Stellar Cryptocurrency - Investor's Complete Guide

10 Feb 2018

Stellar Cryptocurrency - Investor's Complete Guide

Over the last weeks, we've observed the meltdown of the cryptocurrency market. Bitcoin, Ethereum and other top currencies have significantly sagged. But surprisingly for many people, the common trend almost hasn't affected the price of Stellar. This currency not only isn't losing its positions but is keeping moving forward. First, it managed to move away EOS and NEM which've moved each other from the seventh place of the world cryptocurrency rating in turn recently. Now its market cap is more than Litecoin's one. What are the significances of this coin and what keeps its head above water? By means of what does its cap grow like a mushroom? Let's try to figure it out!
 
What Is Stellar Cryptocurrency
Many experts are sure that Stellar is a better and way more liable version of Ripple, and such comparison between Stellar and Ripple didn't appear from nothing.
As it's known, the Ripple platform with the same-name token appeared in 2012. Many traders immediately jumped on the cheap and efficient coin which many experts had promised (and still do) to have a fine future.
But, despite all its advantages, the cryptocurrency turned out to be not so liable. The specialists raised three claims against Ripple:
  • Ripple Labs (the company which has created Ripple) is a commercial company which is by default based on own profit but not on profit for ordinary participants of the system.
  • Ripple Labs is the main holder of XRP coins, hence, it's able to manipulate the rate.
  • Ripple is a centralized platform with a closed source code and any changes of its work are possible only at discretion of Ripple Labs.
The developers have promised to solve the described problems. First of all, to change the coins distribution scheme and to make the source code an open one. And while the first point didn't change, they've worked upon the second one.
In 2013, Ripple Labs opened the platform's soucre code. But major claims didn't go away, and the cryptocurrency community started to think that the problems of Ripple may be solved only by means of fork.
It actually happened. It was made by Jed McCaleb and Joyce Kim. As a result of the fork, Stellar cryptocurrency appeared.
 
Stellar Cryptocurrency: Key Aspects
  • The project is developed by non-commercial Stellar Development Foundation and its operation isn't controlled by the developers.
  • From the beginning, Stellar uses its own open protocol.
  • Reports concerning the activities of the foundation, investments and even employees' salaries are accessible for all the users.
  • 25% of created coins (at first, there were 100 billion of them) were transferred to non-commercial organizations and 5% were frozen in the system for payment of operational expenditures.
  • The foundation created a restrictive covenant according to which all participants of the system owning large amounts of coins are obliged not to sell them within 5 years. Such step was made to prevent rate manipulation by large asset holders.
According to the Stellar creators, they've made everything they could to put the entire gambling component out of the project.
From the beginning, the system had used the same-name Stellar cryptocurrency. But a large-scale rebranding was committed in 2014. The coin was renamed as Lumen (XLM) and the platform itself moved closer to its current condition.
 
How Does Stellar Work?
As a matter of fact, Stellar is a decentralized consensual platform for exchanges of any assets. The cryptocurrency itself is just an exchange unit. So, XLM is a kind of a bridge to exchange one asset for another.
For example, you are holding BTC in EXMO exchange and willing to transfer them to another user as ETH. Or to deposit them in your dollar bank account. To do it, you just register in Stellar, enter all exchange data, choose an exchange variant proposed by the system and commit the transaction.
Lumens are required to pay the fee which, by the way, is minimal: just 0.0001 XLM.
Such scheme is possible by means of operation of internal decentralized Stellar exchange. It's working by means of SCP algorithm which is also called a consensus protocol.
This algorithm is based on distributed registry of data (the so called ledger). The data of all actual and executed transactions is entered into it.
The registry operates by means of a number of independent peer nodes where all information from the ledger is copied into. Even if the node comes out of order, the information will be saved in other ones and system failure will be impossible.
 
Major Advantages and Disadvantages of Stellar
A number of key advantages forming the basis of market success of Stellar cryptocurrency may be specified:
  • A fully decentralized open-source platform.
  • All participants of the system have equal rights and opportunities.
  • The system processes about one thousand transactions a second and confirmation time doesn't exceed 5 seconds.
  • Stellar supports all existing cryptocurrencies and is synchronised with major financial systems (bank system in particular).
  • The system's safety is provided by means of cryptographic encryption and peer nodes.
Among major disadvantages of Stellar, only availability of entry barrier and impossibility of mining may be called.
But the barrier (20 XLM on the balance) is established only to prevent spam attacks which may slow down the system's operation. And mining wasn't designed by the developers from the very beginning.
 
Where to Buy Stellar?
You can't mine the coins, so the only way is to buy them.
For instance, in cryptocurrency exchanges:
  • Binance (lumens can be purchased for BTC, ETH and Binance Coin, the internal cryptocureency of the exchange);
  • Bitrex (for BTC and ETH);
  • Kraken (for BTC and ETH);
  • Poloniex (BTC only).
Since recently, XLM may be purchased also for dollars and rubles. Orange Exchange Pro gives such opportunity. Using it, you may exchange fiat money from your electronic wallet (QIWI, Payeer, Yandex.Money) or Sberbank card for XLM.
 
Where to Store Stellar?
Most of the users prefer to keep XLM in official Stellar Wallet. The developers have created several versions of the wallet, the desktop one is considered the most liable of them.
To install the wallet and create account, you'll require just a couple of minutes:
  1. Visit official website www.stellar.org.
  2. Press the "Wallets" tab, select "Desktop Wallets" section and then "Stellar Desktop Client".
  3. Choose appropriate version (for example, if you PC is run by 64-bit Windows, look for the file with "Win-64x" note).
  4. Download the archive and unpack it on your PC.
  5. Run the "Stellar Wallet" app (the last file in the folder).
  6. Press the "Create New Account" tab and then "Create an empty account" (the second variant of the dropdown list considers that you've already installed other version of Stellar Wallet).
  7. Create a liable password and enter it into "Password" field, then repeat it in the lower field.
  8. Click "Encrypt Account" (the program will create an encrypted file to be stored in your computer).
  9. Choose "Show Secret Key" and save your private key (it's required to complete transactions via Stellar system).
  10. The wallet is ready to use!
There are 14 wallets on the website to store Stellar in:
  • desktop ones (official Stellar Wallet, Ledger and Stargazer);
  • mobile apps (Lobstr, Stargazer, Papaya, Centaurus);
  • online wallets (Ledger, Stronghold, LuPoLex, StellarTeam, Lobstr, Papaya, Saza).
How and Why Did Stellar Price Change?
Despite the fact the cryptocurrency had been created in 2014, it has appeared in cryptocurrency exchanges only 3 years later. Only in one exchange, Poloniex, to be precise.
In winter 2017, the token's price was 0.06 dollars but in Spring it fell down to 0.01 dollars. Poloniex explained that the slump had happened due to unexpected cyber attack on the exchange.
Many experts are still sure that the attack was paid-for. This statement is confirmed by the fact that in March 2017, many traders started placing high stakes on decrease of price of XLM.
Nevertheless, in summer, the price of the cryptocurrency was on the same level. But in autumn it became known that a world-famous IBM IT-company was planning to use Stellar technology to create a global transaction system.
Also three top cryptocurrency exchanges (Binance, Bittrex and Kraken) started using Stellar.
Invest capital started flowing in the cryptocurrency, and its price naturally began growing. In October 1 XLM was equal to 0.04 dollars and in December — 0.2 dollars already.
In January 2018, almost the whole cryptocurrency market crashed and lots of cryptocurrencies started losing their value. Not Stellar though.
The developers entered into several prospective contracts (in particular, the agreement concerning use of the currency by Hong-Kong based OKex exchange and the agreement concerning partnership with global Pundi X cryptocurrency service), and the price of XLM reached 70 cents. Those traders who've purchased the coins in spring and have sold them in January gained 70-fold profits.
It's not surprising that many traders started selling XLM which led to decrease of the market price of the cryptocurrency. The rate was corrected and current price of Stellar token is about 60 cents.
However, those traders who haven't sold their assets have all chances to gain way higher profits.
 
Is It Worth Investing in Stellar?
The experts share the same opinion that market price of XLM will keep growing. Most of all, it's linked with growing popularity of the cryptocurrency. It's clear now, that the developers were really able to create a more liable, convenient and, which is the most important, decentralized version of Ripple.
According to CoinMarketCap, current market cap of the cryptocurrency is 10.3 billion dollars (as a comparison, a few days ago this index was equal to 8 billion dollars, and in December — to 2 billion dollars) and Stellar is on the sixth place of the world rating.
But many analysts are sure that market cap of the cryptocurrency will grow even larger till the end of the year. Some accept that it may pass the level of 100 billion dollars.
Sounds impossible, but today there is every reason to believe that both market cap and rate of the coin will jump:
  • Stellar is based on unique technology allowing to exchange different assets immediately and not to lose money paying fees.
  • Many corporations around the world are already using Stellar technologies and are actively investing in the project's development.
  • Practical use of the cryptocurrency is constantly widening. For instance, soon Stellar will be used for organization of African Vumi messenger and for payments in some countries of the Dark Continent.
It's obvious that every large investor and every contract entered into will cause increasing demand of XLM. So, the coin's price will increase too.
Conservatively estimated, the rate may reach 10 dollars till the end of 2018. It means that if you invest one thousand dollars today, it will give you 15,000 dollars of net profit in a year.
But many analysts are sure that the price may reach even 20-30 dollars. It depends on how fastly the developers will attract new large investors for cooperation.
But, given the fact that they are actively working upon perfecting the platform and that such IT market giant as IBM has already joined the project, it's black and white that the cryptocurrency will be successful.
So, now it's the right time to purchase XLM at a low rate and to keep the coins until the rate reaches its peak value. The main thing is not to buy into artificial manipulation of the rate and not to sell the assets in case of little decrease of the price.
The developers have already proven that they are able to correct the rate, and only bearskins make profits out of massive sale of coins.