Stellar Lumens (XLM) – A Working Technology

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Stellar Lumens (XLM) Bitcoin’s price is skyrocketing due to the financial industry’s recent acceptance of it as a legitimate technology. Unfortunately, other than a store value, the only thing going for Bitcoin is its name recognition. Bitcoin launched almost a decade ago in 2009.  Although a novel solution to the double spend problem, the technology has moved on, leading to Bitcoin alternatives that provide real world solutions to important problems – problems that Bitcoin will not solve.    

Bitcoin is slow and expensive.  Because of the mining process which involves equipment consuming massive amounts of electricity, the time and cost to process a transaction is substantially more than 2nd generation currencies that validate transactions without mining (for example, proof-of-stake and the Stellar Consensus Protocol). Recently SatoshiPay dropped Bitcoin in favor of Stellar Lumens for this reason:  (https://medium.com/@SatoshiPay/satoshipay-partners-with-stellar-org-4288ae0baa72) “A few months ago it became evident that Bitcoin’s original vision of a peer-to-peer electronic cash system is no longer viable for everyday transactions.  Due to its wild success, stalling scalability measures and the subsequent network congestions, minimum amounts that can be sent over the Bitcoin network and transaction fees rose from under a cent to several EUR/USD per transaction.  For SatoshiPay this meant we could no longer wait for Bitcoin to scale, but needed to look for a new blockchain or distributed ledger to migrate our nano-payment system to.”

 

 

 

 

Image 1 – Stellar Lumens (XLM) Charts Source: https://coinmarketcap.com

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Similar to Bitcoin, Ethereum uses proof-of-work, or “mining,” to achieve consensus, and therefore its network is suffering. The optimism over Ethereum’s programmability (aka “smart contracts”) isn’t in sync with its true capacity; it isn’t even close. Recently a trivial application built upon Ethereum’s virtual machine, CryptoKitties, was “responsible for roughly 11.8% of all transactions on Ethereum’s network” (http://mashable.com/2017/12/04/cryptokitties-ethereum/#kMR7tRdzraqB).  Further, Vitalik Buterin, the founder of Ethereum, “admitted on multiple occasions that something has to be done to improve” the network’s scalability. Ethereum is now saddled with the complex process of transitioning a live network from proof-of-work to proof-of-stake in order to achieve the platform’s programmability promise. Ethereum is having to play catch-up with 2nd generation alt-coins that avoided the mining process to begin with.

Enter Stellar (https://www.stellar.org/). Stellar and its native currency Lumens was founded by Jed McCaleb founder of Ripple. McCaleb left Ripple due to disagreements with his management team and created Stellar (a Ripple fork) in 2014. Subsequently the code behind Stellar has been improved in order to fulfill McCaleb’s vision of sending money like email (cross-border and cross-currency). Unlike Bitcoin, Ethereum, and other 1st generation coins, Stellar is a working technology that provides fast and inexpensive transactions. Stellar avoids the costly mining process using the efficient Stellar Consensus Protocol developed by Stanford’s Prof. David Mazieres (https://www.stellar.org/papers/stellar-consensus-protocol.pdf).

Taking notice of Stellar’s viable technology, the business world has recently adopted its blockchain: Tech giant IBM partnered with Stellar to facility cross border payments (http://fortune.com/2017/10/16/ibm-blockchain-stellar/). Deemed “a breakthrough for payments technology” this project is underway in “12 currency corridors that encompass Australia and New Zealand, as well as smaller countries like Fiji and Tonga.” Evidence that the project is underway, IBM added 8 new validators from 8 different countries on the Stellar network:

Based on the technology, Stellar is way ahead of Bitcoin and Ethereum.  Based on market capitalization, Stellar is way behind making it an attractive investment. Stellar has approximately 1% of the market capitalization of Bitcoin and 5% of Ethereum. Looking at the stats:

  • Market Capitalization: Bitcoin 295 billion; Ethereum 59 billion; Stellar 3 billion.
  • Transaction Time: Bitcoin 10-30 minutes; Ethereum 16 seconds; Stellar 3-5 seconds.
  • Transaction Fees: Bitcoin $6; Ethereum $0.25; Stellar less than 1 cent.

(These statistics are constantly changing and are shown here approximately at the time of publishing.

Eventually the truth is going to become apparent to investors that Bitcoin isn’t much more than an expensive bank account and that the promise of Ethereum is awaiting a fix to its scaling problem. Certainly the genius of Vitalik Buterin (founder of Ethereum) will eventually scale Ethereum’s network. But will it be too late? Stellar is more than a promise, it is working now (https://stellarchain.io/).

 

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1 COMMENT

  1. It’s worth noting that there is nothing whatsoever wrong with Bitcoins basic technology. The problem is mismanagement of it, and probably intentional mismanagement at that; Blockstream Inc who controls the core developent team and the coin itself have altered it with segregated witness and simply refused to increase its block size, because their intention is to scale it via proprietary side channels. Side channels they have patented.

    Bitcoin Cash is Bitcoin but without the segregated witness nonsense and with 8MB block vs 1MB. It is very fast to transfer, and costs under a cent per transaction. Block size can be scaled up a great deal without materially having very much of a negative impact.

    Stellar is a great third gen cryptocurrency option, no question of that, but it’s not fair to characterize Bitcoin’s technology as failing. It’s the BTC teams implementation and mismanagement that’s causing it to fail. Hence, BCH.

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