- Lumen coin is a unit of the digital currency powering the Stellar network. The platform aims to simplify managing micropayments, remittances and mobile transactions across the globe, with the focus on being accessible to an average user.
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The Stellar network was conceived as an open source protocol which allows for easier management of international transactions between as many currencies as possible. Jed McCaleb is Stellar’s co-founder and CTO, one of the founders of Ripple, and both infrastructures share similar general goals. Stellar Foundation, a non-profit organization behind the Stellar network, originally launched this coin under the name of “Stellar,” followed by switching to its current name Lumens in 2015 in order to avoid confusing it with the native platform.
Stellar and its coin Lumen (XML) are working towards catering to everyone, which sets them apart from Ripple, whose end goal is simplifying remittances and micropayments for financial institutions. Stellar, on the other hand, focuses on those who do not have such resources but still want to use an accessible and decentralized payment system.
The Stellar network consists of a set of so-called “anchors” which any individual user can upload their funds on. These anchors act similarly to a bank or PayPal, holding your funds and issuing credit to your virtual wallet instead. At the same time, a receiver’s virtual wallet in another country can instantly receive this credit, which is automatically converted to any supported fiat currency such as USD, AUD or EUR.
Lumens are what makes the transactions possible in the first place. The uploaded funds in one currency are first converted into these coins, followed by the conversion into a receiver’s desired currency. Thus, it becomes much easier to exchange and transfer various currencies anywhere in the world, with an added bonus of faster transactions at low fees and no intermediaries involved. Today, the list of partners of the Stellar network includes an increasing number of financial institutions and companies which started providing support for it.
In addition to facilitating transactions between various currencies, Lumens are used for the creation of user accounts and payment of transactions fees. Their low price is what sets Stellar apart from its competitors - the base fee is rather symbolic, amounting to 100 stroops, with a stroop being the smallest unit of Lumen coin (0.00001 XLM). Similarly, you will need 0.5 Lumens as a minimum account balance.
Stellar does not support mining of its coins. It employs a consensus system called Stellar Consensus Protocol (SCP) in which transactions are approved by using a portion of its network. It is built around the proof of stake model.
Originally, about 100 billion Lumens were created, with almost 19 billion of them in circulation as of October 2018. To prevent inflation, the number of newly issued Lumens on the Stellar network is increased by 1% on yearly basis and added to the relevant pool. At the moment, the coin market capitalization stands at USD 4.1 billion, with historic high reaching USD 15 billion in January 2018.
Lumens are easily available and tradable on major cryptocurrency exchanges such as Kraken or Bitfinex.