What Are Stellar Lumens (XLM)?

Stands for Stellar Lumens, XLM is just an ISO code (like USD) that represents the currency or 'original asset' of an open source and distributed payment infrastructure known as Stellar.

In this way, XLM is similar to BTC (Bitcoin) - a digital exchange token that works through blockchain technology. Unlike BTC, Lumens (XLM) has been given a unique name that distinguishes them from the networks they run and from the organizations that make them.

At present, Lumen is the 20th most popular cryptocurrency in the world with an estimated market capitalization of $ 662,000,000. This is being developed by the non-profit Stellar Development Foundation whose team includes household names such as Kamal Ravikant and Matt Mullenweg.

XLM History
To tell the XLM story, one must tell the Stellar story. Founded in early 2014 by Jed McCaleb and Joyce Kim, Stellar was originally a difficult fork in the Ripple protocol. After making some very important changes to the consensus code, branching networks created "Stellar-core."

Around this time Joyce Kim claimed there was an error in the initial Ripple protocol (this statement was debated in a blog post by CTO Ripple Labs, Stefan Thomas). Immediately after this drama, the Stellar Development Foundation (SDF) was formed and the latest version of the protocol featuring a new consensus algorithm was released.

The purpose of this new platform is (among others) to "connect people, payment systems, and banks."

The new whiteboard and code for upgrading were released in April 2015 and the network aired in November of the same year. Original assets in the Stellar network are referred to as "stars" (launched with 100 billion units in 2014); the name was changed to Lumens (XLM) after the 2015 update.

What distinguishes XLM?
Lumen exists to link fiat currencies and allows almost instant exchange without the buyer or seller ever touching the crypto currency itself.

But to dig deeper into why Lumen exists and what makes it unique, one must once again take a holistic view. The Stellar system has a default currency for 2 reasons.
Lumens plays an anti-spam role. Each transaction has a very small fee (0.00001 XLM) associated with it. This fee serves as a preventive measure against malicious users who flood the network (DoS attacks). Lumens serves as a security token that eliminates this large-scale transactional attack.
Lumens allows for multi-currency transactions. They function as channels for transactions between currencies that do not have existing or difficult to access markets. This is only possible when there is a liquid market between XLM and every currency involved.
Unlike many crypto brothers and sisters, XLM is sporadically free. Why is this done?

Stellar connects it with their mission:

To achieve a more inclusive digital economy. As per our mission, Stellar.org works to connect people to low-cost financial services. Giving lumens for free is an invitation to the public to design the services they need.

In addition, providing Lumens is an easy way for supporters to expand network coverage. In other words, if there are more people with XLM who are actively using it, the overall system utility will increase significantly.

But this raises many other questions. To whom is XLM given? Why do people buy it if it's distributed for free?

According to SDF, 95% of tokens on the network will be provided with 5% held for operational costs. Rationing the handout looks like this:

50% for individuals who want Lumens
25% for non-profit organizations, business grants, and government institutions
20% for bitcoin holders
As for the second question, people may still want to buy XLM if there are no prizes available and they want to participate, or they might want to buy to support Stellar's vision as a member of the community.

SDF estimates that all Lumens will be distributed in 10 years, where people must buy it in exchange to get XLM.

With the altruistic mandate and unique intentions behind the Stellar platform, XLM is a currency with origins that is slightly different from many other cryptocurrency.

Stellar Team (XLM)
XLM is supported by a strong team of developers, entrepreneurs and venture capitalists.

Here are some key faces.

Jed McCaleb was one of the founders of SDF, whose background included establishing eDonkey2000 (one of the largest file sharing networks of his time), originating in Mt. Gox (first BTC exchange) and Ripple founder.

Joyce Kim is one of the founders of SDF, formerly VC at Freestyle Capital and serial entrepreneur. Kim graduated from Cornell University at the age of 19, then went on to graduate school at Harvard and Columbia Law School. He is also a Fellow Director at MIT Media Lab.

David Mazières is chief scientist at SDF and professor of Computer Science at Stanford University. He holds a BS in Computer Science from Harvard and a Ph.D. in Electrical Engineering and Computer Science from MIT. The Stellar consensus protocol is largely an idea.

If you browse the list of board members and advisors, you will find big names from people like WordPress, Y-combinator, Microsoft, Apache, Stripe, Google, and many others. This is generally a positive indicator when the big list gives weight to the project. To see the full list, click here.

challenges and criticism
Source: Stellar's Facebook page
Every new currency (and underlying network technology) is not without challenges and potential failures. XLM is no different.

One problem that has been noted is that the technology used by McCaleb and the things that Ripple is currently using is very different. This gives a lot of pressure on his vision individually.

Ripple is run by a team of more than 200 people and has raised nearly $ 100 million in funds. In contrast, Stellar is run by a handful of people with far less funds. The argument is, that the possibility of errors or failures is higher with fewer people involved.

There are also some arguments about Stellar transparency (or lack thereof) when it comes to paying Lumen salaries to employees, and Lumen prizes or "airdrops." Whether this issue is a valid criticism or just the pain that grows from a young technology company / company is not yet visible.

How to Buy and Store XLM
Lumens can be purchased on various exchanges, the most popular of which are Bittrex, Kraken, and Poloniex.

In addition, Stellar has a direct registration program to help facilitate its goal of making Lumens accessible to millions of people. In November 2017, they issued this update to the program, letting people know the current situation and what to do if you experience problems claiming your Lumens.

Also, as part of its mandate, Stellar shares XLM with Bitcoin holders. This was done in a series of rounds, the last of which ended on August 27, 2017.

In terms of storage, there are at least ten wallets to choose from after your tokens have been purchased.

Some examples:
Lobstr is a wallet for the Stellar network. Lobstr is available as a web application and also has special Android and iOS applications.
Stellar Desktop Client is an open source wallet for your desktop. This allows you to encrypt your secret key and store it locally on your machine.
Papaya is a wallet that is easy to use to store Lumens and other assets. No technical knowledge is needed to use it - there is no key or trustline.
The great thing about using a wallet is that you don't need personal identification information such as your name, address or SSN to get started. This is a big argument for cryptocurrency adoption.

Final thoughts
Lumen / XLM is another asset in the rapidly growing field of cryptocurrency. It seems to be positioned as a digital currency solution for developing countries, but has flown under the radar (somewhat) in recent years.

In November 2017, Deloitte, Stripe and, most importantly, IBM has created a partnership with Stellar. A big step in the right direction.

Wander around the cryptocurrency forum and you will hear people touting user friendliness, speed (there has been no traffic jam on the blockchain) and as a low-cost solution for sending money. But the question mark remains, and as with almost all new currencies / platforms, the truth will only be seen fully when volume increases.
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