Stellar Lumens (XLM) - Everything Investors Need to Know

• Stellar Lumens market cap recently rose to from $2.5 billion to over $12 billion
• Stellar Lumens (XLM) is an open-source, distributed payments infrastructure
• Similar to Ripple, Stellar Lumens allows people to exchange government issued fiat currency and transactions take just 2 to 5 seconds to settle

Long before the now infamous Pirate Bay, pirating software and media required the use of an early 2000’s piece of torrenting software called 'Kazaa.' This was then superseded by open source peer to peer software called 'eDonkey' and now eDonkey is back. Or at least the inspiration behind eDonkey is. This is due to the fact that new chart-topping cryptocurrency Stellar Lumens (XLM), is itself the brainchild of original eDonkey creator, Jed McCaleb.

What is Stellar Lumens?

Different from all other forms of cryptocurrency, Stellar Lumens (XLM) works more like PayPal than a digital currency like Bitcoin. This is due to the fact that XLM tokens are not designed to be used as a store of wealth. Instead, the Stellar Lumen network is designed to store funds which users wish to transact and exchange internationally for the lowest cost possible.

How & Why Stellar Lumens is Very Similar to Ripple

Because Stellar Lumens' use case focuses specifically on enabling low-cost international payments in both XLM tokens and fiat currency, Stellar Lumens strikes many people as very similar to Ripple XRP.

• Like Ripple, XLM requires participation in its network by banks, financial institutions, and businesses
• Like Ripple, Stellar Lumens is partially centralized, in that the XLM payment ledger is administered directly by stellarr.org
• Similarly to Ripple, XLM boasts fast transaction settlement times, low settlement fees, and the ability to send and receive any of over 180 supported fiat currencies

In effect, Stellar Lumens is Ripple XRP, just opensource. What is more, this is due to the fact that Jed McCaleb was one of Ripple’s original founders. What makes XLM different (and arguably better) than XRP, however, is the fact that Stellar Lumens is more verifiably decentralized.

How Stellar Lumens Works

Stellar Lumens works via what it calls an Anchor, Trust, and Credit system. ‘Anchors,' in this case, are banks and similar institutions who store XLM cryptocurrency tokens or fiat cash deposits.

When XLM users send funds, Anchors on the Stellar network verify that funds are available. The larger distributed Stellar network then processes transactions in place of existing systems like SWIFT. Much more importantly, because transactions take place across a decentralized network, transactions benefit from significantly lower costs. - This and a guarantee that those sending funds will always benefit from the best possible exchange rate.

What Gives XLM Tokens Themselves Value?

Like Ripple XRP, Stellar Lumens digital currency tokens aren’t required by those who wish to send funds via the Stellar network. This means that when people buy XLM digital currency, they buy coins which only have as much value as Stellar Lumens' payment processing technology. (Which in turn has its value depend on how many people actually use XLM.)

Stellar Lumens Big Ripple XRP Problem

At present, Stellar Lumens is impressing investors by trading at $0.28, up from $0.02 in July 2017. As it happens, however, investing in XLM needs to be undertaken with caution. This is because while XLM does benefit from widespread business support from the likes of IBM and Stripe, Ripple XRP is indisputably the preferred payment infrastructure of banks.

Given the above, for XLM coins to grow in value in the long-term, Stellar Lumens will need to start convincing more banks to become anchors on its own network and in effect, directly compete against XRP for business.