Would you invest in a cryptocurrency that allows people in different countries to send money to each other for a fraction of a cent? Wouldn’t that upend how money currently reaches people in different countries, especially poor countries?
That’s the goal of Stellar and it has some well-known names backing it. In this article, we’ll learn what Stellar is, how it is different from other cryptocurrencies and how to invest in it.
What Is Stellar?
Jed McCaleb is the co-founder of Stellar. If that name sounds familiar, he is also the co-founder of Ripple (XRP). Stellar is a nonprofit organization. The organization behind Stellar is the Stellar Development Foundation (SDF), which was incorporated in 2014.
Lumens (XLM) are the cryptocurrency of Stellar and are used across the organization’s decentralized network.
In countries where people don’t have access to banks, they must send money through services such as MoneyGram or Western Union, both of which are expensive. Stellar provides the option to send money directly to another person for pennies.
This aligns with Stellar’s mission, which is to promote global financial access, literacy, and inclusion.
Stripe, the payment gateway, contributed $3 million to Stellar in 2014, when the organization was first getting under way. Stellar jumped on recent news that Stripe may even add support for Stellar as a digital coin. As well, IBM wants to build a blockchain with Stellar.
XLM is ranked #11 on coinmarketcap.com. It has a current value of $.062 and there are 17,868,059,883 XLM circulating.
How Is Stellar Different?
The best way to see how Stellar is different is to compare it to a similar platform – Ripple. While Ripple is focused on allowing banks to transfer value across borders, Stellar is focused on allowing people to transfer value to other people across borders for a fraction of a cent per transaction.
It’s important to point out that Ripple is a for-profit organization while Stellar is a nonprofit.
Stellar transactions are fast, resolving on the network in 2 – 5 seconds. This method is known as consensus. Instead of using miners for validity, servers sync with each other to verify transactions.
Stellar is able to transact in micro payments as well.
Stellar bridges the gap between complex exchanges of currencies. For example, a customer in Egypt needs to send money to someone in Japan. Stellar will utilize multiple currency conversions to perform the EGP to JPY conversion, which is what the customer ultimately sees.
How To Invest In Stellar XLM
You can’t buy XLM directly. Instead, there is a round about way to purchase XLM. The flow looks like this: Buy BTC through Coinbase then transfer to Binance, where you can buy XLM with your BTC.
There are more exchanges coming in the near future that will allow you to buy XLM. For now, we’ll have to use Binance.
Let’s walk through the process in detail.
1. Create A Binance Account
The first thing you need to do is setup a Binance account.
Binance is a popular choice because it allows crypto-to-crypto transactions from companies like Coinbase. It's important to note that you can't send money to Binance. You have to go to Coinbase -> Exchange (Binance) -> XLM.
So, you’ll always need two accounts:
Binance: which you can signup for here
Coinbase: Coinbase gives you $10 in free Bitcoin when you signup and deposit $100 or more
Hopefully, this changes soon, but that's how it goes today.
2. Buy Bitcoin or Ether on Coinbase
Once you have a Binance account setup, you need to buy Bitcoin or Ether on Coinbase.
It's very easy to do once you have a Coinbase account setup. You simply go to the Buy/Sell page and enter your information. Then, your Bitcoin will be in your wallet and you can move to step 3.
3. Transfer Your Bitcoin To Binance
Once you have your Bitcoin or Ether in your Coinbase account, you can transfer it over to Binance. This is also fairly easy to do.
In your Binance account, go to your balances then wallets and you can see all the different coins you can hold in your account.
In our case, we're transferring over Bitcoin, so click on Bitcoin, and you'll see a Wallet Address generate. Here's what most look like:
Once you have that address, you go back to Coinbase, choose “Accounts”, and then “Send.” You'll see this screen come up where you can send your Bitcoin to the address generated in Binance:
4. Buy XLM
Once you have your Bitcoin in your account at Binance, you can finally buy XLM.
In your Binance account, execute the XLM/BTC (or XLM/ETH) exchange.
Once you place your trade, it will show up in your Binance account.
Final Thoughts
The business case for Stellar is compelling. It opens up new markets for businesses who currently find transacting with customers in certain countries to be prohibitive or even impossible. Since such customers are likely to have smaller transactions (i.e., micro payments), Stellar is able to accommodate the interaction between these customers and businesses.
However, like all cryptocurrencies, investing in Stellar is extremely risky. You could lose all your money almost instantly.
If you're not sure about using a digital wallet and this whole process, and want to invest via an ETF, you can't do it yet. However, there is a Bitcoin ETF – GBTC, and you can invest in it for as little as $5 on Stockpile. We'll give you $5 for free when you sign up for Stockpile through this link.
Let us know your thoughts on Stellar in the comments!
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