What is Stellar?
Stellar is a blockchain-based technology, with open source protocols, designed to facilitate financial transactions processing between payment systems, banks, and individuals. This fully decentralised platform is geared towards rapid cross-border payments at low cost.
The Stellar platform is the brainchild of Joyce Kim, a former lawyer, and Jed McCaleb, the co-founder of Ripple, another hugely popular cryptocurrency. The Stellar blockchain was launched on 31 July 2014, and is fully supported by the non-profit organisation, the Stellar Development Foundation.
The Stellar Development Foundation was formed in concert with Stripe CEO, Patrick Collison. The foundation also received 2 billion of the initial Stellars for its seed investment, or 2% of the initial Stellars that were generated. At its heart, Stellar is an open source blockchain network where money can be stored and moved seamlessly.
By allowing for digital representations of fiat currency to be traded, created, and sent on the blockchain, Stella effectively works as a single global network of financial systems. The outsized potential of stellar blockchain – courtesy of SDKs and API – makes it possible for any-sized company to perform international banking transactions with effortless ease.
Stellar was designed with developers in mind, and many development companies and multinational corporations are now built on Stellar, including the likes of: IBM, Bitbond, Wirex, SatoshiPay, Securrency, Coinqvest and the like.
Please note that crypto trading is not available to UK Retail clients
From the start, Stellar had an impressive growth, achieving 3 million unique users by January 2015, and by April 2015, the Stellar Development Foundation upgraded the network to run on a new consensus algorithm, which went live in November of the same year. This new algorithm used a cryptocurrency protocol or SCP (Stellar Consensus Protocol), created by David Mazieres, a Stanford University professor.
The Stellar network is based on blockchain technology. It is basically a decentralised network of servers that run distributed ledgers.
The ledgers update every transaction, with each complete log available on every server. The servers communicate with each other, syncing the ledger every 2-5 seconds. This communication process is what is known as consensus.
To send payments on the Stellar network, you will have to be issued credit by Anchors. Anchors essentially act as a link between any particular currency and the Stellar network, and one will need to exchange debit for credit with an Anchor on the network. In exchange for your deposit, credit will be issued to your virtual wallet, which can be sent or received on the network between participants.
A major benefit is that Stellar supports a distributed exchange model. This then allows a user to send a payment in a particular currency, such as USD, even though they may be holding EUR credit. The Stellar network will perform the forex conversion automatically at the best available rates. In addition, the recipient of the funds can then withdraw the funds through a partner institute, such as a bank.
Stellar and Lumens
Stellar has its native cryptocurrency called Lumens. It uses Lumens as the bridge currency (or cryptocoin) on its network. As the native asset on the Stellar network, Lumens (or XLM) serve two important functions: they facilitate seamless multi-currency transactions as well as discourage DoS attacks on the network by attaching a nominal fee of 0.00001 lumens on every transaction. DoS attacks are usually malicious attempts by unethical participants who may attempt to flood the network.
All three terms, Stellar, Lumens and XLM, are used interchangeably, though Stellar is the blockchain network, Lumen is the cryptocurrency and XLM is its trading symbol.
XLM has generated investor attention because of real-world use cases of the Stellar network. In August 2014, Mercado Bitcoin, the first Brazilian Bitcoin exchange, announced it would be using the Stellar network and in 2016, Deloitte announced its integration with Stellar to build a cross-border payments application, Deloitte Digital Bank.
Notably, since 2017, Stellar has had a long-running partnership with technology giant IBM. IBM has been using XLM for its real-world blockchain solutions, and the company even announced that it is not planning to release its own crypto token, which further cements the case for XLM being IBM’s token of choice for cross border payment solutions. In January 2018, Mobius Network ran its ICO (initial coin offering) on the Stellar network.
Like Ethereum, the Stellar platform also allows users to develop other decentralised apps (dApps) and tokens. There have also been other stablecoin projects, notably USD Anchor, which are fully backed by fiat currencies.
Stablecoins facilitate easy fiat-to-crypto exchanges, and they also help to eliminate the volatility concern of cryptocoins. Naturally, all projects undertaken on the Stellar platform will boost the profile and appeal of XLM coins.
Advantages of Trading XLM CFDs with AvaTrade UK
Cryptocoins are a lucrative financial asset class. Trading cryptocoins, such as XLM, with AvaTrade UK comes with the following advantages:
- AvaTrade UK offers trading on cryptocurrency CFDs (contracts for difference). With CFDs, since you are merely speculating on the asset price and not actually purchasing cryptocurrencies; you do not need to worry about your cryptos being lost or stolen.
- With AvaTrade UK, you do not need to create a wallet in order to trade cryptocurrencies. This simplifies the trading process.
- When trading CFDs, you can profit when markets are increasing and also when they are falling. Since you are only speculating on the asset price, you are not impacted by declining prices.
- AvaTrade offers a secure trading environment. We are regulated via 8 authorities across 5 continents and our client funds are protected at all times.
- Many crypto exchanges charge hefty fees for each transaction. At AvaTrade UK, there are no fees or hidden costs and we also offer zero commissions and no bank fees on transactions.
- You can also trade cryptocurrencies with generous leverage, giving you more exposure to trade than your account balance. AvaTrade UK offers up to 2:1 (for EU residents) and 25:1 (for non-EU residents) leverage.
- At AvaTrade UK, we offer automated trading for convenience and flexibility. When you trade, you can preset profit and loss levels by using stop losses or take profit limits when you trade. Future orders like Buy Stops and Buy Limits are also available.
- Unlike many exchanges who restrict their clients to trade only crypto to crypto, the clients at AvaTrade UK are able to trade cryptos against a wide choice of fiat currencies such as USD, EUR, JPY and more.
At its launch in 2014, the Stellar network had 100 billion stellars. Stellar.org intended to distribute the initial 100 billion lumens as follows: 50% given away to individuals; 25% given away to partners who included governments, institutions, businesses and NGOs; 20% to Bitcoin and Ripple coin owners; and finally, 5% was reserved for the organisation’s operational expenses.
The giveaway is extremely important for Stellar, as it allows the network to expand its reach as well as achieve a more inclusive digital economy.
The Stellar network has an integrated fixed inflation mechanism, which sees new XLM coins added to the network at a rate of 1% per year. As well, funds raised from base fees on the network are added to the inflation pool.
As of January 2019, 8.65 billion Lumens had already been distributed, with the circulating supply standing at 19.16B. At the same time, the total supply of Lumens stood at 104.68 billion.
XLM has had an interesting trading history. Its ICO was presented on August 1st, 2014 when it started at $0.15. The ICO raised $39 million. By the end of 2014, the XLM value had grown fivefold, and in May 2017, XLM spiked from $0.00547 to above $0.047 in just over 3 days.
The subsequent cryptocurrency rally saw the XLM coin post its all-time high of $0.91 in January 2018. After that, it fell, alongside the entire crypto market, but it has been resilient enough to lose about 30% of its value when most cryptocoins have posted an average of about 90% losses. As of January 2019, XLM was trading at circa $0.08 with a market value of about $1.586 billion (~456,927 BTC).
Stellar is one of the few networks with on-going real-life use cases. Stellar’s near-zero fees have lowered the costs of remittances and even made it possible to make micropayments cheaply.
Its real-time settlement of 2-5 seconds is a leader in the industry, while the company has also set the pace in international mobile money integration. Alongside IBM and Deloitte, Stellar also has huge working partnerships with Parkway Projects and TEMPO Money Transfer. As more partners are incorporated, XLM will likely attract even more demand.
Stellar Trading Information at AvaTrade UK
- MT4 Symbol: _XLMUSD
- Trading Time: 24/7 GMT
- Typical spread: 2% over market
- Minimum Nominal Trade Size: 100
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Stellar Trading FAQ
- Where can I trade Stellar Lumens?
As one of the most popular cryptocurrencies there are literally dozens of cryptocurrency exchanges where Stellar Lumens are available for trading. However, with most of them you’ll first need Bitcoin or some other cryptocurrency to do your exchange. A much easier way to trade Stellar Lumens is to speculate on the price of the cryptocurrency using CFDs. If you take this course of action your trading will be simpler and more streamlined. And you can trade Stellar Lumens CFDs right here at AvaTrade. In fact, you could get started today by opening an account in minutes.
- Is Stellar Lumens a good cryptocurrency for traders?
As one of the top cryptocurrencies for some time Stellar Lumens has attracted a lot of investment, and it continues to see good trading volumes and liquidity on a daily basis. That makes the token a good choice for traders, who won’t have to worry so much about price gaps and illiquid situations. The coin is also fairly volatile on a daily basis, giving short-term traders plenty of opportunity to profit from the daily, and sometimes the hourly movements of Stellar Lumens. The best way to trade is through cryptocurrency CFDs and you can trade them right here at AvaTrade with ease.
- What’s the best strategy for trading Stellar Lumens?
Stellar Lumens tends to move up and down in fairly predictable waves, making a moving average crossover strategy suitable for trading this cryptocurrency. Of course, any cryptocurrency trading strategy should also include the use of CFDs. This just makes the trading easier, with far less to learn, and far less risk of losing your coins. It also allows the use of leverage, which can greatly enhance trading profits when used properly. Why not try your Stellar Lumens trading strategy today by trading on CFDs at AvaTrade?