To Buy or Not to Buy Stellar Lumens: Pondering Whether it Worth it… and Taking Action!

Stellar Lumens

Before you decide whether to buy Stellar (XLM), you need to understand what this project is really about.

Stellar (XLM) is a crypto-platform designed to create an alternative and efficient financial infrastructure. It should make it possible to conduct international transactions without using the services of a central bank. All network participants are equal: banks, individuals from any country, payment networks. On the Stellar platform, everyone is on an equal footing.

The Stellar network is characterized by high speed, low transaction costs and the ability to transfer funds across borders. 

Who is behind Stellar Lumens?

The Stellar Development Foundation, a nonprofit organization founded in 2014 by Joyce Kim and Jed McCaleb, launched the new cryptocurrency Stellar Lumens or XLM. McCaleb, who founded a file-sharing network called eDonkey2000 in 2001, was also behind Mt.Gox, the scandalous crypto exchange. At its peak, about 70 percent of the world’s bitcoin trade passed through this exchange. McCaleb sold his shares – a little later the exchange was hacked and ceased to exist.

Even before McCaleb started working on Stellar, he was working on Ripple with Chris Larsen, David Schwartz and Arthur Britto. Joyce Kim, after graduating from Cornell University at age 19 and then earning degrees from Columbia Law School and Harvard, practiced law at Sherman & Sterlin and Wilmer Hale before becoming an attorney in 2006 and the CEO of Soompi, a website dedicated to Korean pop culture.

How Stellar works

Stellar

To know what principle Stellar follows, it is important to know the developers’ desired goal. They want to provide users with a cross-border financial infrastructure through which the movement of funds can take place seamlessly on an equal footing.

This is guaranteed by a decentralized and international computer network. The Stellar network consists of network validator nodes distributed all over the planet. All validators participate in the validation of transactions, which are then stored in a chain of blocks. Network nodes are synchronized at 2-5 second intervals. In this way, hacks and tampering can be virtually eliminated, as there is constant synchronization and consensus searching going on.

To understand the advantages of Stellar’s decentralization, we should remember the situation when in April 2021 Stellar Development Foundation’s own nodes temporarily stopped working due to a failure. However, the network continued to function thanks to independent validators.

The transfer of funds on the network is guaranteed by the moderators. These are the computers that are the interface between the assets themselves and the Stellar platform. Therefore, it is quite possible that some amount may be purchased in dollars through a moderator online and transferred to Singapore. Another moderator,which is in Singapore, receives the amount and makes sure that it is exchanged for the local currency at the best exchange rate, and then credited to the recipient’s account. Value carriers are registered on the blockchain as loans; user accounts act as digital wallets.

Synchronization of network nodes works through the so-called Stellar Consensus Protocol – the rules by which nodes can reach consensus, provided that the authenticity of the transaction is verified. To participate in transaction validation, a node must meet certain requirements: decentralized management, flexible trust relationships, short latency, and sufficient security.

The Lumen cryptocurrency, that was mentioned above, or XLM for short, operates on the platform. It is a digital unit that represents an asset on the network. Each unit of fiat currency is converted into Lumen during transactions on the network.

The transaction fee is 0.00001 lumens. This is also the reason why the network is protected against so-called dDoS-attacks — after a certain point it would become too expensive. In addition, it is necessary for each account owner to have 20 XLMs to ensure that there is serious interest in participating in the network.

That is to say, Stellar is ultimately a bridge between various fiat currencies and payment systems.

Stellar XLM: price chart

price chart

It should be noted that forecasts are often presented in U.S. dollars. However, this doesn’t mean that you should also invest in U.S. dollars – investing in euros is also recommended. Nevertheless, it may be prudent to consider U.S. dollar forecasts when working with support and resistance levels.

In the summer of 2014, the price of XLM was $0.002. The first real signs of life could be seen in mid-2017 – suddenly the price of the cryptocurrency rose to $0.30 and on January 3, 2018, the price was $0.89. Probably also driven by bitcoin’s bullishness, which managed to rise from $1,000 to nearly $20,000 during the year, XLM also benefited from it. A little later, however, it went back down: in December 2018, the price was $0.09.

In March 2020, perhaps due to the situation caused by the COVID-19 pandemic, it fell below $0.04. But XLM did not collapse completely and was able to distinguish itself again, probably due to the strengthening of the crypto market from mid-2020. The year 2021 was a breakthrough year for lumens, and already by mid-May 2021 the price was $0.73. This peak was followed by a series of corrections and today the price is at $0.14.

Stellar has a market capitalization of $3.7 billion, making it 26th in the ranking of all cryptocurrencies.

Advantages and disadvantages of the Stellar network

Advantages

  •   Fast payment.
  •   Minimum fees.
  •   High scalability.
  •   Freezing and refunding of payments if necessary. 

Disadvantages

  •   High volatility of the XLM exchange rate.
  •   The existence of the network is ensured only by a non-profit organization (SDF). However, the same can be said about most cryptocurrencies. 

Stellar Wallets

So, you’ve already learned a lot about Stellar (XLM) and let’s say you’re interested in it. But before you start buying this coin, you need to choose a suitable storage.

Most users store their funds directly on the exchange where the purchase was made. However, this option is not very good unless you are a trader who earns solely on rapid changes in exchange rates. There is always the danger of hacking or elimination of the exchange, as well as blocking your account for one reason or another.

If you buy a coin for long-term storage, it is better to have a special cryptocurrency wallet. Moreover, for some coin purchases it is a prerequisite.

In our opinion, online wallets are the easiest and safest enough place to store it. So, if you still don’t have a personal XLM wallet, register one by following this link, it only takes a couple of minutes. After that you will be able to make transactions with your lumens directly in your browser, which is very convenient. Important note: the wallet is designed in such a way that it does not store any of your data, and this is its clear advantage over cryptocurrency exchanges.

However, there is a wide variety of wallets other than browser wallets. Among them are mobile and desktop (require downloading and installation on a smartphone or PC), as well as hardware in the form of separate devices.

The list of wallets that support XLM can be found here. However, it is far from exhaustive.

For what purposes should you buy Stellar?

As a means of payment

XLM is used as a means of payment in the Stellar network. Of course, XLM could also be used outside the network. But is it feasible? Due to the fact that there are currently few online stores or service providers that accept cryptocurrencies, it seems questionable to use XLM for this purpose.

XLM might be more interesting as an investment. Because if you understand the price dynamics and look at the forecasts, you will notice that you can make correspondingly attractive profits. It is worth noting that there is no profit guarantee – any forecasts should always be treated with caution.

As an investment

Stellar

Take the European Central Bank (ECB) as an example. The bank has an (apparently) endless policy of low and zero interest rates, savings books such as overnight deposit accounts and term deposits are no longer recommended. If the interest rate is lower than inflation, there is a real loss in the value of money. The alternative is cryptocurrencies. Here, among other coins, is XLM. Because as an investment, this coin may have a certain appeal.

Considering the fact that the price of cryptocurrency rose 1000% from May 2020 to May 2021, this could be very promising, but now apparently only in the long term – until the next growth of the crypto market.

But it is important to keep in mind that buying any asset at its peak is not a good investment. You have to buy during a downturn, and it is very likely that now is the right time. 

Options for purchasing Stellar

In general, the process of buying Lumens is standardized. There are several ways to buy XLMs. Among them are:

  •  use the services of the classic Trading Exchange (but for this you will have to pass the identity verification – KYC);
  • use Instant Swap Exchange – this option is easier because it does not require full identity verification, but it is also more dangerous – you may run into scammers; 
  • finally, purchase XLM from other users directly through the Peer-to-Peer Exchange, a service that brings together buyers and sellers of different currencies.

As for payment methods, you can use PayPal service or classic bank transfer. But first, you need to clarify whether the selected crypto-exchange or crypto-broker you have chosen for the transaction accepts one or another payment method. For example, not at all services of this kind online payment service PayPal is available.

Forecast for XLM in 2022

Forecast for XLM in 2022

XLM has never passed the $1 mark in its history. Some analysts suggest that crossing the $1 barrier is still possible in 2022 – if that tipping point is crossed, there’s nothing to stop Stellar Lumens from being bullish again.

While some analysts expect XLM to grow, others are not particularly optimistic and suggest that Stellar Lumens could end up becoming a so-called shithcoin with little or no value.

Indeed, in 2022, the rate of XLM collapsed, but it is unlikely due to the futility of the coin, rather, with the general decline of the crypto market.

The market is unstable. It can be a curse and a blessing at the same time. Because if you invest, you can make attractive profits if the market moves accordingly. However, if it goes the other way, losses are possible and sometimes it entails losing all of your capital.

It is important to remain calm and continue to follow your strategy.

XLM is definitely a cryptocurrency used on a platform that has the potential to grow. This means that anyone who deals with financial technology is likely to come across XLM. Stellar has already partnered with many large companies, and its network is used for a wide variety of projects. For example, before the war in Ukraine, the country’s national bank announced plans to create a digital hryvnia based on the Stellar network.

Yes, these are not the easiest times for the global economy, but if Stellar can make a name for itself in the market after the current storm settles, it could lead to a decent increase in the price of XLM.

Our recommendations for buying

Stellar is constantly evolving and this is far from being the end of the road. The cryptocurrency is quite promising due to the fact that the platform works in the background. Those who invest here can get attractive profits for several years.

What you should always consider if you decide to buy XLM or any other cryptocurrency:

  • Learn what cryptocurrencies are and how they work.
  • Learn about current technologies and read the cryptocurrency roadmap on the official website.
  • Decide for yourself what future opportunities you see for Stellar, and whether you want to invest accordingly in the short, medium or long term.
  • Follow the price dynamics and the current state of the cryptocurrency market.
  • Choose the best broker or exchange to buy cryptocurrencies where you can trade fast, cheap and safe.
  • Keep your funds safe! Don’t forget that broker and exchange have direct access to your funds. Therefore, as already mentioned above, we recommend getting a personal crypto wallet!

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.