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What Are Stellar Lumens? (XLM)
In the world of cryptocurrencies if you're not looking to solve a unique problem you're most likely going to fail and end up on the shitcoin pile. Altcoins are growing at a rapid rate all aiming to solve a particular problem. For example, Monero goes after anonymity, Litecoin banks on its speed and Zcash on its superior security and much more to follow in niche markets.
Its safe to say that cryptocurrencies are here to stay and while we won't know which ones will be around in future one thing we do know is the technology will remain for generations. Since the introduction of cryptos, we now have an alternative means of trade as opposed to fiat currency. Which in itself presents an even bigger problem, with so many fiat currencies and cryptocurrencies trading can become complicated.
Since you would need to find a vendor who wants your fiat or crypto or exchange it to one they would prefer, adding to your hassle and transaction costs of trading. But what if it didn't matter what currency you used? It if didn't matter what currency the vendor wanted? What if you could pay for goods, services or trade at the agreed upon value, pay with the currency of your choosing and the vendor would receive their preferred currency? Well, this is what Stellar lumens aim to do, in a nutshell!
What is Lumens (XLM)?
Lumens are built into the Stellar network, where they act as a unit of digital currency. Similarly to how Bitcoin and other cryptocurrencies work, a Lumen cannot be held physically, yet users can exert digital ownership of these assets with a private key.
The Stellar network launched with 100 billion STR tokens in 2014, which were eventually renamed to Lumens in 2015 as part of a major platform overhaul. The renaming process was done to avoid confusion, as having a token named in the same manner as the network is quite confusing. However, one could argue the Stellar network does not need a native asset. That assumption is wrong, though, as Lumens are designed to prevent transaction spam on the network.
Additionally, all Stellar accounts need to hold at least 20 XLM in their balance at all times. More importantly, the idea behind Lumens is how they may facilitate multi-currency transactions at some point.
The token can be used as a “bridge” between different currencies that do not have their own direct market. It brings additional value to the Stellar network, which has gotten a lot of attention from investors and traders all across the world over the past few days. As a result, the value of XLM has increased to $0.045 each. The main differences between the Stellar network and Bitcoin are:
- Stellar is based on a consensus algorithm rather than mining. This means transactions confirm in a few seconds.
- The supply of lumen increases at a fixed rate of 1% a year. Stellar aims to let you transact in your currency of choice (fiat or digital).
- The hope is that the currency itself will be mostly a behind-the-scenes currency and that the Stellar network will help provide more liquidity between currencies.
Why you should pay attention to Lumens?
Stellar is a decentralized protocol that's main aim is to enable users to send money to anyone in the world, for free, instantly and in any currency.
Stellar allows you to send any currency you hold to anyone else in a different currency through the built-in distributed exchange. People can receive any currency through an anchor they added. F
or example, Amy wants to send Bob euros, using her USD balance. Stellar automatically submits an offer to the distributed exchange selling USD for EUR. The network finds the best exchange rate for the transaction.
Chain of conversions
If there is currently no explicit relationship between offers to buy and sell currency, Stellar tries to find offers from the network that will lead a chain of conversions. For example, if you wanted to exchange from EUR to USD and no willing buyers are available, Stellar will opt for the closest chain like EUR to AUD, AUD to BTC, BTC to XLM, XLM to USD to ensure a completed trade/transaction.
The Stellar network is free to use.
What is Lumens being used for?
Decrease the cost of smaller transfers. Offer incremental payment options to your customers.
Send money to different countries quickly, for a fraction of a cent. Facilitate low-cost payments between different currencies both fiat and crypto.
Make mobile money platforms interoperable. Let your customers send MM to recipients with different providers.
Social initiatives, donations and NGO's
Use low-cost financial services to bring about sustainable social change.
Global trade an exchange
Stellar Lumens offer businesses the opportunity to trade across borders in an instant without having to set up agreements with local payment providers. Lowering barrier to entry for international trade for goods and services.
Can you mine Lumens?
No, even though Stellar Lumens use the blockchain at its core, the Stellar platform is a distributed ledger, which is maintained by a consensus algorithm also known as proof of stake (POS) rather than mining.
Can you earn Lumens?
Since Lumens can’t be mined those interested in Lumens potential can purchase tokens from a number of exchanges and trade them or exchange them for other currencies as it increases or drops in value.
Should you invest in Lumens?
To conclude, it is not hard to see why Stellar Lumens would be of interest to investors. The currency can be used to facilitate blockchain-based multi-currency trades regardless of existing markets and gateways.
While there are forex trades, crypto trades and international purchases there will be a market for what Lumens have to offer. Whether or not that means they always be the front-runner in this market remains to be seen and whether one should invest in XLM, remains a question that is difficult to answer.
One thing for sure Lumens have solid technology, a real problem-solving solution and a large market to compete in but it is never the less still a speculative asset as is every cryptocurrency.
For more on Lumens check out their official website
If you want to know more about cryptocurrency don’t be shy we’re happy to assist. Simply contact us
Disclaimer: This article should not be taken as, and is not intended to provide any investment advice and is for educational purposes only. As of the time posting the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency as all investments contain risk.