While you are investing in the crypto market, it won’t be long before you come across Stellar Lumens. This unique cryptocurrency contains a rocket ship as a logo and a catchy name that reminds you of a futuristic space travel. Aside from their sophisticated marketing, Stellar brings a lot to the cryptocurrency sector.
Stellar is a distributed payment infrastructure with open source code. The platform entered the market with the aim of enabling a more rational approach to international money transfers such as wire transfers. Today, the Stellar ecosystem is known for its affordable, fast, and reliable transmission options. In particular, the platform enables smooth cross-border transactions.
What are stellar lumens?
Unlike its main competitor in the market, Ripple, Stellar is more focused on the needs of the individual than on large financial institutions. In this way, the platform can seamlessly connect individuals, institutions and payment systems around the world. Today the platform consists of an international consortium of individuals and organizations in each region.
How does Stellar work?
Stellar uses decentralization to improve the transfer systems currently in use. The platform includes a distributed ledger to improve efficiency and transparency for users. In this general ledger, all network data including the transaction history for the transmission of the systems used are managed. This ledger keeps an uninterrupted record of all transactions since day one.
Using the Stellar platform is easy. Similar to popular payment processors like PayPal, the process starts when you upload money to the network. In the Stellar Ecosystem, these funds are uploaded to Anchors. The anchor acts as a medium between Fiat and Stellar’s distributed ledger. In this way, anchors serve a critical purpose in the stellar ecosystem.
Once your money is available in Stellar’s distributed ledger, you can easily send it anywhere in the world. Let’s say you want to send $ 1000 to a friend in the EU. You would simply upload your USD to a Stellar anchor for USD network credit.
Next, you can transfer your credit to your EU companion. At the time of transfer, Stellar would automatically convert your USD balance to EUR. It is important that the platform automatically determines the lowest exchange rate. Once the money has been converted, it will be deposited into your friend’s account. Here you can withdraw the financing directly.
Amazingly, this entire process takes place in seconds and completely behind the scenes. In this way, Stellar can achieve its goal of simplifying money transfer systems for the average person. The platform offers a really optimized market approach.
Support for multiple fiat currencies
What is impressive is that Stellar can accomplish this task using three specific protocols. In the first scenario, stellar converts your funds from its order book and simply enables an optimized exchange. In the next process, Stellar converts your money to XLM. Then your funds will be transferred internationally. Once they arrive at their destination, the XLM is sold and the local fiat currency. In this scenario, XLM is used as an intermediary.
It is crucial that sending cryptocurrencies worldwide costs only a fraction of the cost of traditional money transfer systems. In the current market infrastructure, a user can lose more than 7% of their money during the transfer. These lost funds will be used to cover a wide variety of third parties involved in the fiat transaction.
Stellar’s platform works in a smart way and enables complex chain reactions to be carried out. For example, you may find that there is no direct currency pair for your desired trade. In this case, Stellar can enter into a multiple trade transaction. Imagine your USD converts to GBP first and then GBP to EUR.
Another unique aspect of the Stellar is the ability to place exchange orders directly on the platform. These orders are immediately added to the public ledger. Here you can choose between a variety of other currencies. It is important that with this system you can exchange your money for fiat and crypto currencies.
What is XLM?
Although Stellar was designed to display digital representations of any currency, the developers are nonetheless creating their own native crypto called XLM. In fact, all Stellar users must have a small piece of XLM in order to participate in the network. This requirement is intended to prevent the general ledger from being filled with spam or other uselessness.
The decision to create a unique currency for this task was based on Stellar’s desire to generally remain free of a particular currency. For example, if Stellar requires you to hold a certain amount of USD, the platform is in some ways tied to the performance of USD, or at least tied to the US market. This is a situation that developers were keen to avoid.
Unlike most cryptocurrencies, Stellar Lumens don’t need nodes to mine blocks of transactions. Network participants also do not receive any awards for their efforts to validate the blockchain. This approach is in stark contrast to cryptocurrencies like Bitcoin. In particular, the company decided that it would be better to spend 100 billion XLM during the launch of the platform. From there, the supply of Stellar would increase 1% every year for around 6 years.
The developers made a critical change to this approach in October 2019. The developers decided that it would be more conducive to their goals to reduce the supply of XLM in the future. As such, they reduced the amount of XLM to 50 billion. In addition, there is no longer any plan to release XLM in the future.
This strategy currently leaves around 20 billion XLM on the market, with another 30 billion being withheld by the company. These retained funds are to be used to expand the XLM ecosystem. Tasks such as development and marketing are the main uses of Stellar’s plan funds.
A quick look at Stellar’s capabilities and it’s easy to see that this platform came from a seasoned blockchain expert. Stellar’s founder is none other than crypto heavyweight Jed McCaleb. McCaleb is best known for starting the now-defunct Mt.Gox exchange.
At one point, Mt.Gox controlled 70% of the global Bitcoin trading volume. However, in one major hack, the exchange broke up after losing $ 450 million in Bitcoin. In particular, McCaleb had left the company and sold his stake before the hack.
In particular, McCaleb also founded Stellar’s main competitor, Ripple. However, he left the company in 2013, citing irreconcilable differences in the direction of the company. Unsurprisingly, the two cryptocurrencies have many things in common, most notably the goal of making cross-border payments more efficient.
Stellar’s board of directors includes some of the biggest names in the business. The company managed to win Stripe CEO Patrick Collison, WordPress founder Matt Mullenweg and AngelList founder Naval Ravikant.
How to buy XLM tokens
Investing in Stellar Lumens is easy once you know where to look. First of all, it is important that you understand that Lumen trade under both the XLM and STR ticker depending on the platform you are on. The company decided years ago to change its ticker from STR to XLM, but some exchanges have decided to keep the original ticker regardless of the choice.
Most of XLM’s trading volume comes from three major exchanges – Bittrex, Poloniex, and Binance. Crucially, all of these platforms support XLM-to-BTC trading pairs. If you want to convert USD to XLM, you must first buy BTC on your preferred exchange and then convert it to XLM. If you want to buy XLM directly with USD, you will need to go to the Kraken exchange to make your purchase.
Where do I store XLM
When it comes to storing your XLM, there are a few options you need to consider. If you plan to continuously trade your Stellar, it is more convenient, but less secure, to keep your XLM on your preferred exchange. As long as you don’t trade too much, exchanges like Binance offer a decent level of security for your holdings.
Once you are ready to finish your day trading strategy, you can always send your XLM to a mobile wallet like Jaxx. These platforms are the easiest to navigate and use. In most cases, you can download your wallet app and use it in less than ten minutes. Best of all, you always have access to your XLM when you need it.
If you want a more secure approach to XLM storage, consider using Stronghold. Fortress is the distributed switch for the Stellar network. There is even a desktop client available to assist with your storage needs.
If you’re looking to make a larger investment in XLM or HODLE that crypto for an extended period of time, a hardware wallet is the best option. Hardware wallets keep your crypto offline in the “cold store”. This strategy makes it impossible for online threats to access your inventory. The Ledger Nano S or the further developed Ledger Nano X both support Stellar Lumens (XLM).
Given the level of expertise Stellar has and its unique approach to the market, it’s no surprise that XLM is one of the most popular cryptocurrencies in the world today. You can expect this popularity to increase as more people enter the blockchain sector. For now, you can shed light on your crypto investment strategy on any of the exchanges listed in this guide.