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
Buying Stellar Lumens (XLM) used to be more challenging, but over the last two years, it's become easier to invest directly through platforms like Coinbase. If you want to see your other options, check out our list of the best places to buy cryptocurrency here.
Let’s walk through the process in detail.
1. Create A Coinbase Account
The first thing you need to do is setup a Coinbase account.
Coinbase is a very popular choice because they have some of the most popular currencies easily available for purchase on their app or website.
Read our full Coinbase review here.
One of these is Stellar Lumens - which you can easily buy on the app, along with Bitcoin and others. Plus, you can easily transfer US dollars in and out as well.
2. Buy XLM
Once you have your Bitcoin in your account at Coinbase, you can buy XLM.
In your Coinbase account, simply click on Stellar Lumens (XLM) and place a trade.
Once you place your trade, it will show up in your Coinbase account.
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, you can definitely do it through any of the apps here.
Let us know your thoughts on Stellar in the comments!
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.