See how the Stellar network works and what you can use Lumens for.
Stellar lets anyone send, receive or trade any kind of currency, whether fiat or crypto, with anyone else in the world almost immediately and at practically no cost.
Lumens (XLM) is the name of the cryptocurrency token, while Stellar is the name of the network as a whole, and it’s a cryptocurrency with a difference.
Find out where to buy, how it all works and what you can use Lumens for.
How to buy Stellar Lumens (XLM)
If you live in the United States, you won’t find a cryptocurrency exchange offering Stellar Lumens for direct purchase.
Instead, the easiest way to buy Stellar is through a two-step process that requires an exchange with another cryptocurrency.
1. Buy some bitcoin or Ether.
Exchanges where you can buy, sell or trade Stellar
Exchanges where you can buy or sell crypto with USD
Stellar price history graph
Wallets that support Lumens
The primary Stellar wallet is Centaurus, and it is available for Android and iOS. It was specifically designed for Stellar and integrates well with it.
The following wallets also support Lumens:
- Ledger Nano S
- Stellar Desktop Client
- Stellar Portal
How Stellar works
Stellar is essentially a matchmaker for currencies and facilitates worldwide transfers and exchanges in any fiat currency and cryptocurrency.
It’s much like Ripple. The main differences are more of a focus on simplicity and scalability, as well as on functionality to help move money in remote areas at lower costs.
There are three different ways you can do this.
- Direct exchange. You can make direct currency exchanges. For example, if one person wants to trade USD for AUD and another person wants to trade AUD for USD, it can match them and automatically carry out the exchange for the requested amounts.
- Exchange via XLM. Stellar can use XLM as an intermediary currency where the amounts don’t add up or there isn’t a direct exchange available. It simultaneously looks for buy and sell offers for XLM and the needed currencies. Once it finds a good offer, it then handles the exchange.
- Chain of conversions. If no other options are available, Stellar will try to handle any currency by finding a chain of conversions, such as AUD to BTC to EUR to USD.
The Stellar network is simultaneously doing all of the above at the same time. When you make a transfer, it will aim to provide the best possible rates every time.
If you simply want to send or receive money rather than make an exchange, it can do that by directly connecting individual entities.
The different parts of Stellar
When using the Stellar network, you’ll typically use the ledger and anchors.
- The ledger. This is a central ledger of every account on the network and the currencies it holds. This information is needed to make transfers around the network.
- The anchors. These are trusted entities on the network that hold the currencies being transferred. An anchor might be anything from a bank to a person in a remote village who takes the money online and then hands the recipient the cash.
Why buy XLM?
Lumens is the network token, which you can use to do the following:
- Charge a very minor operation fee. A fee of 0.00001 XLM (almost nothing) is charged to senders for each operation in a transaction. This is purely intended to discourage DDoS attacks, which occur when people flood the network with meaningless transactions.
- Act as an “entry pass” of sorts. You need to hold at least 20 XLM to use the Stellar network.
- Exchange currencies where needed. If necessary, XLM can act as a universal unit of exchange for transferring currencies.
How to sell or trade XLM
- Go to the exchange platform you have your Stellar Lumens in. If you have your XLM in a digital wallet, then you can choose whichever platform from the list above that you’d like to complete your sale using.
- Transfer your XLM to bitcoin or Ether within the platform.
- Still using the platform, follow the steps to sell or trade your bitcoin or Ether.
One of the notable features is the ability to freeze transfers. For example, you can freeze a transfer if you’ve mistakenly entered the wrong wallet address. This is unlike the irreversible transfers of most other cryptocurrencies.
Once transfers are frozen, the funds are unable to be used by the recipient.
All transactions on the network are public by default, but transactions can be made private and confidential through the use of third-party plugins.
And like other blockchain systems, the Stellar network is a decentralized application run on computers all around the world. This makes it almost entirely failsafe.
If the nonprofit Stellar organization disappeared, its network would keep going.
What to consider when buying Lumens
The initial supply of Lumens was set at around 100 billion XLM, of which around 18 billion are in circulation.
It’s worth considering that Stellar has built inflation into its system by gifting members small amounts of free XLM over time. A fraction of the Lumens collected with each operation goes towards this inflation, along with other XLM released into circulation.
It’s also worth remembering that Stellar is a nonprofit organization aimed at creating a more inclusive world economy for everyone. A high price for Lumens might undermine that goal, prevent people from listing their XLM on the ledger to facilitate exchanges and drive up the average cost of transfers, so there’s a real incentive to keep prices in check.
It’s safe to say XLM prices won’t ever skyrocket in value the way bitcoin has.
However, Stellar has also formed partnerships with companies like IBM and specifically aims to offer low-cost, easy business money transfers. It looks like many organizations are aiming to use Stellar for their money transfer needs, and wider use is likely to cause prices to climb over time.
Buying Lumens also gives users the means to more easily interact with a range of fiat currencies. Forex enthusiasts, frequent travelers or anyone else who can benefit from cheap, quick and easy access to a variety of fiat currencies might get their money’s worth from buying Lumens even if the price doesn’t increase.
If you’re considering what the price of Lumens will do going forward, you might want to compare the features of Stellar and its close counterpart, Ripple. The price increase in Lumens from November 28-30, 2017, saw a corresponding downswing in Ripple at the same time, suggesting that the value of these might be closely tied.
It may also present an investment opportunity for day-trading Ripple or Lumens CFDs, as well as investing by buying.
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