Stellar Lumens (XLM) is a form of cryptocurrency created in 2014 by the non-profit organization Stellar Development Foundation. Stellar is an open-source network that allows users to create, send, and trade digital representations of currency. The foundation created Stellar Lumens as a barrier to entry to increase the efficiency of the Stellar system.

It is important to research investment opportunities before jumping in, so this article will guide you through the history of Stellar lumens, what they are used for, and how to buy them.

What are Stellar Lumens?

The Stellar Development Foundation was founded in 2014 as the bedrock of the open-source Steller Network. The foundation’s mission was to make money more fluid, enabling people to participate in the global economy.

By using Stellar, consumers can easily conduct financial transactions with any currency. But rather than exchanging or sending the actual currency, they send a digital representation of it. Steller relies on blockchain technology similar to other cryptocurrencies, but claims to do so in a faster and more affordable way.

So what exactly are Stellar lumens for?

Lumens are Steller’s built-in tokens specifically designed to create friction in their system. Because Steller is an open-source network, the founders feared it would be too easy for bad actors to slow down the system with spam.

To use the Stellar network, users must have a minimum balance, which is currently one Stellar lumens . A minimum transaction fee of 0.00001 lumen is also required. These requirements are just high enough to deter bad actors, but low enough to keep Stellar accessible to genuine users.

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Special characteristics of Stellar Lumens

Like other cryptocurrencies, Stellar Lumens (XLM) are a form of digital currency that allows money to flow more freely. But in the case of Stellar, the currency itself is not the focal point. Lumens were created to add a small barrier to entry to the Stellar network to deter bad actors from slowing it down. The Stellar network itself is really the focal point.

How are Stellar Lumens created?

One of the biggest differences between Stellar Lumens and other cryptocurrencies is how tokens enter the market.

Major cryptocurrencies like bitcoin are mined, and anyone can mine them as long as they have the right tools. Many of these digital currencies have a maximum supply, and people can mine them until that cap is reached. Additionally, users often receive a reward for mining cryptocurrency.

But Stellar Lumens cannot be mined. Instead, the Stellar Development Foundation released 100 billion lumens in 2014 when the network was launched. Over the next five years, the foundation increased the supply by 1% each year.

In October 2019, the Stellar community voted to eliminate this annual supply increase. In fact, they decided to reduce the supply of Stellar lumens, cutting it in half. The 50 billion lumens that exist today are the only ones that will circulate in the future.

As of July 2021, 20 billion lumens are held by network users, while the remaining 30 billion are retained by the foundation to help it develop and promote the network. Eventually, these lumens will also be put on the market for purchase by users.

How to buy Stellar lumens?

The purpose of buying Stellar lumens is actually to gain access to the Stellar network. You can buy these tokens on major cryptocurrency exchanges , including Coinbase, Kraken, Binance, and Bittrex. You can also buy lumens on Stellar’s native exchange, named Lobstr.

Wallets

Cryptocurrency wallets are usually needed to store the private key required to access your Stellar Lumens or any other form of cryptocurrency. You have several options when looking for a wallet to store your lumens , including hardware wallets like Ledger and Trezor, downloadable wallets like Keybase, Solar Wallet, and Lobstr, and online wallets like Coinbase Wallet.

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Transaction time

Cryptocurrencies often require a number of confirmations on their blockchain technology before a transaction can be processed. Many currencies require dozens of confirmations and processing can take several minutes or hours. Stellar transactions can be processed almost instantly, and some exchanges like Coinbase only need one confirmation.

Fees and Expenses

Each cryptocurrency exchange charges its own fees, and the amount you pay depends on the exchange where you buy your lumens. There are also fees for using the Stellar network, with a minimum fee of 0.0001 lumens per transaction.

Other Ways to Invest in Stellar Lumens

Another way to have Stellar Lumens in your portfolio is to invest in the Grayscale Stellar Lumens Trust. When you invest in a Grayscale Trust, you are investing in a security whose value is derived from Stellar Lumens without buying or storing the Lumens yourself.

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