In this article, you will be able to get acquainted with the technology behind the Stellar network, how it works and how you can begin to trade it using our market analysis.
Currency name(s): now Stellar Lumens (XLM), originally Stellar in 2014 but changed to Lumens in 2015 to avoid confusion between the network and the currency
Genesis Block: Early 2014
Total Supply: 105 billion Lumens; ~19 billion currently in circulation
Algorithm: Stellar Consensus Protocol (SCP)
Features: open-sourced, decentralized, community-owned
Stellar is a community-owned cryptocurrency network and its mission is to create worldwide financial access for everyone and to connect people with other payment systems, cheaply and reliably. The Stellar network started as a hard fork of Ripple network (Ripple’s shorthand is XRP) in April 2014. Ripple itself is based on an even earlier payment protocol, Ripplepay, which came into existence in 2004. At first, the Stellar network relied on the Ripple protocol. However, when issues with Ripple protocol were found, the non-profit organization which is behind the creation and maintenance of the network, Stellar Development Foundation (SDF), developed an updated version of the protocol now known as Stellar Consensus Protocol (SCP) and created an entirely new consensus algorithm named Federated Byzantine Agreement (FBA), which we will explain in the Technology section. With these changes and updates, the Stellar network was live in November 2015.
While performing the Stellar network technical analysis, we have seen that its main value lies in its ability to transfer funds around the world and provide its low-cost financial services using its native currency – Lumens. However, the supply of Lumens is limited and has a 1% inflation rate per year – meaning that new Lumens are generated on a weekly basis and distributed throughout the network. All users vote where new Lumens should be distributed and those accounts that receive over %0.05 of all votes will receive these newly released funds.
Stellar technical analysis has proven that at the core of this network lie two powerful algorithms – one is the currency, Lumens, and the other is its ‘proof of work’ algorithm, the Federated Byzantine Agreement System (FBA). The main carriers of value on the Stellar network are Lumens: these are units of digital currency that are built into the network and give the users the ability to move the funds around the world and create fast and secure transactions between various currencies for a very small fee. They are stored solely onto the Stellar network and cannot be taken out and moved.
The utilization of Lumens as Stellar’s native currency has two main purposes:
The Federated Byzantine Agreement System (or FBA) is what the Stellar network uses as a proof-of-work algorithm that works in the following way. Each server within the network stores a record of all transactions of all accounts – therefore the network does not depend on anyone or anything to operate properly. Once a request is made, all the servers communicate to verify the transaction. If the majority of the servers (a quorum) reaches a consensus that the sender is to be trusted and does, in fact, have the funds they want to transfer, the transaction can commence and the funds can be sent or released. This protocol is used so that the whole network is aware of the transactions and of what is happening on the network.
Currently, Stellar’s market cap is valued at approximately $2.5 billion, with a circulating supply of Lumens set at 19.3 billion. However, Stellar also saw an increase in value during 2018 when the price for owning one Lumen grew to an all-time high, and sat at around $0.95 in multiple markets (the highest price was recorded on Jan 4, 2018). Many exchanges, such as Bitfinex, Poloinex and Bittrex allow for Stellar Lumens to be traded either for fiat currencies or for Bitcoin and other various altcoins (such as Ethereum’s Ether, for example). Recently, Lumens have seen a 25% increase in value across all markets, and their price is currently on the rise. The markets have seen an increase in interest in Stellar Lumens as well, and many analysts are tracking their performance.
Regarding price fluctuations, Stellar Lumens fare well in short and medium terms, mostly due to the fact that a recent bubble influenced their price, and after very strong fluctuations where the price fell steeply, it is now stable and slowly on the rise. It has stopped being very volatile, and is on its steady growth for the past 6 months across all markets, while the global average is slowly rising as well and a 2.5x price surge is visible. While swing trading and short selling of Lumens are profitable, long term holders may at times be anxious as over long periods of time their price noticeably fluctuates.
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