Stellar (XLM): What You Need To Know Before Investing

Stellar’s XLM is just one of the many crypto assets currently available. Its popularity may make you wonder if XLM is a good investment move for you. To make that decision, you should consider Stellar’s background and its performance to date.

What Is Stellar?

Stellar is a decentralized network on which users can create, send and trade several types of cryptocurrency. Developers can use Stellar to deploy global payment apps, asset exchanges and micropayment services for large and small businesses alike. It was created in 2014 and launched in 2015 with the mission of bringing the world’s financial systems together under one network.

Like other decentralized platforms and exchanges that use blockchain technology, Stellar is spread across multiple servers. This means that the activity carried out on Stellar is not monitored by a singular source.

About Stellar

Stellar began in 2014 when Jed McCaleb left Ripple, a platform he co-founded, to create a new financial system. McCaleb and former lawyer Joyce Kim launched Stellar as a platform for the everyday user. Soon after, Stripe’s CEO collaborated with McCaleb and Kim to create the nonprofit Stellar Development Foundation.

Stellar has experienced many growth spurts, such as when Mercado Bitcoin announced its use of the platform. In less than a year, Stellar housed almost 3 million user accounts. Since that time, Stellar has signed on over 55,000 accounts of its own and built a network of partners that includes Coinbase, Franklin Templeton and MoneyGram.

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What Are Stellar Lumens?

While the Stellar platform is open to all representations of money and cryptocurrency assets, it does provide its own digital currency called lumens, or XLM, which is the foundation of the network.


Lumens are most often used to pay transaction fees on Stellar. However, lumens also act as the intermediate currency that allows Stellar users to execute trades quickly.

A built-in protocol automatically converts money sent through Stellar to lumens and then to the desired coin. For example, if you send a payment in U.S. dollars to a recipient in Mexico, Stellar converts the payment to lumens, and the recipient can receive the payment in pesos. It takes only seconds to complete the entire conversion, making it easy to send and receive money from anywhere in the world.

Moving Away From Stellars

At the time of its launch, the platform’s native currency was called “stellars.” Stellar later changed the name to lumens, but the original name stuck with many people, so you might still hear the term stellars and see lumens listed that way on cryptocurrency exchanges. You might also hear Stellar and lumens used interchangeably, but Stellar is the platform itself. Lumens are the crypto asset used by the platform.

What Are the Differences Between Stellar and Ripple?

People who have used both Stellar and Ripple have noted the similarities between the two platforms. They use almost identical blockchain code, neither allows mining, both use a distributed ledger and both provide nearly free and instantaneous transactions.

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These similarities are due mainly to the fact that McCaleb, one of the founders of both platforms, knew what worked well with Ripple and brought that vision and knowledge with him to create Stellar.

Advantages Stellar Has Over Ripple

The platforms differ significantly in their goals. Ripple was created so that banks could make transfers around the world in a matter of seconds for a very small price. It improved the efficiency of banks and financial systems.

Stellar, on the other hand, was built with the average user in mind and for those in developing countries. The platform provides access to the global economy through simple, quick and low-cost transactions. While the average person can use Ripple and banks can use Stellar, they were each designed for specific users to provide a more efficient experience to their target markets.

In terms of the organizations behind the platforms, Stellar is supported by the nonprofit Stellar Development Foundation, while Ripple is a for-profit company. Some believe Ripple’s status as a profit-making company poses a conflict of interest where its stewardship and decision making over XRP Ledger, the software behind the platform, are concerned, according to the cryptocurrency exchange Kraken.

Good To Know

At this time, investing in Stellar (XLM) seems to be a wise move, but it is essential to remember that things can change quickly. Investing can always provide big rewards, but it can also pose significant risks. It is imperative to your financial stability to ensure you are using the most up-to-date information. Before making any investment moves, whether you are investing in stellar or anything else, you should always check the current market and trends.

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Is XLM a Good Investment?

When determining whether Stellar’s XLM is a good investment, there are two factors to consider: how lumens have performed up to this point and their potential.

Performance History

Generally speaking, XLM has shown promise to date. Since the inception of the asset, its value has risen from a small fraction of a cent to $0.1087 as of Sept. 28, though not without some wild swings before and after periods of relative stability. For example, XLM climbed from less than $0.09 in November 2020 to $0.73 in May 2021 before trending downward to its current price.

Although XLM’s 59% drop since the beginning of the year is alarming, the decline is even with bitcoin’s and slightly less dramatic than ethereum’s 65% drop. Viewed in the context of the larger cryptocurrency market, lumens’ performance suggests the coin could be a viable long-term investment, but it’s one that carries significant risk.

Potential Value

Stellar has destroyed half of its lumens and does not plan to create more. This may cast doubt on its investment potential, but it is important to recognize that the coin will be scarce in the future. Rarity increases the value of any item, as could be the case with the lumens that are still in existence. The potential increased value could make XLM an excellent asset to buy and hold.

Of course, the coin’s value is closely tied to its utility and ability to solve real-world problems. Lumens check both boxes because of Stellar’s ability to process international payments quickly, efficiently and at low cost. Stellar also has the backing of some major players, including MoneyGram.

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Where To Buy Stellar Lumens

You can purchase lumens directly from the Stellar platform, but this is certainly not the only way to do so. Lumens are available on most cryptocurrency exchanges, including:

Even if you do not see your preferred exchange listed here, there is a good chance it offers lumens. Check your platform’s crypto asset availability.

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Daria Uhlig contributed to the reporting for this article.

Data is accurate as of Sept. 28, 2022, and is subject to change.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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