Investing in Stellar Lumens (XLM): Everything You Need to Know
27 Aug 2023 by Crypto Presale 5 min read
Investing in Stellar Lumens (XLM): Everything You Need to Know

Stellar Lumens is a decentralized protocol made to 'support digital representations of any currency.' It was designed to make cross-border payments much simpler by allowing anyone in any region to send any token of their choice. 

But what does this token really have to offer? Is Stellar Lumens a worthwhile investment? This guide will provide you with all the information you need about XLM.

What is Stellar Lumens (XLM): An Introduction 

Stellar Lumens is a blockchain network with one goal: to onboard as many people as possible into an optimal financial system. To do this, the network has its own token called Lumens (ticker: XLM). 

XLM acts as the intermediary between different currencies by facilitating their conversion. Stellar Lumens is run and managed by the Stellar Development Foundation. But who is behind Stellar?

History of Stellar Lumens 

This cross-border network was created in 2014 by Jed McCaleb. Interestingly, McCaleb is the co-founder of another, but more popular blockchain network: Ripple. He worked with a lawyer named Joyce Kim to set up Stellar, which received $3 million in seed funding from Stripe.

Since its beginnings in 2014, Stellar has grown to be a formidable network in the crypto space. With an impressive market cap and financially inclusive use case, this network has the potential to grow beyond facilitating cross-border payments. Let's look at some more uses of XLM.

Use Cases of XLM 

While cross-border payments are the most popular use case of Stellar, the network is designed to support other functions such as:

1. Fiat bridge: 

Have you ever had to pay outrageous fees to convert one currency to another? Well, Stellar eliminates this by using XLM as a bridge currency, allowing anyone to convert between different fiat currencies.

2. International remittances:

Stellar Lumens can be used for international remittances, helping people send money much easier and quicker. 

3. Token creation:

Anyone can create custom tokens on the Stellar network by holding XLM, which acts as a base currency for these tokens.

4. Trading: 

Traders use Stellar Lumens to provide liquidity on the Stellar DEX (StellarX) as a bridge between tokens, especially when they want to send tokens across different networks 

5. Smaller payments:  

Unlike Ethereum which has high gas fees, Stellar Lumens can be used for smaller crypto payments because of its relatively low gas (transaction) fees. This makes users more comfortable using crypto for payments and promotes financial inclusion.

What are Lumens (XLM)?

We mentioned "Lumens" a lot in the last section, so let's clarify what they are. Lumens, often known as Stellar Lumens or simply XLM, is the native cryptocurrency of the Stellar network. They are critical in facilitating numerous transactions and operations within the Stellar ecosystem, and have a circulating supply of 27 billion tokens, out of a max supply of 50 billion.

Lumens also act as a bridge currency, allowing for the frictionless exchange of value across various types of assets, such as fiat currencies, cryptocurrencies, and other tokens produced on the Stellar network. 

Lumens are at the heart of the Stellar network's operation. In fact, the network cannot do without them because they enable fast and cost-effective transactions as well as support the generation and exchange of other network assets.

Where to Buy Lumens (XLM)

To get started on your Stellar journey,  you would need some XLM. You can buy this coin from a variety of centralized exchanges such as Kraken, Binance, and Huobi. In fact, you can see a list of exchanges recommended by Stellar here.

If you prefer not to use centralized exchanges, you can opt for Stellar's DEX instead. However, we recommend using centralized exchanges as a beginner due to their ease of use. It only takes a few minutes to set up an account with these exchanges. 

What is the Difference between Stellar and Ripple?

There is almost an unending debate as to which blockchain network is better for cross-border payments. Is it Stellar or Ripple? Here are some of the main differences between both networks.

  • Vision: Stellar focuses on financial inclusion for individuals, while Ripple focuses on helping companies and financial institutions overcome the challenges of TradFi (traditional finance).

  • Consensus: Stellar uses a consensus mechanism called the Stellar Consensus Protocol (SCP), which ensures fast and secure transactions while maintaining decentralization.

On the other hand, Ripple utilizes a consensus algorithm called the Ripple Protocol Consensus Algorithm (RPCA), which relies on a network of validating nodes to confirm transactions and achieve consensus.

  • Native token use cases: XLM serves as a bridge currency to facilitate transactions and conversions between different assets. XRP (Ripple's native coin) is primarily used for payment settlement on the Ripple network.

  • Leadership: Stellar is known as open-source and urges developers and users to contribute to its growth. Ripple is very different in this regard. It's a company and has a distinct corporate image. Decisions are mostly made by those at the helm of affairs and not the users.

So while both networks have different target audiences, they are both important in cross-border payments and crypto adoption. So, should you be looking at Stellar as an investment?

Is Stellar (XLM) a Good Investment?

Now to the section a lot of you will be interested in: Should I buy Stellar or not? One important factor to consider before buying any cryptocurrency is its use case. As we have pointed out earlier in this article, Stellar has a variety of uses making it a solid network. 

It also has real-world uses and has been in existence for a long time. All these are additions to the network's credibility and worth. Not many projects have been able to remain top of mind for years.

However, XLMs value is directly tied to the success of the Stellar Network. If the network stops existing, your investments would be in danger. 

Wrapping up: 

Stellar Lumens is an exceptional blockchain network that is constantly working on promoting financial inclusion within and outside Web3. From cross-border payments to token generation, Lumens (its native cryptocurrency) has plenty of uses.

While Stellar is more suitable for individuals, Ripple is ideal for companies who desire easy cross-border payments. You can buy Stellar Lumens on a variety of exchanges, but be careful to do your research before you jump right in. 

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This article is intended for educational purposes and is not financial advice.