I admit it. I’ve never really been on the cryptocurrency train. While I can fully appreciate the potential of crypto’s underlying blockchain technology, simply creating an unlimited number of alternative, unregulated currencies out of thin air sets the stage for disaster. Everything prompts a reaction of some sort sooner or later. Often, those reactions are unforeseen and undesirable outcomes.
However, there are a couple of up-and-comers that have caught my eye of late. Of the two in question, I might end up actually taking a shot on Stellar Lumen ( XLM -6.39% ).
A clear purpose that makes perfect sense
Ever since they moved into the mainstream, one of my chief hangups with cryptocurrencies has been their limited degree of practical use. For a crypto to be a successful alternative to fiat money, enough sellers must be willing to accept it as payment, and enough buyers must be willing to use it as a means of payment. That has been the underlying reason so many cryptocurrencies and related stocks have been struggling of late: Not enough participants can agree on which of a plethora of altcoins out there are the ones to commonly utilize. Most of the early ones were established without a particular usage in mind.
Stellar — Stellar Lumens, to be precise — isn’t hampered by this philosophical flaw.
Established back in 2014 on its own built-in token called the lumen, Stellar’s network is built from the ground up to allow large organizations to do cost-effective, cross-border business with ease. And they have. Over the course of the past seven years, the platform has facilitated over 450 million transactions, allowing payers to make payments in their local currency and payment recipients to receive payments in their local currency.
Cross-border deals can get done for dirt cheap in minutes, as opposed to a matter of days; users only need to own one lumen to do a deal, and transactional fees start as low as 0.00001 lumen. It wouldn’t be out of line to describe it as the world’s fastest, most complete, and most cost-effective foreign exchange. The lumen token and its corresponding blockchain ensure it all happens the right way, fairly and squarely.
The coolest part is that Stellar works with any currency, fiat and otherwise. The stablecoin USD Coin, for instance, is also compatible with the Stellar network.
Stellar Lumens is in good company and limited supply
It remains to be seen whether Stellar Lumens will end up being one of the world’s preferred cryptos — a requirement if there’s to be any hope for the price stability needed to make a particular digital money a reasonably safe means of storing, conveying, or receiving value. Otherwise, it continues to be little more than a speculative coin toss.
The Stellar platform’s certainly got the right support to become the platform of choice among the world’s key players though. Technology giant International Business Machines — better known as IBM — is partnering with Stellar to offer IBM’s corporate clients cross-border payment solutions, touting the network’s speed and low usage costs. MoneyGram, Liquid Mortgage, and Knabu Bank are also working directly with Stellar to make cross-border dealmaking easier and quicker.
At the very least, would-be buyers can embrace the fact that no more of this cryptocurrency will be mined, diluting the current float in the process. If a company wants to plug into the Stellar network to use its impressive payment capabilities, it’s going to have to buy some in the open market. That’s a bullish backdrop, not to mention a solid start for today’s owners.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.