Stellar Lumens is a company founded by Jed McCaleb. You'll have heard this name many times before, and it's no wonder. After all, McCaleb is the founder of Mt. Gox.
Mt. Gox is an abbreviation of Magic The Gathering Online eXchange. Thus, Mt. Gox began as an exchange platform for cards from the popular card game Magic the Gathering. In 2010, Jed decided to use its address as an exchange for cryptocurrency.
Mt. Gox did go bankrupt, but that was only after Jed sold that thing. It was the largest cryptocurrency exchange of its time, hosting 70% of crypto trading from 2010 - 2014 at its peak.
Jed McCaleb is also one of the founders of XRP. After having disagreements with other high-ups at XRP, he decided to start his own platform, Stellar. This is loosely based on XRP, so it is not surprising that these two cryptocurrencies are so similar. However, it is not a fork of XRP.
Whereas Ripple focuses mainly on businesses and banks, Stellar Lumens is more concerned with individual payments.
Stellar Lumens is a platform for exchanging money around the world. XLM is the cryptocurrency of their network.
If you want to send XLM around the world, you are cheap. You pay just 0.00001 XLM per transaction. That can still come off with a price of around ten cents each at the moment. The reason they charge a fee at all is to prevent spam transactions or DDoS attacks. These are unprofitable with this fee.
This does compare to XRP, which is also extremely cheap. Therefore, when sending coins, it is quite conceivable that you exchange crypto to one of these before sending, which is cheaper.
Stellar Lumens can handle around 2,000 transactions per second. If you consider the time in which the coin was developed, that is enormously fast. Back then, Bitcoin and Ethereum were running into their limits in terms of speed and affordability.
Transaction time is about in 5 seconds, so if you have no patience a fine coin.
If you want to send XLM peer to peer around the world, it is very easy. This is unlike if you want to send fiat money through banks.
An anchor or anchor is an intermediary that can convert your XLM into another currency. Suppose you want to send 50 euros worth of XLM to Jose in Brazil. Of course, 50 euros is of no use to him because they have a different kind of fiat money there.
The anchor then exchanges your XLM into the fiat money of the country Jose lives in, looking for the most favourable exchange price.
You can think of an anchor as a bridge between blockchain and traditional financial institutions, which must meet high standards such as audits and 1:1 reserves.
Anchors work within the same network, allowing them to send money enormously fast and cheaply when compared to banks.
Stellar works with the Stellar Consensus Protocol. All transactions within the network are decentrally validated. Stellar does not work with proof of work, but gradually brings the coins into the world itself. There is some risk of dilution, however, as only about half of the coins are on the market.
The Stellar Consensus Protocol ensures the security of the network. Since there are no miners, the transaction can also be entered cheaply by the validators. They do not get a transaction fee for doing so.
XLM is the cryptocurrency of the Stellar Lumens network and their ticker symbol.
When you make a transaction through XLM, you have to make a very small fee of 0.00001 XLM. This is to prevent spam. If no fees were charged, the network would be easy to attack via DDoS attacks. Now that is too expensive, as absurd as it sounds with such a low fee.
If you have an XLM account, you should also always have 1 XLM in your wallet. This prevents bots from creating a mountain of accounts and filling up the network with accounts.
XLM is the bridge to other types of currency.
Most tokens will be given away through a variety of constructs like airdrops, innovative ideas for Stellar and contributions to projects. A small number will be given away on a day-to-day basis.
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The founding of Stellar (that's what it was called in the beginning) took place in 2014.
This split-off, where the code was loosely based on Ripple, was necessary for Jed McCaleb because he disagreed with the way things were going at Ripple. He found a partner in Joyce Kim.
The Stellar Development Foundation was set up soon after in partnership with Patrick Collison, CEO of Stripe. $3 million was put into this foundation by Stripe.
By 2015, Stellar already had 3 million registered accounts on its platform.
At the end of 2015, a new consensus protocol was implemented by the foundation, SCP. This is the Stellar Consensus Protocol, written by Stanford professor David Mazières.
2017 was the birth year of their commercial arm, Lightyear.io. The same year saw proposals for a partner programme, where new projects on Stellar could receive funds for start-up.
In 2018, Lightyear acquired Chain Inc, after which the two continued as Interstellar.
In 2019, Denelle Dixon took over as CEO from Jed McCaleb, with Jed taking another position. In the same year, Binance embraced XLM.
The years 2015 - 2021 saw the launch of a variety of partnerships with Deloitte, IBM and others, with a particular focus on enabling XLM to work in countries where it was not a given, such as third-world countries.
Over the years, Stellar has also held a number of airdrops of their tokens to spread them across the community.
Stellar started with 100 billion tokens, but the community had voted to halve the amount in 2019 and so there are now "only" 50 billion XLM tokens.
As advisers, they have prominent employees from major companies like Wordpress and Apache Software.
With their Enterprise Fund, they aim to attract more and more companies, contributing to the start-up.
Companies they are already working with include Deloitte, IBM, Abra, SatoshiPay and Tala.
Their main interest is in collaboration with wallets, banks and cross-border payments.
At Stellar, they have also developed a smart contracts platform that works like a blockchain. Their Software Development Kit (SDK) lets you build your own smart contract.
It is written in Rust, so programmers will soon feel at home with Soraban.
The idea is that these contracts will be scalable and provide access to financial products.
Those who still have some cold feet can start experimenting with Soraban and get rewards for composing smart contracts until you become familiar with Soraban.
In 2014, the Stellar Development Foundation was established. The purpose of this foundation is to grow and expand the open source Stellar network.
This foundation is the point of contact for governments and other regulators.
They also promote access to financial markets in all countries. On the technical front, they work to maintain and expand the base of their code in all kinds of areas.
The Stellar Development Foundation is thus the focal point of Stellar. They provide the ecosystem, platform and infrastructure.
The Stellar network and XLM can be used for, among other things:
Converting real world value into tokens.
Since not all tokens are on the market yet, there may be dilution. About half are in circulation, so when the remaining coins enter the market, this could be a considerable drag on the price.
Our expectation is that Stellar knows this very well and will put the coins on the market with some regularity, hardly affecting the price.
The highest price ever paid for 1 Stellar was around USD. We do not expect this again, as that was from the insane bull market of 2018.
Most importantly, Stellar Lumens is still in the top 50 and thus still in the spotlight. As a result, the price will not go down anytime soon.
For this reason, we consider Stellar Lumens a good investment, it is a well-researched and easy, fast and cheap product.
We prefer not to make price predictions here, as this might create false expectations.