Back in 2009, Satoshi Nakamoto released Bitcoin’s whitepaper defining the main idea and goals of this cryptocurrency. In short, Bitcoin was to replace fiat money and become the new global currency. Bitcoin holds the key position in the cryptocurrency industry now, but there are a lot of potentially successful projects with similar ideas. For example, Stellar is the system which allows transferring and exchanging both fiat and crypto all over the world.
Here’s a small guide on the Stellar system and its notable features that will help you to distinguish between Stellar itself and Stellar Lumens (XLM), explore the reasons to buy Stellar Lumens, and find a reliable cryptocurrency exchange where XLM is available.
Stellar is the blockchain network which allows users to exchange and transfer money quickly and with low fees. The main idea behind Stellar is to facilitate financial operations for all interested people, especially in regions with poor traditional banking. The citizens of such regions may get access to the worldwide money transfer system and use it without restriction.
Stellar acts as an exchange facilitator for different currencies, assets, tokens. Like any blockchain network, Stellar consists of multiple nodes – all distributed around the globe. Every transaction that is made between these nodes is recorded in the ledger that is immutable. The network is pretty fast, so it can process thousands of transactions per second. Stellar makes it possible to send and receive different assets thanks to the network anchors that act as intermediaries between the transacted asset and Stellar. Simply put, anchors are trusted companies (like banks, payment processors, merchants, etc.) that hold and convert transferred funds.
Another unique feature of Stellar is its distributed exchange that allows you to convert currency at the most favourable rates. Let’s say, Steve from the US wants to buy EUR for USD and Martha from Germany wants to do the opposite. Then Stellar connects these orders automatically in seconds.
The security level of Stellar is high thanks to the unique protocol based on the Byzantine system with a distributed consensus.
XLM is a native Stellar token, like ETH for the Ethereum system. Stellar Lumens can’t be mined because the total amount is already produced. There were 100 billion tokens, but the currency has a controlled inflation of 1% yearly. According to Coinmarketcap (refer to https://coinmarketcap.com/currencies/stellar/), there are 19.2 billion XLM circulating and 104 billion XLM available as of November 19, 2018. This means that 84.8 billion XLM is held by the system itself. There’s no centralization, as the community can control the tokens.
Stellar Lumens have three main purposes:
- To protect the network from DDoS attacks. Each transaction in the system has a fee of 0.00001 XLM. Fees protect Stellar from flooding with thousands of spam deals known as DDoS attacks.
- To validate active accounts by the minimum required balance. Additionally, each account in the system must hold at least 0.5 XLM. It helps Stellar to clear the blockchain of inactive and neglected accounts so that each participant will be useful to the system.
- To exchange unpopular currencies. Stellar uses XLM when it can’t perform a direct exchange of currencies. Let’s take the USD/EUR pair again. If there is no matching buy/sell order in the order book, USD is converted to XLM first, and then XLM is converted to EUR. This method is extremely useful for poorly developed states the currencies of which are not in demand.
The top reasons to get XLM
Since any token’s price depends on the practical value, you must ask yourself whether you need Stellar Lumens or not. Here are some bullet points:
- XLM is a universal unit of exchange. Now, Stellar uses its tokens as intermediaries for unpopular currency pairs. Further on, Stellar Lumens may develop into a universal exchanging tool.
- The system charges pretty low fees. With the price of $0.23 per coin, the system’s fee is about $0.0000023 per transaction.
- Money transfers are reversible. Unlike Bitcoin, Stellar allows users to freeze transactions to the wrong wallets.
However, XLM has low chances to skyrocket in price because of the project’s ideology of cheap money transfers all over the world.
How to buy XLM
When the project started, tokens were gifted to new users, partners, and holders of Bitcoin and Ripple. Still, the fastest and easiest way to get a large amount of Lumens is to buy them at a cryptocurrency exchange. Let’s proceed to our featured list of exchanges divided into two groups.
The number of exchanges allowing direct trades of Stellar Lumens for fiat currencies is limited. When it comes to trade volume and reliability, CEX.IO is an undoubted leader among the cryptocurrency exchanges that offer buying XLM for fiat.
Once registered on the website, you will have a chance to buy Stellar Lumens for USD or EUR, and even make it with a credit card. Typically, it won’t take you more than a few minutes as the process of purchasing is completed in several clicks – you enter the amount of Lumens, choose the currency you would like to pay with, and click “buy”. As simple as that!
What is more, CEX.IO will also allow you to make fiat deposits to your account via bank transfers, which are free, by the way. Having your CEX.IO account funded, you can take advantage of XLM trading as well – just navigate to https://cex.io/xlm-usd and place your first order. For this purpose, the exchange provides a multi-functional trading platform with a high-liquidity order book.
Trading fees range within 0-0.25%, while the option of buying XLM with a credit card will require a 7% fee on top. Deposit fees vary.
More exchanges offer crypto-to-crypto trading and allow buying Stellar Lumens for BTC, ETH or other major coins. Here are the most popular exchanges of this sort:
- Binance.It has the largest volume for Stellar Lumens and offers BTC, ETH, and USDT as exchange pairs for XLM. Trading fees are 0.05-0.1%.
- Bittrex.It supports BTC/XLM and ETH/XLM only. Fees are 0.25% for all traders, but deposits and withdrawals are free.
- Poloniex.This exchange offers BTC/XLM and USDT/XLM trading pairs. Its fees depend on your account’s 30-day volume of trades.
What’s important to remember
While Stellar is a system for money transfers, Stellar Lumen or XLM is a native token of this system used for facilitating transactions. Coins are pre-mined and controlled by the Stellar Foundation. The price of XLM will likely remain low as per ideas of the project which aims to support cheap and easy international transfers. Still, tokens are actively used for trading at exchanges.
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