What is Stellar Lumens? Learn More About XLM Crypto
At first, creating a single network capable of making all forms of money in the world work together probably sounds like a very ambitious goal - almost unrealistic. But that’s exactly what Stellar has accomplished.
We dive into the topic of what is Stellar Lumes and what is XLM crypto.
Table of Contents
Introduction: What is Stellar Lumens?
So, what exactly is Stellar? Created in 2014, it is an open-source network for digital currency. It does share some similarities with Ripple. This is no coincidence: Ripple’s co-founder Jed McCaleb is the one behind Stellar.
In order to connect different financial systems, Stellar uses its own native token, the lumen (XLM). This cryptocurrency is used primarily to complete and also validate transactions within the blockchain. There is also one fundamental difference between XLM and other cryptocurrencies: it cannot be mined. If you are interested in acquiring and storing XLM, you must buy it.
Now, join us as we take a deep look into more details about the Stellar blockchain, including how to trade Stellar Lumens at Admiral Markets.
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What is Stellar Lumens Cryptocurrency?
The Stellar blockchain was created back in 2014 by Ripple co-founder Jed McCaleb and lawyer Joyce Kim. After some disagreements over how Ripple was being run, McCaleb left and began working on what would later become the Stellar network.
Just as we mentioned earlier, it does share plenty of similarities with Ripple. Stellar is a payment network, but much faster and also easier to use compared to conventional methods. It is possible to complete a transaction using two different currencies without relying on a bank to process and settle it. And because of this, Stellar can complete this transaction in a matter of seconds rather than days.
Another important matter is scalability, which is always an issue when it comes to cryptocurrency. Stellar relies on its own consensus protocol to validate transactions. It significantly speeds up the process compared to the traditional Proof of Work method.
Different nodes in the blockchain can verify the transaction. However, rather than relying on a network-wide set of nodes, the Stellar Consensus Protocol (SCP) instead designates a select number of nodes to take care of one specific transaction and then broadcast the operation to the rest of the network. McCaleb suggested that Stellar is capable of running around 4,000 transactions per second.
In order to do complete transactions on Stellar, you must own the blockchain’s native cryptocurrency, lumen. This is the primary use of XLM, which we will go into further detail about below.
What is Stellar Lumens (XLM) used for?
The Stellar lumen (XLM) crypto is the blockchain’s native token. XLM is used to complete transactions within the Stellar blockchain. Owning lumen is also a requirement if you want to use Stellar. But how exactly does it work and what is the Stellar lumen crypto actually used for?
What are the capabilities of the Stellar Lumens blockchain platform?
As an open-source and decentralized payment platform, the Stellar blockchain’s main goal is to become a global system. It can essentially speed up transactions that would otherwise take days to complete using conventional banking methods. However, rather than aiming to completely replace the financial system in place, Stellar aims to act alongside and improve it.
Let’s make it easier by highlighting some of the Stellar blockchain platform capabilities:
- Token creation: Stellar allows you to create tokens of any currency you can come up with: dollar, euro, pound, yen, peso, and even other cryptos such as Bitcoin.
- Path payment: The blockchain automatically handles conversions from one currency to another. In other words, it’s possible to send your payment in dollars to the other end, which will then receive the value in a different currency of their choice without having to calculate the exchange rate.
- Connection to real-world endpoints: Stellar was created to improve on what the traditional payment methods offer, working along with them and growing a network of real-world partners. This way, it allows users to turn their XML into other currencies to use outside the blockchain.
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What are the Use Cases of XLM?
The Stellar Lumen crypto XLM is used primarily on the Stellar network.
- Transactions: In order to complete any transaction, you must own Lumen. This was put in place to discourage bad behaviour and to stop potential hacker attacks. For that same reason, every transaction also has a small fee of 0.00001 XML.
- Tokenization: Alternatively, you can also create tokens of your financial assets, which you can use to trade on the Stellar network.
How is Stellar Lumens (XLM) Different from Ethereum?
Stellar and Ethereum are both decentralized platforms, but their similarities end here. Ethereum relies on the classic Proof of Work method to validate, which takes a lot of time.
While Stellar can process thousands of transactions per second, Ethereum is limited to an average of 15 transactions per second. A single node can easily clog the entire network. Stellar’s Consensus Protocol, on the other hand, speeds up the whole process and does not suffer from similar issues.
On the other hand, Ethereum definitely has an edge in popularity, being the second-biggest blockchain platform.
Is it Good to Trade Stellar Lumens?
It all comes down to preference in the end. Just like any other crypto, XML has its own benefits and risks. Should you trade Stellar Lumens?
On one hand, XML is easy to acquire and relatively simple to use. On the other hand, as is the case for most digital currencies, the lumen is very volatile. While you will still be able to use XML on Stellar, it can lose value in such volatile conditions.
We show you below the daily price fluctuations of the XLM against USD:
Advantages and Disadvantages of Stellar Lumens
Stellar has some advantages and disadvantages, like all other cryptocurrencies and crypto CFDs. We have listed some of them so you can make an informed decision on whether or not to trade it - Keeping in mind with crypto CFDs, you may also trade both price directions (Buy or Sell).
Advantages of Stellar Lumens
- Scalability: Thanks to SCP, Stellar has managed to work around one of the biggest problems that blockchains usually face. It can process thousands of transactions per second, making it a fast alternative.
- Cheap transaction fees: Just as we mentioned early, transaction fees cost on Stellar 0.00001 XML - less than a cent. For comparison, the average Ethereum transaction fee is $8.
Disadvantages of Stellar Lumens
- Ripple comparison: Ripple holds the first mover privilege compared to Stellar, which gives it a significant edge. As a result, it usually draws in more users than its competitor.
- Popularity: Stellar also suffers from a relative lack of users compared to other popular blockchains aside from Ripple.
What is Stellar Lumens XLM? Conclusion
Stellar brings in a very interesting concept. It combines positive aspects of both traditional payment methods and crypto.
By working alongside, and not competing against the more conventional banking methods, Stellar becomes a valid alternative for fast and cheap transactions - which is something that also sets itself apart from other blockchains.
You can trade the XLM CFD against both USD and EUR on our trading platforms with an Admiral Markets account - Follow the banner below in order to register an account today:
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