the Top 5 trading volumes that operate 24/7.
- Poloniex is known for its incredible, extensive range of altcoins, so you can trade lumens in various pairs.
- Kraken is a Bitcoin exchange that has expanded its currency selection, and is a popular option, although the system can sometimes be quite latent.
Currently, there is no easy, trustworthy way to purchase lumens with a credit or debit card. For the time being, you will have to use a trading platform. Do you want a slicker solution, but hold another cryptocurrency service? If so, Changelly will give you access to lumens by trading them for any other coin.
Step 3: Withdraw your Lumens
As always, if you bought Stellar Lumes from an exchange, make sure to withdraw them to your own wallet. Keeping your lumens on an exchange exposes you to the risk of hacks, theft, and insolvency (on the exchange’s part).
Stellar Lumens Price: Will It Continue to Rise?
Like virtually any cryptocurrency, 2017 was a mind-blowing year for Stellar. Its market cap grew exponentially, and the coin price moved substantially. December 2017 saw a move from around $0.10 up to over $0.80 per lumen. Since then, prices have pulled back, and throughout early 2018, they’ve hovered around $0.50.
There is no chance that the price will ever skyrocket like bitcoin and ether, but it is not unimaginable that XLM will someday follow a trend that’s similar to XRP.