Stellar Lumens (XLM) is an intriguing project with a rather interesting history behind it. Drawing obvious comparisons to Ripple, the Stellar network is focused on payment processing between large corporations and in the consumer to consumer space. The main difference however is that Stellar operates as a nonprofit organization that doesn’t charge for use of the network. The initial funding for the project was from payment processor Stripe.
For example, you are an American who wants to send money to your friend who lives in Germany. Currently, you would have to pay large transaction fees to send Euros from your US bank. However, by using XLM (or Lumens, the currency of the Stellar network). You could send USD, and your friend could withdraw money in Euros, without having to pay huge currency conversion fees. The current base fee for a transaction is just 0.00001 XLM, which is just a fraction of a penny, and is paid for by the sender. Like other blockchain projects, transactions on the Stellar network are publicly available and verifiable to prevent fraud occurring.
The Stellar team also focus on social causes, such as making a banking system that is available to those who don’t currently have access to one. The reduced fees, especially for those who need to frequently send money overseas, is a big selling point in the third world countries, this initiative is targeting.
2017 was a big year for the Stellar project, Forbes magazine dubbed it;
Venmo, but on a global scale – and for larger bodies like banks and corporations.
The coin was added to larger exchanges like Binance and is now compatible with well known hardware wallet including the Ledger Nano S.
In October 2017, the team announced a formal partnership with IBM and KickEx to;
develop a blockchain-based cross-border payments solution proven to significantly reduce transaction costs and increase transaction speeds.
This announcement kick started a price surge for Stellar which continued for the remainder of the year.
Stellar’s history is one that should be mentioned as well. It was founder in 2014 by Jeb McCaleb and Joyce Kim. McCaleb has history in the cryptocurrency space and was one of the founders of the Mt. Gox exchange, which at its peak, was the largest cryptocurrency exchange in the world. McCaleb sold the exchange in 2011, shortly before the hacking incident that would result in Mt. Gox’s bankruptcy.
McCaleb then moved on to Ripple, but was made to leave the team after the Mt. Gox incident which deterred major financial institutions from wanting to deal with the project. This is where it gets dicey, after being asked, McCaleb announced that he would be liquidating his 9 billion XRP that he accumulated for his part in the project. He proceeded to do so in one lump sum and resulted in XRP’s price crashing. He was then taken to court by Ripple and ended up losing the case.
This doesn’t necessarily mean anything for Stellar going forward, and the project has been free of any controversy thus far. However I do feel it is important to take a look at the backgrounds of prominent team members, especially those with a track record like McCaleb’s.
Moving into 2018, the success of Stellar Lumens will largely depend on the continued adoption of the platform. Partnerships with groups such as SatoshiPay, a web payment system that helps online publishers monetize their content, is one such initiative. As of December 2017, the network was processing roughly 30,000 transactions per day with an average transaction time of 4 seconds.
The network does have built-in inflation to deal with the increasing volume of transactions. Currently, this rate is set at 1% per year. 5% of all Lumens (5 billion) are reserved for operating the network.