One of the biggest uses of cryptocurrency nowadays  is a  tokenization of fiat money to optimize cross-border payments providing high security, anonymity and  low fees of transactions.  Network Stellar is an open source which provides the ability to create, send and trade digital representations of all forms of currencies. How it  works,  we describe it in this article.

Information about Stellar
Information about Stellar

What is Stellar Lumens cryptocurrency? 

Stellar is a decentralised platform that enables convenient and fast online monetary transactions between different currencies. It leverages the strengths of Ripple and intends to get rid of the competitor's weaknesses. Because of this, the platform has been somewhat sceptical for some time. But Stellar has managed to gain a foothold in the market and achieved a $5 billion capitalisation. In this article, you will understand the critical features of the cryptocurrency, its advantages, disadvantages and why to buy XLM.

How Stellar Lumens works

Stellar emerged from a spin-off from Ripple in 2014. The creators and developers are Jed McCaleb, formerly co-founder of Ripple and the Mt.Gox exchange, and Joyce Kim. They did not like the centralisation of Ripple because it counters the values of the cryptocurrency community. For this reason, the developer of the new platform was not a company, but an independent non-profit foundation, the Stellar Development Foundation.

Stellar had a start-up capital of $3 million. The project borrowed money from US fintech company Stripe and later paid off with 2% tokens.

The platform is positioned as a competitor to Ripple. Compared to the latter, Stellar is closer to bitcoin. It provides anonymous, decentralised, fast transactions. The project does not see banks as its customers but plans to work for ordinary users.

Stellar is a platform that seeks to decentralise any currency transactions in the project's network. One of its features has been open-source, which is why many have started to buy Stellar.

A consensus protocol allows the exchange of data between the servers of the network's members. All users have access to the Ledger, a distributed ledger in which transaction data is recorded. They are stored on all servers simultaneously. The nodes in the network are independent.

Anchors play an essential role in the operation of the Stellar platform. That is the name given to the intermediaries that accept deposits and issue digital credit.

If a user needs to send money in another currency, they will have to hand over regular money to the anchor, receive digital credit, and execute the transaction. The amount is then converted into the desired currency. But it is dangerous to work with an intermediary just like that, which is why there is a concept of "trust" online. It is determined by the amount of money sent.

Oh, and about the name of Stellar Lumens. The cryptocurrency was called initially Stellar. But in 2015, the name was changed to Stellar Lumens or simply Lumen (XLM for short). The initial issuance of Lumen was 100 billion coins. The Stellar cryptocurrency is intended for internal use on the platform.

Stellar trading conditions
Stellar trading conditions

Stellar cryptocurrency: main features and characteristics

Of course, everyone who wants to buy XLM knows why they need them. So what are the features of Stellar?

  1. Stellar, compared to Ripple, has a decentralised platform and a different technology. But the projects still have a lot in common. At first, they even shared the same protocol. But in 2015, Stellar switched to its development. The Stellar protocol is open source.

  2. Any currency can be transacted on the Stellar network. It uses digital credit for this purpose. It converts the user's deposit of fiat currencies into digital credit. Anchors handle deposits and credits.

  3. Project networks have different bandwidths. For example, stellar has 1,000, and Ripple has 1,500 transactions per second. 

  4. Another difference between the projects is the different audiences. Stellar is focused on users, not banks.

  5. Stellar's cryptocurrency, Lumen, is needed for internal payments on the network. A fee of 0.00001 XLM is charged on each transaction. As a result, 5% of the 100 billion coins have been frozen for the Stellar fund.

The rest of the cryptocurrency is distributed in stages in three ways:

  • 50% will go to users who sign up for the site.
  • 25% of Lumen will be given to non-profit organisations.
  • 20% will be divided between bitcoin and Ripple users - the former will get 19%, while the latter will only get 1% XLM.

All coins will not be released to the market at once. Instead, 1% of the Stellar coin is added to the network every year. The cryptocurrency does not have any mining.

Stellar Trading Platform (XLM)
Stellar Trading Platform (XLM)

Advantages and disadvantages of Stellar cryptocurrency

So, anyone planning to invest in Stellar is looking to get as much value in return as possible. 

The main advantages of Stellar Lumens include:

  • Low fees;
  • The open source and decentralised nature of the platform;
  • High transaction speed - up to 1000 per second;
  • Exchange of assets: compatibility with different financial systems;
  • Project cryptocurrency cannot be mined - the system is independent of miners and producers;
  • Any fiat currency can be used by exchanging deposits for digital credit on the network;
  • Stellar platform is protected by cryptographic encryption;
  • All users in the system have equal rights.

The disadvantages of Stellar are related to competition and are often the flip side of the advantages:

  • bandwidth is lower than that of Ripple;
  • the Stellar network is too similar to Ripple, which entered the market earlier;
  • due to the lack of mining, the principle of obtaining Stellar cryptocurrency is not clear to everyone.

The disadvantages are equally essential to consider. It will help to calculate the risks when investing or buying cryptocurrency. 

How to buy Stellar (XLM)?
How to buy Stellar (XLM)?

Should you invest in Stellar?

There is no solid advice on whether or not to invest in the Stellar token. Some experts are optimistic about the platform's prospects, but time will tell.

It has innovative technology, well-known developers, a decentralised network, and a growing number of client companies. But there are also plenty of competitors.

The Stellar project could serve as a platform for an ICO. This opens up great opportunities to develop the platform, raise additional funds and increase the value of the tokens. The project is not only interested in cryptocurrency ICOs, but also central banks. If they decide to issue national cryptocurrencies on the Stellar platform, it will positively impact the project's token value.

An important step was the partnership with IBM. Stellar is going to make financial transactions faster and cheaper and create a platform for transfers. The collaboration with IBM is highly beneficial for Stellar financially and in terms of marketing.

An investor wishing to make a profit on the project should consider that it will not be possible to do so too quickly. 

The return on investment depends on:

  • peculiarities of the cryptocurrency market;
  • growth in the number of users, customers and partners of the project;
  • cooperation with central banks;
  • expansion of the scope of the project's technology;
  • increase in the number of ICOs on the platform;
  • the success of Ripple and other competitors.

The specifics of investing in Stellar are that XLM is a cryptocurrency for internal use. It is needed to protect the platform from spam attacks and transactions. Given the gradual distribution of coins, the rate depends on large institutions using Stellar. More transactions mean a higher need for XLM and, therefore, an increase in the exchange rate.

Deposit replenishment
Deposit replenishment

Ways of obtaining Stellar

Mining tokens are not available. But coins can be:

  • Receive from another user;
  • To buy Stellar from an exchange;
  • Get Stellar in a free altcoin giveaway.

Buying on an exchange.

The coin is traded on most major CEX exchanges and DEX within the platform. Examples: Coinbase, Kraken, Binance, Bittrex, Huobi. In addition, users can buy Stellar through a third-party exchange site. But this method is riskier.


Suppose you have purchased a cryptocurrency. But how do you use it?

Applications for Stellar:

  1. Instant transactions between users. The emphasis is on cross-border transfers.

  2. Convenient, fast exchange of digital assets.

  3. Maintaining an account online. It is not necessary to have a lot of cryptocurrencies. It is enough to have a minimum amount of lumens on balance.

  4. Payment for goods, services in online shops, online services. Although their number is still limited, the coin's growing popularity will increase the number of partner sites.

  5. Naturally, used for trading on large crypto-exchanges to earn even more money. 

How to invest in Stellar wisely

Those wishing to invest in Stellar may want to consider CFD trading. This is because an overwhelming number of exchange trades are conducted under the CFD scheme.

The Contract for Difference (CFD) is a low-cost trading method for novice and experienced investors. A CFD can be traded on shares, commodities, indices, precious metals and even cryptocurrencies. 

As its value is linked to the value of the underlying assets, a CFD is a derivative instrument. CFDs are paperless, fast and relatively easy to use. All of the above factors contribute significantly to their growth. All transactions are purely contractual, so there is no physical delivery of any product.

Registration on the Investment Platform
Registration on the Investment Platform

How do CFDs work?

CFDs are over-the-counter products, so they are not listed on any exchange. Instead, traders and investors work directly with each other, even if neither owns the asset.

In the same way, the investor predicts whether the asset's value will rise or fall in a certain period, and the CFD provider takes the change as the agreed value. You exchange the value of the difference in price between the opening and closing of the trading period.

Bottom line.

Thanks to its developers' efforts, the Stellar platform aims to be better than Ripple. The project wants to change the world's payment system, so every investor or buyer helps that idea come to fruition. We recommend you to follow the news, learn how to earn and go towards your goal. Don't be afraid to try new things if you want to change something in your life. Happy trading!

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