After being forked from the Ripple protocol in 2014, Jed McCaleb, one of the co-founders of Ripple, and Joyce Kim came up with Stellar Lumens. When a new blockchain system draws original code from an existing technology and improves on it, it is referred to as a fork.
Stellar Lumens is a "platform that unites centralized institutions, payment systems, and people to improve the rapid, reliable, and economical movement of money," according to its website.
A total of 100 billion Lumens are expected to be issued on the network, and the coin's value has risen steadily since its inception in 2014.
It's simple to see why the Stellar Lumens cryptocurrency has been slowly increasing in value and attention over the last several years. This cryptocurrency platform, also known as "Stellar," was created to make payment processing more efficient than current technologies by bridging the gap between centralized organizations like banks and digital currencies. We'll teach you how to get the cryptocurrency in this step-by-step instruction.
The above paragraphs are of the basic information about Stellar Lumens.
Now that you had something to grip on, let's go ahead and list down the pros and the cons of investing in Stellar Lumens.
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Pros of investing in Stellar Lumens
Quick transaction speed
Stellar has a transaction rate of roughly 2,000 transactions per second. As a result, each transaction is approved in less than 5 seconds. It's an excellent alternative for making cross-border payments because of the fast rates.
Low transaction fees
Unlike other cryptocurrency projects, Stellar is built with consumers in mind rather than profits in mind, which helps keep costs down.
Strong collaborations
Since its inception, Stellar has made significant strides. For example, it collaborated with IBM to develop the Stellar payment mechanism.
Cases with regulatory bodies are absent
Despite having a close relationship with Ripple, Stellar has stayed out of any regulatory cases. Jed McCaleb is a Ripple co-founder as well as a Stellar co-founder. This is why there are so many parallels between Stellar and Ripple and so few differences. XLM has remained unaffected by XRP activity so far, as it has maintained its independence in terms of commanding a price on its own, rather than as a fork of the first-mover of cross-border payments. A lack of controversy or regulatory action brightens the future of the technological business and influences its valuation positively.
These are just some of the advantages I found and to be honest, there's not a lot of them out there.
Since you know the advantages already, let's take a look on the drawbacks next.
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Cons of investing in Stellar Lumens
Strong competition
Due to the large number of cryptocurrencies and blockchain technologies available, Stellar faces stiff competition. Ripple is its main competition. Furthermore, centralized institutions are working to improve the efficiency of cross-border transactions.
Stellar has a low popularity
A ticker symbol is attached to cryptocurrencies. Although the correct name of the innovative token is Ether, it is quite easy for a beginner investor to learn that BTC stands for Bitcoin, LTC for Litecoin, and ETH for Ethereum.
Because XLM is a relatively unknown cryptocurrency, it is recognized by cryptocurrency aficionados with a keen interest in the field.
Too much emphasis is placed on expanding the network rather than advancing cryptocurrency
Stellar's creators are interested in forming profitable collaborations with well-known financial institutions. This isn't good news for its new token.
This is the primary reason why XLM is disliked by thousands of traders and investors. It is not impossible, but finding information regarding XLM being incorporated as a payment method is exceedingly tough.
When compared to other teams, the Stellar team is rather small
Ripple had 548 employees as of the end of 2020. Stellar Development Foundation has 115 employees as of October 2021. This gives Ripple, a direct competitor, a competitive advantage in terms of marketing, development, and adoption of the blockchain's solution to address antiquated ways of conducting daily transactions.
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Many programmers are hesitant to work on the Stellar blockchain
Many developers desire to make a lot of money with their apps. Stellar has a lower transaction fee, which may be advantageous to developers. Unfortunately, Ethereum has the first-mover advantage, making it the smart contract of choice for developers at the moment.
Decentralized lending, exchange, insurance, and yield aggregation are all being added to Ethereum by a number of developers. Because of Ethereum's prominence, they can reach a far larger audience and profit from its innovation.
There are no mining incentives to entice more people to use its cryptocurrency
Because XLM is not reliant on mining, there are no mining rewards to attract traders and investors.
Although this reduces the amount of energy consumed by mining in blockchain technology, it also removes XLM from important discussions about cryptocurrencies on Reddit, Facebook, and Twitter.
Overly reliant on Bitcoin's price patterns
Stellar, like other altcoins, has failed to establish a lasting history. In comparison to BTC, ETH appears to be developing some independence at the moment.
Although ETH and BTC can move in opposite directions, XLM has not been able to do so. Any negative news about Bitcoin is immediately reflected in the price patterns of XLM.
As an investor, you should be aware that all types of Stellar investments are based on two characteristics that are sometimes overlooked. They are the concepts of risk and reward. When deciding whether or not to invest in the Stellar XLM asset, you must consider if the potential profits outweigh the dangers.
Stellar has a number of risk considerations, including a reliance on BTC swings, severe competition from Ripple, and a lack of popularity. This places it on a road that is far behind the present price and valuation of digital currencies that have only been on the market for a few years.
As a result of its collaborations, accessibility on cryptocurrency exchanges, and online payment wallets like Skrill, Stellar is progressively becoming more well-known to millions of people. Wallet holders can buy, sell, and hold XLM for a long time with SKRILL.
Note: Do not take this as a financial advise. Its been created for information dissemination only.
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So how do I start? Though anything concerning crypto is banned in my country here so I really don't know much about this