Stellar Cryptocurrency Review (XLM)
Stellar is a cryptocurrency that is among the ten most popular coins in the world, and it is the fifth cryptocurrency with the largest market capitalization.
We can notice a tendency in the crypto market when the prices of famous cryptocurrencies like Ethereum and Bitcoin decrease, while the price of Stellar still continues to grow. There are reasons for this. The main factor is the well-developed technical structure of the cryptocurrency, which other assets of this kind often lack.
Why did Stellar become an innovation in the crypto world, and what are the prospects for this coin? Let’s dig deeper to answer these questions.
Let’s Meet Stellar
The history of Stellar began when Ripple posted the code of the network in the public domain, which allowed any willing programmer to start developing a fork of a coin. This is what Jed McCaleb, one of the owners of a large share of all XRP assets, did. He perfected an existing coin. After its launch, Jed sold all of his Ripple assets and invested in the new product.
However, the programmer did not act in good faith: because of the rapid sale of assets, the exchange rate for the coin fell sharply. This caused discontent with other shareholders and developers, and they went to court. The court ruled that under the contract, Jed could not sell assets without selling them. Now, the developer has in his account XRP coins worth more than $40 million, but cannot sell them.
Stellar is a public distributed payment system that belongs to the Stellar Development Foundation. It allows quick and reliable transactions. The American company Stripe is the main investor in the fund and controls almost all the activities on the site.
Stellar enables the use of any cryptocurrency and synchronization with financial structures. Cryptographic encryption ensures the safety of the platform.
However, there are some disadvantages in Stellar. One of them is the threshold for entry. By the way, mining is not available with Stellar.
Stellar’s users are provided with a cryptocurrency called the Lumen (XLM). The system works on basic cryptographic principles and provides a decentralized server that includes a constantly-updated distributed ledger.
Stellar doesn’t work on the mining system to validate transactions. It uses the Federated Byzantine Agreement (FBA) algorithm, which provides the ability to process transactions much more quickly than Bitcoin.
What does this mean? Imagine that there is a large Byzantine army governed by many generals. Soon, they will have a big battle. Each general could be a traitor.
Before the battle, there are two strategies that might be attractive to the army:
- Go on the offensive and lose many troops, but win the battle
- Retreat and lose the battle, but save the troops.
Here is a mathematical problem for programmers: how to make generals check each other at the expense of the veracity of their intentions, without showing anyone confidence. This type of verification algorithm is included in Stellar’s code, where communication nodes act as generals.
Analysis of data during the exchange allows you to fully secure transactions. Validation of transactions is implemented through quorum slices. In Stellar, each node has the right to choose reliable nodes. Its speed of transaction validation has made Stellar really popular among users. This network can process up to 1,000 transactions per second.
Initially, Stellar used a cryptocurrency called Stellar. However, in 2014, a large-scale rebranding was carried out. The coin was renamed Lumen (XLM).
Even though the cryptocurrency was first issued in 2014, it was listed on exchanges in 2017.
At the beginning of 2017, the token price was $ 0.06, but in several months, it dropped to $ 0.01. In Poloniex, a sharp drop in rate was explained by a hacker attack on the exchange.
A lot of experts were sure of the attack’s customized nature, as, in March 2017, many traders had made large bets that caused a fall in the price of the Lumen.
Be that as it may, the Stellar coin held its price. In autumn 2017, there was information that IBM, the internationally-known IT-company, planned to integrate Stellar technology to build its only transaction system.
In addition, Stellar was added to the list of the three top cryptocurrency exchanges: Binance, Bittrex, and Kraken.
Investment capital immediately flowed into cryptocurrency, and the price naturally went up. In October, 1 XLM cost $0.04, and in December, it was $0.20.
With the beginning of 2018, many cryptocurrencies collapsed and lost their value. Stellar was not among them.
The developers concluded several promising contracts that aimed to add the Lumen to the Hong Kong stock exchange, OKEx, and to promote cooperation with the global cryptocurrency service Pundi X. As a result, the XLM price increased to 70 cents.
Experts agree that the market value of the cryptocurrency will instantaneously increase. This is due, first of all, to the increase in the cryptocurrency popularity. It is already clear that the developers had created a truly reliable, convenient, and, most importantly, decentralized version of Ripple.
Here’s what you should know about Stellar before investing in it:
- The platform has set a symbolic charge for conducting operations on the network:0.00001 XLM. The developers did this to avoid DDoS attacks, which happen if the network becomes full of meaningless transactions.
- It is required to possess at least 20 XLM to use the Stellar network.
This plan is possible due to the functioning of the internal decentralized stock exchange of Stellar. It works thanks to a built-in SCP algorithm, which is also called the consensus protocol.
The basis of this algorithm is a distributed data registry (the so-called ledger). It contains and stores data on all current and completed transactions.
The registry provides many peer-to-peer and independent nodes. Even if one node fails, the information will remain on the others, and the collapse of the system will be impossible.
CoinMarketCap reported that the circulating supply of Lumens was 18,771,744,750 XLM out of a total supply of 104,204,519,656 XLM as of August 2018.
Reports on fund activities, investments, and even staff salaries is available to all users. The initial supply of Lumens was 100 billion, but the currency was developed to be inflationary. The fixed inflation rate is 1% per year.
Consider the initial supply plan of 100 billion Lumens:
According to this distribution plan:
- 50% was given to people invited to join Stellar.
- 25% was allocated to organizations that want their investments to grow through the adoption of the Stellar network.
- The next 20% was distributed through giveaways.
- The last 5% remained for technical expenses.
The fund created a restrictive contract, according to which all participants in the system who own a large number of coins undertake not to sell them for 5 years. This step was taken to prevent major asset holders from manipulating the exchange rate.
How to Buy Lumens
For Americans, it is impossible to find Lumens on the exchanges.
Follow the recommendations listed below if you do not have an account on the exchanges.
First, create an account — for example, in Coinbase. It is strongly recommended to use two-factor authentication to provide double security to your account. Choose the most suitable method to pay for a cryptocurrency, Then, buy either Bitcoin or Ether. (Skip this step if you have already done this).
Second, register for an account on the Binance exchange. Copy and insert the address of your Binance wallet.
After this step, withdraw Lumens from your account and send them to the Binance wallet.
Now you can exchange your coins for XLM.
Where to Store Lumens
To find the most convenient storage for Lumens, first, figure out which type of wallet is perfect for you. There are several basic options:
- Hot wallets. These are services that allow you to store cryptocurrency online. This can be either special services for Stellar, or simply currency accounts (for example, a cryptocurrency exchange account). This is a very convenient way to keep XLM, since you can use your assets at any time. The disadvantage is that the money is vulnerable to hackers (especially if you choose an unreliable wallet).
- Cold wallets. This option allows you to store savings directly on your computer. To do this, you will have to download the software on your PC, as well as download the entire blockchain of the coin.
- Hardware wallets. A convenient option for those who want to have Stellar at hand. After all, a hardware wallet is a specialized portable device on which your coins will be “recorded.” You can always connect to any device and use assets.
All you have to do is choose how to store Stellar in a specific situation. You can have several wallets: one for daily trading, and the other for fixed assets. There are lots of options.
In general, there is no official wallet from the developers. But you can use a variety of services already proven by many users: Ledger, Stellar Term, Foxlet, Stargazer.
Ripple vs Stellar
It is no secret that Ripple is Steller’s biggest competitor. Let’s compare them to find out the differences between these two projects.
Many experts believe that Stellar is an improved and much more reliable version of Ripple. The Ripple platform, with the token of the same name, appeared in 2012. Many traders jumped at the cheap and practical coin, which promised (and still promises) a bright future. But, despite all its strengths, the cryptocurrency was not perfect. Experts put forward three complaints about Ripple:
- Ripple Labs (the company that created Ripple) is a commercial organization, which, by definition, is not guided by benefits for ordinary members of the system, but by its own benefit.
- Ripple Labs is the main holder of XRP coins, and therefore can artificially manipulate the course.
- Ripple is a centralized platform with a closed program code, and any changes in the operation of the system are possible only with a filing by Ripple Labs.
The developers promised to solve the problems described. First of all, to change the scheme of coin distribution, and make the program code open. And if nothing happened with the first item, they would work on the second one.
In 2013, Ripple Labs discovered the platform code, but the main claims did not disappear. The cryptocurrency community claimed that only a fork could solve Ripple’s problems.
And it happened. It was performed by Jed McCaleb and Joyce Kim. The result of the fork was the emergence of the Stellar cryptocurrency.
Lumens (Stellar tokens) are needed to pay meager commissions (about $ 0.000001 per transaction), and are designed to build bridges. If, for example, someone needs to exchange hryvnia for Zimbabwean dollars, but there is no direct market between these two assets, they can buy Lumens in hryvnia, and then buy the required dollars for Lumen.
The Stellar network is also a great platform to create a new crypto project. ICOs like the Mobius Network and SureRemit have already been launched on the Stellar network.
Stellar is a unique technology that provides the ability to instantly exchange crypto assets and avoid losing money on commissions. Many corporations all over the world are already using Stellar technology, and are actively investing in the development of the project.
The possibilities for practical application of this cryptocurrency are constantly expanding. Stellar will be integrated into the organization of the African messenger Vumi, to allow payments in some countries of the continent.
Obviously, with every new major investor and every contract, the demand for XLM will grow. Accordingly, the price of the coin will rise, as well.