Stellar’s cryptocurrency XLM is basically a fork of Ripple. This means Stellar uses the same basic rules Ripple does with some distinct changes. The main reason for the Stellar fork was to create a much more altruistic payment network than what Ripple has become.
Ripple is a for profit company that serves mainly banks and financial institutions. It has raised a lot of money and is very PR and marketing driven. Stellar, on the other hand, is a non-profit foundation that raised very little money and aims to be a “Free for all” payment network (similar to Bitcoin’s censorship resistance).
Of course, things have developed since the 2014 fork, but direct comparisons are still easy to see. For example, 100 billion Lumens, Stellar’s native token, were “pre-mined” and exist today (similar to the supply of Ripple’s XRP). There are now around 20 billion Lumens in circulation while the Stellar Foundation currently holds the remaining supply.
It is important to understand how the Stellar network operates, including how it affects lumens before investing. Generally, both Ripple and Stellar try to solve issues with international payments by allowing users to convert them into the digital currency, so they can send them as assets to the receiving party. But Stellar (and Ripple) do not strictly follow this practice.
To make a payment using Stellar, users must work with a network anchor, which is simply a trusted intermediary that holds and converts funds. Fiat (such as dollars and euros) is sent to an anchor and where it’s exchanged for digital credit. The digital credit is then sent to another anchor that’s trusted by the receiving party, where it will be exchanged back to Fiat.
So where do lumens come in? There is no explicit relationship between the Stellar network and the lumen token. That said, you are not able to participate in the network without holding some tokens.
Lumens are needed for several purposes:
- Help avoid fake accounts on the Stellar network by requiring a 0.5 Lumen deposit for each account on the network.
- When sending transactions through the Stellar network a small transaction fee (0.000001 Lumens) is deducted in Lumens.
- Lumens sometimes facilitate trades between pairs of currencies between which there is not a large direct market, acting as a bridge.
If you are looking at Stellar Lumens as an investment, take a look again. It will draw the same criticisms as Ripple and its native token. Of course, transactions can be made by using lumens, but it still feels somewhat forced. It is also important to note that it is really an intermediary currency, which people are unlikely to hold for large periods of time.
Buying Stellar Lumens (XLM)
In order to store your Lumens you will need a wallet that can hold them. There’s a variety of wallets like Blockchain that support Stellar, however only one reputable wallet supports both Stellar Lumens and other cryptocurrencies.
The Ledger Nano x is a notable market leader that allows for lumens to be held in its hyper-secure hardware wallet. If you’re looking for a wallet that hold lumens (along with other currencies, including Bitcoin, Ether, and Ripple), you won’t find many better options than the Ledger Nano S. This pocket-sized hardware wallet is basically unhackable, and its user-friendly nature makes for a happy crypto life.
If you can’t afford a hardware wallet, Foxlet is an open source desktop wallet that can hold XLM. It allows you to encrypt your secret key and store it as a file locally on your computer. Easily trust, send, and trade all within the client.
Once you have your wallet you will need an XLM address. Your XLM address is a long string of characters all uppercase that start with a “G”. For example:
Buy Stellar Lumens
Lumens carry the ticker symbol XLM, which was recently changed from STR. Some exchanges may not have updated this change, so check for both when looking to trade. Buy Ste
Buy Stellar With Fiat Currency (credit card, wire) The best way to purchase Stellar Lumens (XLM) with Fiat currency is via CEX. The London-based veteran cryptocurrencies exchange has been around since 2013 and offers a fast & convenient way to purchase Stellar Lumens.
As opposed to most other options, CEX can accept deposits via a credit card as well as a debit card.
For more advanced users there’s the option to use Kraken, a Bitcoin exchange that has expanded its currency selection, and is a popular option, although the system can sometimes be quite latent.
Buy Stellar With Bitcoin or Ethereum (trade BTC/ETH for XLM)
Withdraw your Lumens
If you bought Stellar Lumens from an exchange, make sure to withdraw them to your own wallet. Keeping your lumens on an exchange exposes you to the risk of hacks, theft, and insolvency (on the exchange’s part).
Buying XLM is a bit more complex than most other popular cryptocurrencies out there, however with the variety of exchanges and Web wallet around today, the whole process shouldn’t take too long. Just make sure that you know how to operate whatever Stellar wallet you choose, since aside from the Ledger Nano S, these wallets aren’t very common.
Stellar and XLM are considered to be the “good” twin sister for Ripple and XRP. The company has shown considerable progress since it began in 2014, however it’s unclear if investing in XLM is actually a good move, since there is no direct use of XLM in the Stellar network.