Stellar Lumens (XLM): Is This the Year it Catches Up With Rival Ripple?
What is Stellar?
Stellar is a blockchain network that can connect banks, payment systems, and people together using its native digital asset, Lumens. It seeks to make sending value as easy as sending an email.
While Bitcoin uses the proof-of-work algorithm, which requires miners to validate transactions on the network, Stellar uses the open source Stellar Consensus Protocol (SCP):
“The main differences between the Stellar network and Bitcoin are the following:
- Stellar is based on a consensusalgorithm rather than mining. This means transactions confirm in a few seconds.
- The supply of lumen increasesat a fixed rate of 1% a year.
- Stellar aims to let you transact in your currency of choice (fiat or digital).”
A simplistic way to describe Stellar is by saying that it is a more decentralized version of Ripple and its target user base is not aimed directly at financial institutions, but rather everyday users and technology businesses.
The SCP used by the Stellar network is derived from what Ripple uses, and as I’ll explain later in this article, it has a very intertwined history with Ripple!
Stellar’s Creation and its History With Ripple
Stellar was created from the Ripple protocol, and its co-founder, Jed McCaleb, was one of the original founders of Ripple.
While these two protocols are ultimately attempting to innovate global payments, they take different approaches to it.
Ripple’s primary focus is on innovating the financial institutions’ ability to settle cross-border payments (the very institutions Bitcoin seeks to make obsolete). Stellar is aiming at payment providers, technology companies, and individuals, making its technology available to the community.
The image below, from Bitcoinist.com, compares the differences between these rival digital assets. Interestingly, each time Ripple has experienced a price breakout, Stellar usually follows, similar to the relationship between Bitcoin and Litecoin.
“Stellar.org connects people to low-cost financial services to fight poverty and develop individual potential.”
Decentralized Vs. Centralized
Key fundamentals separate these two networks. Stellar is a non-profit organization, and its technology is open source. It uses reserves to fund the Stellar Development Foundation (SDF), which is dedicated to the development of Stellar’s technology and application development within its ecosystem. As pointed out earlier, its target market is the retail user and technology companies.
In contrast to this, Ripple has 60% of its token supply locked up. It’s a for-profit organization that is building a global payment network (RippleNet) with the very institutions that drive down the purchasing power of nations and trigger economic implosions.
As mentioned earlier, Stellar’s technology is based on similar code to Ripple, and while Ripple is clearly the more centralized of the two, it remains to be seen which will emerge as the most efficient protocol. As they each evolve and move into different ecosystems (decentralized and centralized), so will their protocols and the technological requirements to thrive.
Morally and ethically, Stellar is the superior blockchain designed for the people, and it has the innovative ability to stay relevant and compete with Ripple’s technology. It can scale and bridge multiple fiat and cryptocurrencies together at a cost-effective rate.
Stellar’s Innovation and Scalability
The blockchain sector has always embraced entrepreneurism and innovation, as they’re vital for its growth and survival. Stellar embraces this as well, encouraging application and scalability development on its network.
Enter Mobius, a new payment application built on top of the Stellar network. By using the Stellar Consensus Protocol as its foundation, it allows for scalability, speed, and cost-effective transactions in a decentralized manner.
Price Behavior in 2017 and 2018
In 2017, Stellar experienced price growth of over 20,000%, making it one of the top-performing blockchain protocols.
Stellar suffered a brief downturn after peaking at the $0.90 region, as the cryptocurrency markets overall suffered a sharp pullback.
However, against Bitcoin, Stellar has been a strong asset to hold, and it has performed better during this turbulent January 2018 than many other digital assets.
Five Reasons to Purchase Stellar Lumens
- In late 2017 IBM revealed the successful results of a partnership with Stellar, it successfully settled transactions using the native digital asset of the Stellar network, Lumens (XLM).
- Stellar’s asset Lumen (XLM) is becoming more liquid as the Blockchain space evolves, you can find it listed on most trusted exchanges. This creates a more resilient price and reduces the likelihood of price manipulation.
- Something which is a hot topic in Blockchain is the regulations on digital assets and how it influences the cryptocurrency sector, Stellar is already compliant with regulators and its foundation is fully active and above board.
- It has the technology to issue any asset, making it flexible with who can use it while providing the service in a secure and cost effective manner.
- XLM allows any financial instrument to transfer as a form of money, by digitally representing existing currencies and assets on a fast and scalable network. Scalability is something the Blockchain sector is striving to solve and Stellar’s technology is setting the pace in this regard.
Where to Buy
(Most exchanges will list Stellar Lumens)
Where to Store Privately
This is not investment advice; full critical research is recommended before making any investment decisions.
Please always read the white paper before taking action. Research will provide confidence and help your judgement in these highly-volatile markets.