Stellar Crypto: Is It Worth Investing In?

With the world of cryptocurrency taking centre stage in the new digital economy, Stellar (XLM) is one of the many options available to you if you're looking to invest. However, it's important to be aware of the cryptocurrency you're planning to invest in and its future implications.

Stellar is an open-source network for currencies and payments, allowing users to create, send and trade digital representations of all forms of money. It was launched in 2015 and has since gained popularity due to its compatibility with the requirements of the common man. Unlike traditional blockchain-based systems like Ethereum and Bitcoin, Stellar is faster, cheaper and energy-efficient.

The growth of Stellar has been phenomenal, returning 125% by the end of 2021. Analysts do not see it slowing down anytime soon. Its current affordable prices and potential for improvement make it ideal as an investment destination. Another reason why Stellar is a good choice for investing is its unique upgrades that augment the flexibility of Stellar core and customer-based applications.

If you're still unsure about whether you should invest in Stellar, consider the fact that the whole market is on the rise. The crypto market is usually quite predictable in the sense that it moves as a whole. For example, when Bitcoin hit its high of $68k, the altcoins market rallied too, with many altcoins hitting and surpassing their all-time highs.

However, it's important to remember that investing in cryptocurrency is extremely risky and volatile. If you're considering investing in Stellar or any other cryptocurrency, be sure to do your own research and only invest what you can afford to lose.

Stellar's growth and future prospects

Stellar's future prospects are positive, with several analysts predicting extensive growth in the short and long term. Stellar's partnerships with centralized institutions, its open-source nature, and its ability to settle cross-border transactions quickly are expected to drive its future growth. Stellar's native token, Lumens (XLM), is also expected to gain value as more people adopt crypto payments. The number of companies accepting crypto is growing, and crypto payments are becoming more practical due to the rising network fees of Bitcoin and Ethereum.

Stellar's blockchain can handle between 1,000 and 5,000 transactions per second, making it a formidable competitor to centralized payment systems. Its built-in KYC feature also makes it attractive to regulators in key markets like the US and the EU. Additionally, Stellar's decentralized exchange allows for fiat on-ramps, making it easier for investors to get into XLM.

Stellar's team is also a strength, led by Jed McCaleb, a respected name in the crypto space. The team also includes tech heavyweights like Denelle Dixon, David Mazieres, Patrick Collison, and Sam Altman.

Stellar's price predictions for the next few years are positive, with Wallet Investor estimating an average price of $0.30 and a maximum price of $0.513 by the end of 2022. Digital Coin Price predicts a price of $0.55 in 2024, and Coin Price Forecast predicts a price of $0.58 by the end of 2026.

However, it is important to note that cryptocurrency investments are highly volatile and unregulated in some countries. There are risks associated with investing in Stellar, and the high levels of unpredictability could see it become a bad investment.

The practicality of Stellar Lumens as a currency

Stellar Lumens (XLM) is a practical currency for several reasons. Firstly, the Stellar blockchain can handle between 1,000 and 5,000 transactions per second, making it a formidable competitor to centralised payment systems. This speed is essential to the essence of crypto: making payments faster and competing with centralised payment methods such as Visa and Mastercard.

Secondly, Stellar is among the cryptocurrencies emerging as a viable option for payments. This is because, unlike Bitcoin and Ethereum, which have established themselves as stores of value and utility cryptos respectively, Stellar is being used for daily transactions. This is especially true for those without access to the traditional banking system, or businesses that want to accept crypto payments. As more companies begin to accept crypto, the number of daily transactions is only expected to grow.

Stellar is also more accessible than other cryptocurrencies. It only requires a small amount of Lumens to initiate an account and transactions. The platform does not give preference to any one currency, and its primary intention is to make people's savings more useful and accessible. It has a built-in system that converts money sent through Stellar into the desired currency. For example, if the recipient is in India, the currency is first converted to Lumens and then to Indian rupees.

Stellar is also a safe option. It uses a ledger system where a network of independent computers cross-check each other's work. Its lack of central authority makes it impossible to tweak the numbers and transactions. Its efficient algorithm, the Stellar Consensus Protocol (SCP), ensures that everything is in sync.

Finally, Stellar is user-friendly. It can be stored on multiple wallets, including Ledger and Trezor, and the average transaction cost on these wallets is negligible at 0.00001 XLM. Transactions are also anonymous, fast, and almost cost-free.

The KYC functionality of Stellar Lumens

Stellar Lumens (XLM) has built-in Know Your Customer (KYC) functionality, which is a critical feature for the crypto asset to be accepted by regulators in key markets like the US and the EU. This functionality is also important for XLM to compete with Central Bank Digital Currencies (CBDCs).

The KYC feature allows for background checks on users, which helps to address the risk of cryptos being used for money laundering and other financial crimes, as noted by ECB President Christine Lagarde in April 2021.

The Stellar Development Foundation (SDF) has partnered with Elliptic, a leading provider of crypto risk management solutions, to integrate Elliptic's compliance tools within the Stellar network. This integration is aimed at helping businesses on the network conduct compliance checks and enhance their risk assessments.

While the Stellar protocol provides the functionality to perform compliance checks, the responsibility for conducting these checks falls on the organisations using the network. This can be a challenging task due to the large volume of data involved, and this is where Elliptic's tools come into play, helping companies identify suspicious wallets and transactions without collecting sensitive personal information.

The use of Elliptic's services is not mandatory, but it adds another tool for businesses to manage risk and enhance their compliance processes. With these tools, businesses can more easily address the risks of bad actors exploiting blockchain technology for illicit activities, which is critical for the broader adoption of blockchain and digital currencies.

The safety of the Stellar network

The Stellar network experienced a ledger fork related to a failure of the underlying Ripple/Stellar consensus system. The Fischer Lynch Paterson impossibility result (FLP) states that a deterministic asynchronous consensus system can have a maximum of two of the following three properties: safety, guaranteed termination, and fault tolerance. Any distributed consensus system on the internet must sacrifice one of these features. The existing Ripple/Stellar consensus algorithm is implemented in a way that favours fault tolerance and termination over safety. This means it prioritises ledger closes and availability over everyone agreeing on what the ledger is, thus creating potential risk scenarios.

The new Stellar consensus algorithm will not only be provably correct but also prioritise safety and fault tolerance over guaranteed termination. This is considered a better choice as it is preferable for the system to pause than to enter divergent and contradictory states.

Stellar is extremely safe. For proof-of-work (POW) algorithm-backed blockchains such as Bitcoin, an attacker needs to acquire at least 51% of the computation power to gain control of the network. Fortunately, the upgrade to the Stellar network, which resulted in the Stellar Consensus Protocol (SCP), makes its network asymptotically secure. Asymptotic Security is used in computationally securing cryptography.

The investment risks of Stellar

Investing in cryptocurrencies is always a risky endeavour, and Stellar is no exception. Here are some of the key risks associated with investing in Stellar:

Volatility and Uncertainty

The cryptocurrency market is notoriously volatile, and Stellar is no exception. The value of Stellar can fluctuate significantly in a short period, and it is difficult to predict its long-term performance accurately. As with any investment, there is a risk of losing money if the value of Stellar decreases.

Regulatory and Legal Issues

The regulatory landscape for cryptocurrencies is still evolving, and the risk of increased regulation or legal issues is always present. For example, the SEC's classification of cryptocurrencies as securities could impact the value of Stellar. Additionally, the complex nature of blockchain technology and the potential for misuse by criminals may lead to tighter controls and restrictions.

Competition and Market Dynamics

Stellar faces competition from other cryptocurrencies, such as Bitcoin, Ethereum, and XRP. The success and widespread adoption of competing cryptocurrencies could negatively impact the demand for and value of Stellar. Market dynamics, such as investor sentiment and institutional investments, can also affect the price of Stellar.

Technical and Security Risks

As with any digital asset, there are technical and security risks associated with Stellar. The decentralised nature of blockchain technology makes it difficult to address security vulnerabilities or recover funds in the event of a breach. Additionally, the complexity of the technology may lead to unforeseen issues or challenges.

Adoption and Usage

While Stellar has gained traction, there is no guarantee that it will be widely adopted in the future. The success of Stellar depends on its ability to attract and retain users, and a lack of adoption could impact its value. Additionally, the integration of Stellar into the global economy and its ability to provide practical solutions for cross-border payments will influence its success.

Investor Experience and Due Diligence

Investing in cryptocurrencies requires a high level of knowledge and understanding. The complexity of the market and the potential for misinformation or scams poses a risk to investors. It is crucial for investors to conduct thorough due diligence, assess their financial stability, and only invest what they can afford to lose.

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