Stellar Price (XLM)

Stellar is an open-source payment technology that allows quick, cheap, and secure borderless transactions between a variety of currency pairs. It eradicates the need for middlemen by connecting the sides of the transaction directly. Stellar is designed as a decentralized, community-owned network that runs on a propriety blockchain. The network is powered by its cryptocurrency, called Lumen (XLM). XLM powers the Stellar network, similarly to the way ETH powers Ethereum. The Stellar Lumen (XLM) is among the top 10 most popular cryptocurrencies.

Stellar is supported by the decentralized non-profit organization Stellar.org. The project went live in July 2014. Stellar’s team describes the project as a blockchain-based network that works more like cash. The transactions, conducted over the Stellar network are much faster and cheaper (nearly free) than the Bitcoin ones, while at the same time consume far less electricity.

In reality, Stellar shares some similarities with other payment protocols, such as Ripple (XRP). This is no surprise as both Stellar, and Ripple was founded by Jed McCaleb, a serial entrepreneur and a prominent figure in the world of cryptocurrencies, who also started Mt.Gox and several other ventures.

Stellar is similar to Ripple in the sense that it tries to improve the speed of cross-border transactions and mitigate their costs by connecting financial institutions in one network. However, they also have some notable differences. For example, one is their technology model. While Stellar is an open-source network, Ripple is a closed system. Another key difference is the target markets. While Stellar is focused on developing markets, Ripple targets leading companies and established financial institutions. Aside from that, Stellar has multiple use-cases for its technology, such as bank loan distribution to unbanked customers and money remittances.

One of the main benefits of Stellar is that it supports various tokens, aside from the native Lumen (XLM). This makes it one of the alternative ways for ICOs, aside from Ethereum. All this sets Stellar in a unique position – competing with Ethereum as an environment for ICOs and with Ripple as a digital payment system provider for businesses.

Over time, Stellar has managed to earn the trust of several leading companies and, today, it has multiple successful use-case examples. In 2016, for example, Stellar and Deloitte’s joint efforts resulted in the development of the Deloitte Digital Bank - a project, intended to ease cross-border transfers for some of the world’s leading retail and commercial banking institutions. A year later, in 2017, the organization announced a partnership with IBM that aimed at setting up a payment infrastructure to ease non-profits, small businesses, and financial institutions around the world in making quick and cheap transactions. The initiative is known as World Wire and is one of the most notable examples of a cryptocurrency use case. SatoshiPay also uses Stellar in its efforts to transform online publishing.

Stellar works in a similar way to all decentralized payment systems. There is a distributed ledger, powered by a network of decentralized servers and nodes. The information between the nodes is updated very quickly - in a period of two to five seconds. All transactions on the Stellar network are recorded on a shared public ledger, which makes them accessible to anyone around the world.

To understand how Stellar works in detail, think of it as a quicker, cheaper, and more flexible PayPal. All the user has to do is to deposit funds to an anchor on the network. The anchor fulfills the function of the bank in the case of traditional money transactions. He holds the deposited funds and then credits the virtual wallet. That way, anchors ensure there is a bridge between the deposited currency (as the network supports traditional currencies and crypto) and the Stellar network. The whole process works similarly to swaps transactions where you formally convert your funds once you deposit them and make a transaction. Here is an example – you have an account in EUR and want to send funds to your friend in the USA. Once you make the transaction, the Stellar network will convert the EUR amount in USD by using the lowest FX rate. Sometimes this may require multiple conversions to help you get the best rate. However, in each scenario, the transaction is finalized within 5 seconds. The recipient will then be able to withdraw the USD through a USD-supporting anchor. All this allows for high-speed transaction execution. Users don’t have to wait for an extended period of time to get authorization for their transfers, unlike the case with banks where operations can take up to several hours. However, you should bear in mind that anyone who intends using the Stellar network to make transfers or store funds should also hold XLM. Users should set aside and maintain a certain amount of lumens for each type of assets in their accounts (more on the matter here).

The network is currency agnostic, which means it supports all types of assets, including conventional currencies and crypto-assets. Conversions on the Stellar network may include the native token (XLM), as well as other digital currencies. Banks, for example, have the freedom to use their own cryptocurrencies to facilitate their transfers.

Stellar employs a unique consensus protocol that makes it more flexible when compared to Bitcoin, for example. Instead of needing the entire network to verify a transaction, Stellar uses an algorithm called Federated Byzantine Agreement (FBA), which streamlines the whole process by relying on quorum slices. This means transactions can be validated by just a small group of the network, which speeds up the process significantly. You may wonder how is this secure, and how are the risks accompanying the lower number of involved nodes, overcome? Each node on the Stellar network has to choose a set of other trustworthy nodes. Think of it as a mini-network of nodes (called quorum slices). For a transaction to be approved, there must be a consensus between all nodes in the set. This means the Stellar network needs fewer resources to validate transactions, which allows it to process up to 1 000 operations per second.

The Stellar network is independent by design and is controlled entirely by its nodes. The nodes on the network use a specially-designed algorithm called the Stellar Consensus Protocol. The SCP was designed by David Mazières, a professor at Stanford University, and allows the network to run with minimal computing and financial resources, making it available to institutions, businesses, and non-profits of all sizes. The idea behind the design of the SCP is to overcome the flaws in Bitcoin’s mining mechanism by providing a flexible, energy-efficient, and speedy way to validate transactions.

Stellar is also considered a system for tracking ownership. It uses a distributed accounting ledger that collects two types of information about each user on the network – his account balance and what he wants to do with his money (in terms of buying and selling). While the first one is typical for most payment networks’ blockchains, the idea of throwing users’ operations in the equation allows for trade automation and the development of more functionalities.

Stellar has become so popular due to its ability to streamline cross-border transactions. It has disrupted the existing model where banks have to maintain accounts in local currencies in foreign countries to be able to serve two clients. Thanks to Stellar’s infrastructure, transactions happen on the blockchain instantaneously, without the need for intermediaries, conversion, or reconciliation of currency accounts. And most importantly - at a fraction of the cost.

For the first five years of its operation, the Stellar network has handled more than 450 million operations, initiated by over 4 million users. According to Stellar.org’s information, the costs for a single transaction are around 0.000001$, which means they are almost free.

You can buy XLM at almost every major cryptocurrency exchange. The best way to find a reputable platform to buy XLM is by navigating to the “Markets” tab on the Nomics’ Stellar page. It will show you all exchanges where you can buy lumens, alongside with near real-time price and trading volume information. The “Markets” tab also serves as a quick way to find out on which platforms you can buy XLM with fiat and which support only crypto-to-crypto transactions.

The exchanges on our platform are sorted by their Transparency Rating. That way, you can see the most reputable service providers first, thus finding a trading venue that is secure and with a good reputation.

At the time of this writing, on Nomics, there are more than 210 markets for Stellar, 35 of which coming from exchanges with the highest Transparency rating score of A+ or A.

Another place you can buy XLM is from Stellar’s decentralized exchange. You can do that via StellarX, the UI client of the decentralized exchange. StellarX allows you to trade assets, issued on the Stellar network, or buy lumens via a variety of fiat asset issuers.

When the Stellar network went live initially, in 2014, 105 billion lumens (XLM) were created. The lumens were allocated in the following way:

• 20 billion XLM in circulation;
• 17 billion XLM in the Stellar Development Foundation’s (SDF) operational fund;
• 68 billion XLM for giveaway programs and investments (under the monitoring of the SDF);

However, over time, as the project matured, the foundation decided to decrease the number of lumens at its disposal. There were several reasons behind the decision, including the need for calibrating the existing number of lumens and easing the process of bringing the cryptocurrency to the market. So, in November 2019, the Stellar Development Foundation revealed that it had burned almost half of the existing XLM, shrinking the supply to approximately 50 billion. The burned lumens were as follows:

• 5 billion from SDF’s operating fund, decreasing the number held there to 12 billion;
• 50 billion from giveaway programs, lowering the total to 18 billion;

The total lumens in existence were reduced to 50 billion, 30 billion of which are administered by the Stellar Development Foundation. The number of lumens in circulation remained the same.

Out of the 30 billion XLM controlled by the foundation, 12 billion were dedicated to the needs of the direct development fund, supporting the organization’s operations. Another 2 billion were intended for support of the currency and the infrastructure, while 10 billion were set aside for investments (2 billion for new products and 8 billion in Stellar’s enterprise fund). The last 6 billion were dedicated to user acquisition, including marketing and in-app promotions. To find out more about the allocation of the lumens in the SDF’s funds, check this article.

The community voted to fix the supply of XLM so that the inflation can be discontinued. Later on, Stellar revealed that it has no intention of burning additional lumens.

As one of the most popular cryptocurrencies, Stellar is supported by a variety of solutions, including desktop, hardware, software, and mobile wallets. However, it is also worth noting that there is a niche of XLM-only wallets, designed solely for the purpose of storing lumens. Here, we will go through the best choices from each category:

Hardware wallets for storing Stellar

Hardware wallets are considered the safest way to store your cryptocurrencies. The good thing is that the devices of the leading hardware wallet providers in the face of Trezor and Ledger both support Stellar. If you decide to invest in a hardware wallet, then the best choices are the Trezor One and the Ledger Nano S. If you have a bigger budget, you can choose the premium devices Trezor Model T or Ledger Nano X.

Software wallets for storing Stellar

If you prefer to go for a free option, then there are several desktop and mobile wallets for you to choose from. Let’s start with those suggested on Stellar’s website.

One of them is Keybase, an encrypted communication app with a built-in XLM wallet. It is available for mobile and desktop devices. You can also go for Solar Wallet (available for both mobile and desktop devices), which is an intuitive wallet app with built-in multi-signature transactions. Next on the list is Lobstr, a custodial wallet that allows you to store all types of Stellar-based tokens. You can install Lobstr on your phone or computer.

Aside from those, it is worth considering also some of the most popular multi-currency third-party solutions. If you intend to store small amounts of cryptocurrency, you can check the Coinbase Wallet. Other viable options are also the Atomic Wallet, one of the most popular software wallets worldwide, available for both desktop and mobile devices, as well as Guarda and TrustWallet. In 2018, Blockchain.com, the biggest crypto wallet solution provider worldwide, also added support for XLM.

Other XLM-specific solutions are also StellarTerm (desktop), Stellar Foxlet (desktop), and SAZA (a web wallet).

Paper wallets for storing Stellar

Unlike the case with Bitcoin and Litecoin, with Stellar, the paper wallet solutions are pretty limited. The most popular options are the StellarPaperWallet.com generator and the official wallet repository on GitHub - Stellar HD Wallet. Both solutions are based on the same code.

If you decide to use a paper wallet solution, there are a few things that you should bear in mind. First of all, make sure to download the software locally, check the code to see if you aren’t generated a pre-seeded wallet (if you have the necessary tech skills), and generate your wallet offline. These precautionary steps apply to all paper wallet solutions and don’t refer to any Stellar wallet generators in particular.

There are lots of different forecasts for the future price of Stellar and the potential of the cryptocurrency. However, the case with all estimates is that they are rarely accurate. In 2019, for example, some analysts suggested that XLM will reach a price of $0.1 - $0.2 in December 2019 and $35 - $45 per token by the end of 2020. The estimation was based on in-depth technical analysis and soon became a hot topic on forums, creating a positive vibe towards the potential of the cryptocurrency. Many investors saw the 25% immediate price jump, following the Stellar Development Foundation’s announcement that it had burned half of the coin’s supply as a positive sign that the way-too-optimistic forecast is possible. In reality, though, the truth is that the price prediction doesn’t seem reasonable, considering that XLM’s all-time high was $0.89 at the start of 2018.

Other analyses point out to prices ranging between $0.1 - $0.2 by the end of 2019 and up to $0.7 per token by 2020. However, it is worth noting that XLM closed 2019 at a price of $0.045, which remains way below the estimations, and a price of $0.7 per token remains unrealistic.

AtomicWallet also had a forecast about the price of XLM in 2019, which didn’t pan out. The Atomic team projected that Stellar’s successful partnerships with IBM, Deloitte, SatoshiPay, Hashcash, and Mobius, alongside with all the marketing around the project, will help XLM reach price levels of $0.3 - $0.4 for 2019 and up to $0.6 in 2020.

CoinSwitch saw XLM’s price rising to $0.61 by the end of 2019 and up to $1 in 2020. However, they also state that a more realistic forecast for 2020 is a price of $0.77 per token.

Although backed by hours of analysis, all these forecasts still struggle to predict the real situation on the market. The overly-optimistic estimates of $45 per coin aside, even a realistic goal of $1 per token, will mean a price increase of approximately 2 000% from the levels at the time of this writing. Although we are talking about the world of cryptocurrencies, this still remains a very unlikely situation. The more likely scenario for the coin is to see a modest increase that, in the short-term, won’t surpass its all-time high.

What all this comes to say is that getting the price forecast right is really hard. Instead of trying to predict the future price, it is better to learn more about the factors that drive XLM’s price and understand how to predict them, instead. To give you a hint we should note that, in the long-term, XLM’s price will depend on two main questions: 1) How well will the mainstream adoption go?; and 2) Who will find the coin valuable? More on this in the next question.

Several factors drive the price of XLM. The first one is the development of the Stellar network. Over time, Stellar has managed to strike key partnerships with leading companies, including IBM, Deloitte, SatoshiPay, Hashcash, and others. Aside from that, Stellar collaborates with many non-profit organizations and funds, focused on the development of the cryptocurrency industry, as well as blockchain and other projects. The Stellar Development Foundation aims at finding partners not only on corporate but on industry and national levels as well. Organizations and whole countries from all around the world (most notably the developing markets) use Stellar’s infrastructure to grant access to financial services for the unbanked part of the population. The best example is IBM’s World-Wire system, an international payment system, available in 72 countries and supporting close to 50 currencies. Striking such a partnership meant a lot to Stellar, considering that 97% of the world’s largest banks are IBM’s clients. The fact that such a prominent industry leader has chosen Stellar’s technology to power its ambitious project had a massively positive effect on XLM’s price. The cryptocurrency’s price doubled right after the announcement was made. Aside from that, news about the development of IBM’s project that had come out at a later stage continued to drive the price up. Another example is when Wirex, a UK-based, FCA-regulated payment platform, revealed that it plans to use Stellar’s blockchain to create 26 stablecoins for EU citizens. The positive news resulted in a 40% rise in the price of XLM. So, in a nutshell, partnerships are essential to XLM’s price and if Stellar proceeds to attract leading companies and widen its network, the bullish trend is guaranteed.

Another key thing that influences the price of XLM is the development and the mainstream adoption of the cryptocurrency niche as a whole (and Bitcoin in particular). If digital assets manage to penetrate a broader set of industries in the next few years, then Stellar as a cryptocurrency with a real-world application will surely be a vital cog in the whole process. Add to that the fact Stellar is the only real payment system provider in the niche, aside from Ripple, and we can see the reasons why some analysts believe the IBM/Stellar platform is capable of replacing the SWIFT/IBAN system in the long-term.

Of course, Stellar holders should be wary of the development of its step-brother Ripple. Although both currencies have a very similar model, they shouldn’t be considered as rivals. Their founding team has managed to differentiate the market and position each cryptocurrency in its own niche. Ripple, for example, is focused on serving banks and financial institutions, while Stellar’s primary targets are the developing markets and those, lacking a real working payment infrastructure and resources to build it (like its partnership with SureRemit that has allowed African citizens to make transactions from abroad to their home countries). However, the development of the Ripple project and the way it is perceived by the market, as the only real alternative to Stellar, can’t be dismissed. At some point, all this may turn out to be an influential factor for the price of XLM.

Essential for XLM’s price is also in-house decisions such as the one to burn half of the tokens in existence or to eliminate the inflation mechanism. In both cases, the price of the coin jumped, as a sign that the SDF takes into account the feedback from its community and has real plans in hand for the successful development of the project. Any changes to the Stellar Development Foundation’s mandate for token distribution also have the potential to influence the price of the coin.

The potential in front of Stellar is vast. If it manages to capitalize on it and connects in one financial network the parts of the world that need it the most, it will prove to be a real game-changer.