Stellar Lumens (XLM) Explained – How does it work?

This educational article on Stellar Lumens (XLM) covers the below topics:

1. What is Stellar Lumens, the decentralized protocol for payment network 
2. Lumens Supply Metrics
3. Stellar Lumens Key Metrics
4. Stellar Github Key Figures
5. How to use Stellar Lumens 
6. Stellar Lumens: a flash in the pan or a good investment?
7. Article Resources

What is Stellar Lumens, the decentralized protocol for payment network 

Lumens are the cryptocurrency that runs on the Stellar network.

Allowing users to send any amount of money worldwide simply using their phone and automatically converting them into the recipient’s currency, Stellar Lumens (XLM) made its fortune by making money more fluid and spendable. 

In the plan of its creator Jed McCaleb (former Ripple’s Co-Founder), it was meant to be a very competitive method of transferring money (only 0.00001 XLM the fee for a Lumens transactions) in a very accessible way: an internet connection and a lumens-ready wallet app is what you need to make an online exchange. 

Following the recent sharp drop in its value, what prospects await the Stellar Network created in 2014? 

Lumens Supply Metrics

The SDF (Stellar Development Foundation) Dashboard API endpoint reports the live totals for the essential numbers around lumens.

As of December 12, 2019, the Dashboard API shows:

{
  "updatedAt": "2019-12-12T21:07:23.480Z",
  "originalSupply": "100000000000",
  "inflationLumens": "5443902087.3472865",
  "burnedLumens": "55442098181.3755700",
  "totalSupply": "50001803905.9717165",
  "upgradeReserve": "414310437.8111675",
  "feePool": "1807341.5766261",
  "sdfMandate": "29635032570.5297368",
  "circulatingSupply": "19950653556.0541861",
  "_details": "https://www.stellar.org/developers/guides/lumen-supply-metrics.html"
}

Glossary endpoints can be found in the Stellar documentation as well as the API (V2)
• https://developers.stellar.org/docs/glossary/lumen-supply/
• https://dashboard.stellar.org/api/v2/lumens

Stellar Lumens Key Metrics (As of August 2022)

Stellar Github Key Figures

On August 2022, the Stellar GitHub reported a total of:

• 148 releases (Latest V19.3.0)
• Top Languages incl. JavaScript  TypeScript  Go  Rust  Python
• Approx. 3000 Stargazers on Stellar core
• Approx. 100 repo.
• 6 Stellar organization members

How to use Stellar Lumens 

Stellar Lumens (XLM) (where Stellar indicates the network on which the exchange transactions are carried out, and Lumen its correlative cryptocurrency) was designed to help people during cross-border transactions, often characterised by long procedures and high fees.

In its first six months, it had joined 3 million registered user accounts on its platform and allowed the performing of more than 450 million transactions so far. 

As a novel middleman, Stellar simply validates the validity of the procedures and gives the pass without altering in any way the market, making SWIFT codes superfluous, for example. 

And making even a bank superfluous. Let’s see how it works. 

What users need is a simple wallet where to deposit their money in any currency, and an application programming interface (API) manages all the money exchange procedures.

The money is virtually sent to an anchor in the network, which will deliver to the payment recipient. 

The decentralised nature of the Blockchain appears in all its extraordinary revolutionary scope: wallet addresses are completely anonymous as they are identified by a string of numbers, although the transactions are visible to all the participants. 

When a new deposit is made in one traditional currency, the network creates a corresponding amount of tokens (called XML). 

Its decentralised Blockchain network is composed of many nodes that aim to check the ledger and verify that the right amount of XML has been credited to the legitimate person while keeping track of all the transactions taking place.  

Is it a successful new payment method? So far, it’s still too early to say, as it partially depends on how it will take root in different economic systems, but it surely can contribute to solving some real issues, and this could be its fortune. 

Stellar Lumens: a flash in the pan or a good investment?

Lumens has definitely few arrows to its bow: among his various practical intentions, even the most honourable purpose to fight poverty and give and hand to developing countries, given its derisory transactional costs. 

Among its partnership with multinational giants like IBM and its recent experience with the Ukrainian government, which tried to implement it as a central bank digital currency, the collaboration that arose in 2020 with Blockchain analytic company Elliptic is noteworthy. 

Elliptic, which collaborates with various actors of the crypto scenario, will detect and prevent illicit activities on the Stellar network (in primis money laundering). 

According to its CEO James Smith, Elliptic receives long strings of numbers, Blockchain-transaction codes, and customer IDs: these data should be only used to identify suspicious users to prevent crimes.

Things are not doing great at the moment: according to Nasdaq, during 2021 alone, the currency fluctuated from a low of 13 cents to a high of 79 cents before dropping dramatically in May.

All crypto experts seem to agree that, similarly to other cryptocurrencies, even Lumens can be quite volatile, and its future is uncertain, not more than for Bitcoin and Ethereum. 

However, the system held up relatively well to the impact of the large loss in the month of May, amortising the loss of users, relying on the undoubted usefulness of its mechanism. 

Many crypto writers agree with the fact that if adopted at a large scale, its straightforward mechanism should overcome its extreme volatility in 2021.  

The lack of real-world utility and applicability is often a pitfall of cryptocurrencies: businesses need the adequate resources to comply with regulatory requirements and implement Blockchain technology. 

The extraordinary ability of Lumens to manage 3000 transactions per second combined with the chance of revolutionising financial payments can really be its trump card.

Sources

Stellar Dashboard, Stellar Developers Nasdaq, CoinJournal, Decrypt,  Blockchain 4 Innovation

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