Stellar (XLM) is a cryptocurrency that managed to quickly become popular among investors. Today, the digital coin can still compete with Bitcoin and the top altcoins, ranking 30th in market capitalization. XLM is suitable for trading and also deserves to be included in aggressive and conservative investment portfolios. Let’s evaluate the advantages and disadvantages, as well as future growth prospects.
Stellar is of interest not only to retail investors, but also to institutional investors. Based on the blockchain of this cryptocurrency, the Government of Ukraine plans to launch a digital hryvnia. Over the past six months, XLM has returned to the support zone, so it’s time to consider the prospect of investing your savings in this asset at a very good price.
What makes Stellar different from other cryptocurrencies?
Many experts believe that Stellar is an improved version of the cryptocurrency Ripple. This is partly true. The blockchains, direction and functionality of the projects are indeed similar. However, it is worth considering that the XLM coin solved many of the problems of XRP back in 2018, and also surpassed the more prominent competitor in key technical parameters.
To begin with, Stellar is a fully decentralized network. The founders of this project took into account the mistakes of its predecessors, distributing coins among participants in a more balanced way. The main problem of Ripple was that 60% of coins belonged to the founders of the company. That’s why they completely control not only the system but also the XRP rate.
It is impossible to manipulate the value of Stellar. It is a more transparent cryptocurrency. The value of coins is determined solely by the level of supply and demand. As for the platform itself, it is much faster.
XLM blockchain provides fast conversion without the involvement of intermediaries. Such properties could, in theory, allow Stellar to become a leading decentralized exchange. The vast majority of exchanges are centralized projects. Therefore, in the era of the popularity of the DeFi segment, DEX exchanges could become an important node in a fundamentally new ecosystem.
Investors and traders who prefer to work with cryptocurrencies are more focused on decentralized exchanges. First, they can provide the highest level of security. It is virtually impossible to hack such exchanges. Second, you can buy and sell coins on them absolutely anonymously, without any identification.
The main successes of Stellar
The developers of this project have created their own concept of a network ATM. The implementation of this project has the potential to attract new funds. We are talking about investors who do not want to understand the intricacies of the blockchain industry, but still want to earn on digital coins. The founders of Stellar offered the simplest and most affordable way to make cryptocurrency. The whole industry has been missing just that. Now any user with a basic knowledge of computer management can make a transaction.
The leaders of Stellar are not giving up on institutional money. Ripple is developing along the same lines. Not surprisingly, because both projects were originated by the same developer – Jack McCaleb. Earlier, he reported that about 30 international banks have already agreed to cooperate. The cryptocurrency has been verified by many popular services. We are talking not only about exchanges, but also wallets.
XLM coin is supported by popular hardware storage Nano Ledger, Trezor, KeepKey. However, the simplest and most convenient way of storage users consider online wallets (mono-wallet specifically for Stellar (XLM) is available at https://stellar-wallet.org/).
An important functional feature of the Stellar blockchain is the issuance of new tokens. Here it is quite appropriate to draw parallels with Vitalik Buterin’s Ethereum. New cryptocurrencies are created on the basis of the decentralized platform in question, and then the ICO is organized here. In the future, the developers are ready to compete with Ethereum for this segment. Jack McCaleb wants to poach developers by offering more favorable terms.
Ethereum has one major disadvantage – a complicated technology of programming smart contracts, which discourages developers. To write them you have to use special programming language which not everyone knows. Therefore, we have to hire specialists, which results in additional costs. The Stellar platform has no such problem. You can create smart contracts using the traditional programming code.
Technical characteristics of the Stellar platform
The system has several important features at the same time:
- All issues concerning the development of the project are controlled by a special non-profit foundation. It functions autonomously and is not subordinate to the founders;
- The Stellar platform was created on the basis of a new open-source protocol. Therefore, its work is as transparent as possible;
- Transactions within the XLM-network are carried out within 5 seconds;
- the high level of security is provided by the distributed network nodes and cryptographic encryption;
- all participants get free access to information about the activities of the nonprofit foundation. Information about investments raised, expenses, including salaries of the company’s employees are publicly available;
- A quarter of the issued coins were almost immediately transferred to nonprofit companies. 5% of the total issue is frozen within the system. All of this money will be used to pay off operating costs, which has reduced the level of fees that users pay to conduct transactions;
- all network members have exactly the same rights. The turnover of the transactions performed does not play any role;
All of the above solutions allowed the developers to minimize the excitement on the part of investors. Stellar is truly an open project for absolutely all users.
Despite the large number of advantages, there are also disadvantages. The lack of mining and too high entry threshold are the main problems. Those are especially detrimental to retail investors with limited startup capital. There is a limit on the minimum amount of transactions within the network. This is done to protect the platform from spam. If the number of fake users increases, it will negatively affect the network’s performance.
What is the principle behind the Stellar platform?
It is a decentralized consensus network. The platform provides a fast and high-quality exchange of any financial assets. XLM cryptocurrency is just a unit of exchange. Therefore, the asset acts as a bridge to convert fiat money and other digital coins. Initially, the coins were called exactly Stellar, but later it was renamed to XLM.
To carry out an exchange transaction using the platform in question, you must first create a personal account by passing a standard registration, and then choose one of the proposed methods of funding the account and conduct the transaction. Stellar provides the exchange, as well as making payments to a specified purse in the desired currency.
Such a convenient and fast scheme was made possible thanks to the presence of its own DEX-exchange, which we have already mentioned earlier. The integrated SCP algorithm, which is also the protocol for reaching consensus among participants of the platform, has a distributed data registry. All information relating to transactions is entered into this database.
Peer-to-peer nodes keep the database up and running. If one of them fails, the others will ensure the correct operation of the platform. The implementation of the scheme is very clever, so it is virtually impossible to hack a Stellar blockchain.
