When I first wrote about Stellar Lumens on the 15th of November, it was only worth £0.028, at the time of writing this blog, XLM is worth £0.65p, thats a 2221% increase inside 7 weeks. But why are people like me raving about Stellar Lumens?! Have a read.
What is it?
Stellar is a platform that facilitates cross-border payments in an extremely cost-effective manner. Transactions typically settle within 2-5 seconds, as opposed to 5-10 mins with Ethereum, and 30mins - 1 hour with Bitcoin. Stellar will be compared to Ripple as they run a very similar service, and most notably because the original founder of XRP (Ripple), Jed McCaleb, left Ripple to start Stellar.
Ripple has been making significant strides in the cryptocurrency market, it surged over 35,000% in 2017 and built major partnerships, AMEX and Santander to name a few. Stellar's impressive year has gone a bit under the radar, but a 17,900% increase in 2017 is nothing to be quiet about. Stellar partnered up with IBM in October of 2017, and they are starting to get the recognition they deserve.
When the Chinese based exchange, Binance, listed XLM on December the 8th, the price of XLM was at £0.10p, its no coincidence the price has skyrocketed since then. The asian market is the largest contributor to cryptocurrency investment, this is reflected in the fact that the two largest cryptocurrency exchanges are based in Asia. Most recently, OKEx (based in Hong-Kong), the 5th largest cryptocurrency exchange in the world listed XLM on the 29th of December. This listing will open up even more capital flow to XLM, especially deep-pocketed investors based in China's financial hub.
Stellar ICO Platform
This is where things get really interesting for Stellar. We know that Ethereum has become go-to platform for decentralised applications to launch their ICOs. More than $1 billion worth of ICOs were raised on the Ethereum platform in 2017. One ETH token is worth over £660, and its no secret that as Ethereum became the popular platform for companies to raise their ICOs on, the ETH tokens became more popular in demand. In order for these keen investors to participate in these ICOs, they must have held ETH tokens in order to exchange for the particular ICO tokens. As a result, the demand for ETH tokens shot up exponentially, thus leading to a significant hike in price. This surge in demand for the Ethereum platform has highlighted some of the flaws of the platform. Ethereum has struggled to scale and was significantly slowed down by the 'Crypto Kitty' game in December. Questions have been raised regarding Ethereum's capability to handle decentralised applications which require a platform that can scale.
Companies are starting to look elsewhere for platforms that have the ability to scale. A major example of this is KIK, we all know KIK to be the hugely successful messenger app. Last year, KIK decided to launch their own ICO token, KIN. They raised their ICO on the Ethereum platform, but decided that Ethereum was not the right platform to deal with the demand they were receiving. Ted Livingston, CEO of KIK, referred to Ethereum as "the dial-up era of Blockchain", stating that Ethereum's scaling issues were a problem. They have now chosen to move their ICO over to Stellar. This is a big deal for the Stellar platform and its investors. Once the KIN ICO is successfully launched on the Stellar platform in February, this could end up having a major domino effect, with many other companies potentially opting for the Stellar platform over Ethereum.
Stellar over Ethereum - Why?
Ethereum is marvelled for its Turing-complete smart-contracts, and it is the reason why Vitalik Buterin is rightly regarded as a genius. However, most ICOs/Crypto companies don't actually need this complex algorithm to be integrated into their company. Stellar is the option for those companies that do not require Turing-complete smart contracts, as Jed McCaleb clearly stated "Stellar is the best choice for ICOs that do not require complex smart contracts".
Here are 2 major reasons why ICOs may be raised on Stellar as opposed to Ethereum:
- Decentralised exchange: Stellar has its own decentralised exchange. For many companies launching their ICOs, their biggest problem is getting listed on an exchange. Exchanges have a strict criteria for listing tokens, and the failure to get listed on many exchanges significantly weakens the outlook of the company. By opting to raise their ICOs on the Stellar network, they will automatically be listed on the stellar exchange, thus not having to worry about entry to market.
- Faster and cheaper: Ethereum requires 'gas' to process transactions. Gas is the execution fee for every operation made on Ethereum. Miners can refuse to process a transaction with less then a certain gas. This can make operating on the Ethereum platform quite expensive. Stellar does not require 'gas' to execute programs. Stellar takes a minor transaction fee of .00001 XLM (£0.000006p). As well as being cheap, Stellar's transactions settle within 5 seconds, as opposed to 3-5 minutes for Ethereum.
We saw what the rush of ICOs did to Ethereum price, what could it do to Stellar?
FairX - A new generation cryptocurrency exchange
One of the biggest issues for new cryptocurrency investors is access to altcoins. It's not exactly clear to a new investor on how they could get access to many altcoins. They are faced with the daunting prospect of purchasing BTC/ETH/LTC on Coinbase, then sending it to another exchange. A new exchange, FairX, backed by IBM is due to be launched in 2018 and it is looking to tackle this exact problem.
Their motto of 'cash for crypto' demonstrates what they are trying to achieve. They will enable users to buy any altcoin with cash, directly. How does this affect XLM? FairX recently announced that they will be using the stellar distributed exchange 'heavily'. Once FairX launches, the demand for XLM may surge as it starts to get used as a 'cross-asset' payment pairing for other altcoins.
Stellar is widely compared to Ripple for its similarities. However, many have yet to consider Stellar as an ICO platform, or a popular cross-asset payment for a major cryptocurrency exchange. These two new factors are starting to come into play already, and only a small portion of investors are aware of this. The price of Stellar rose to impressive heights in 2017, but this is minor in comparison to what is about to happen in 2018.
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