When you cut through all the buzz and the shilling, Stellar Lumens (XLM) is one of the more impressive and lesser known projects in the cryptocurrency ecosystem.
The Stellar team made a lot of headway in 2017, of course, but many users in the crypto space still don’t know much about it.
Our preliminary assessment? XLM is a definitely a cryptocurrency worth considering going into the new year. We’ll break down why.
First, nomenclature …
“Stellar” = the network, e.g. the Bitcoin network.
“lumens” = the cryptocurrency of the Stellar network, e.g. bitcoins.
What does Stellar Lumens do?
Billing itself as a “decentralized consensus platform,” the project is the result of a 2014 fork from Ripple (XRP). The platform is currency agnostic, capable of supporting the transactions of any type of currency.
How, you ask? Through the Stellar network’s built-in decentralized cryptocurrency exchange.
YouTube’s Boxmining musing on the XLM whitepaper – Image via YT
Beyond these fundamental points, the platform’s specs are interesting and manifold:
- Txs confirm in no more than 5 seconds
- Can process 1000s of txs per second (e.g. like VISA)
- Can facilitate transactions between any currency (tokens, assets, etc.)
- Uses the Stellar Consensus Protocol (SCP), not Proof-of-Work (POW)
- A lone, optimized API for maximum ease-of-use
- Functionality for smart contracts and multi-signature wallets
- No mining; 100 billion lumens exist from the start
- Annual inflation (fixed) of 1 percent
Pretty impressive stuff, we think. But it’s important to remember that with any cryptocurrency project, there are trade-offs. Stellar Lumens seems to trade off a bit of decentralization for an incredible amount of transaction speed. So that’s at least something to consider.
POW is tried and true as far as engendering consensus in a trustless, decentralized fashion for a cryptocurrency’s native network.
Stellar Lumens’ SCP helps to create the Stellar ledger, which is like Bitcoin’s “ledger,” except SCP is facilitated by “each server that runs the Stellar software,” as the project’s website puts it, and any “entity can run a Stellar server.”
These servers sync every few seconds, which establishes consensus.
What is Stellar Lumens for?
The project can facilitate solutions to some important problems, including:
- cross-border payments
- intermediary currency functionality
To this last point, say someone is looking to swap British Pounds for U.S. dollars. The Stellar network could facilitate the conversion by looking for, and then matching, relevant offers. Lumens would then be used to make the swap in rapid fashion.
This dynamic could be extraordinarily useful in chain conversions, where you need to swap between an uncommon currency and a more common one.
The very useful possibilities at play is why IBM just recently teamed up with the Stellar team on cross-border payments; a mammoth partnership by any stretch of the imagination.
Is XLM worth investing in?
There’s no denying that XLM has some interesting specs and use cases.
We can’t give financial advice here at CoinBureau, but we reckon the Stellar ecosystem will have a bigger year in 2018 than it did in 2017. Going off of that, you’ll have to decide what’s right for your portfolio personally.
Featured Image via Fotolia