Investing in Stellar: What to consider
Stellar is a platform created to serve financial needs, such as money transfers, micropayments and delivering remittances, as well as exchanging different currencies, cryptocurrencies and other tokens. Based on the Ripple Labs protocol, and later forking into its own platform, Stellar operates as a nonprofit organization, with some well known people from the tech space at the helm. So what is the Stellar coin? Like the Ripple Labs’ XRP token, the Stellar token, known as Lumen (or XLM) has very low individual value. However, the overall market cap of XLM positions Stellar as one of the top cryptocurrencies in the world. Stellar’s approach is quite different than other cryptos, since some of its declared missions include fighting poverty and providing financial solutions for bankless individuals.
Who should include Stellar in their portfolios?
Cryptocurrency traders: Since Stellar is one of the top cryptocurrencies in the world, traders and investors who focus on cryptos should consider investing in it, as part of a well-balanced portfolio.
Blockchain believers: The main use of the Stellar platform is in the field of finance, one of the earliest industries to embrace blockchain. Therefore, those who believe that the phenomenon will expand, and more businesses will embrace the tech, could buy XLM.
Day traders: As with all cryptos, the XLM chart could display significant price swings over the course of a single day. Therefore, traders often try to capitalize on these movements in the hope of generating short-term gains.
Technology for social change enthusiasts: One of Stellar’s missions is to help reduce global poverty and offer solutions to societies which do not have access to banking services. Investors could buy Lumens as a way of helping Stellar promote their social agenda.
What drives Stellar’s price?
Like so many other cryptocurrencies, Stellar burst onto the scene in 2017, showing massive gains and reaching a market cap in the billions. While fueled by the crypto bull run, there are other various factors that could impact the XLM coin price. Since it was created first and foremost to support real-world applications, its price is exposed to both crypto-related and non crypto-related influencers:
Bitcoin: The first cryptocurrency still has a firm grip on the market. Despite hundreds of new altcoins introduced since its launch, Bitcoin is still the most influential crypto, and when it shows volatility, it could often stir the entire market with it.
XRP by Ripple Labs: Since the way how Stellar works is similar to the Ripple Labs protocol, it is reasonable to believe that the two are perceived as linked by some investors. Therefore, news or price movements relating to one, could impact the other.
Mainstream adoption: The Stellar protocol could be used for various financial applications. Therefore, whenever it is adopted by a well-known company, it could increase its credibility and might result in an increase in Stellar Lumens price.
Social impact: One of Stellar’s main agendas is to help the less privileged gain access to financial services. Therefore, the organization’s success could come in ways other than financial gain, such as showing progress in promoting social change.
The Stellar Protocol: Making money smarter
The Stellar protocol enables the transfer and exchange of different currencies and cryptocurrencies, using Lumens as a bridging currency. Moreover, since it is blockchain-based, it is also built in a way that ensures parties on both sides will get the best exchange rate possible. The platform automatically locates the best rate for each transaction and charges XLM fractions as a fee, resulting in each transaction costing less than a cent in commission.
Therefore, it has attracted quite a lot of attention in the tech and financial world, securing some interesting partnerships. For example, IBM has chosen Stellar as the platform on which to base its cross-border payment solution. The solution aims to drastically reduce the time it takes to transfer money from one country to another, and has garnered attention from some major financial institutions.
History of Stellar
Stellar was founded in 2014, supported by the nonprofit organization, Stellar Development Foundation. The founding members of Stellar are far from anonymous in the tech world. The co-founders are Jed McCaleb, founder of the popular P2P file-sharing solution, eDonkey, and Joyce Kim, a veteran venture capital executive.
Originally based on the Ripple Lab protocol, the network later forked into its own formation. In 2015, Stellar underwent a complete overhaul, changing its base code and creating an entirely new server-based consensus algorithm for approving transactions. Each server on the network can approve transactions every 2-5 seconds and and each change is logged on a public ledger updated at the same rate. This ensures both fast transaction times and real-time tracking of each XLM token’s owner.
Like many other cryptocurrencies, Stellar had a stellar year in 2017, dramatically rising in value and reaching a market cap in the billions of dollars, positioning itself as a top 10 cryptocurrency.
Conclusion: Stellar could harness blockchain for good
In the fast paced multi-billion dollar cryptocurrency space, Stellar is somewhat of an oddball. It does have similarities to other blockchain companies, such as Ripple Labs and Ethereum, but it functions as a nonprofit, and actively works to promote social change. When put together with its growing capital, efficient money transferring technology, and big name partnerships, Stellar’s path could be quite promising.
The cryptocurrency revolution had another, major side effect, namely, to put the spotlight on blockchain technology. While the financial world was interested in e crypto coins, the tech world was fascinated by the possibilities of using blockchain for other purposes. Companies like Stellar, Ripple Labs, Ethereum and NEO all championed the use of blockchain for a variety of applications, and their cryptocurrency value subsequently rose. Stellar is one of the companies that has more to offer than just an investment option, and, therefore, could stay more relevant in the coming years.
*This content is for information and educational purposes only and should not be considered as investment advice or an investment recommendation.
*Cryptocurrencies can fluctuate widely in prices and are, therefore, not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Past performance is not an indication of future results. Your capital is at risk.