Stellar (XLM) or Stellar Lumens is a cryptocurrency designed as a money transfer solution. Like Ripple (XRP), the purpose of Stellar is to move money around.
Specifically, Stellar.org plans to expand access to low-cost financial services using cryptocurrency and blockchain. To explain, Stellar.org is the “nonprofit organization” that created Stellar (XLM).
Interestingly, the developers designed Stellar (XLM) as both a cryptocurrency and mobile money. To clarify, mobile money is a digital currency designed for use on mobile phones.
Stellar (XLM) plans to Cash in on Remittances
For example, Stellar.org wants to offer low-cost remittances. Remittances are cross-border cash payments people send to friends and relative in other countries. Speculators should note this because remittances are an enormous business.
Notably, the World Bank estimates remittance volumes hit a record high in 2017. For instance, the volume of remittances to low and middle-income countries increased by 8.5% in 2017. In detail, people sent $429 billion in remittances in 2016, that figure grew to $466 billion 2017.
More importantly, the total volume of global remittances reached $613 billion in 2017. All remittance payments grew at a rate of 7%, rising from $573 billion in 2016 to $613 billion in 2017.
How Stellar (XLM) plans to Modernize Remittances
Stellar.org plans to cash in on remittances by combining them with mobile money. Ultimately, Stellar.org will build a payment network that allows people to send remittances directly to phones in other countries.
For example, a Honduran working in Chicago could send a cash payment directly to his mother back home instantly. If it worked as advertised, the Stellar (XLM) payment will go directly to the mother’s phone instantly, and the son will receive notification of the payment.
Conversely, it could take 12 or 24 hours for an existing money transfer service to send payment and notify the sender. Additionally, the average international money transfer cost from a US bank is $45 to $50. Obviously, that’s a lot of money for a working stiff.
How Stellar (XLM) could make Remittances Better
Stellar.org’s plan is offer low-cost remittances that provide instant notification of payment. Notably, Ripple (XRP) is testing a similar product between Japan and Thailand.
A greater advantage to such services is that the mother does not have to risk her life carrying cash around. To clarify, today’s system requires senders and receivers to go to a wire transfer office. Therefore, criminals will wait outside the wire-transfer office for people with cash.
By going to pick up a remittance the mother risks her life, and the possibility the cash will lost for good. Obviously, the cash the mother picks up is not insured. If the local gangster; or crooked cop, takes the cash, the mother has nothing.
Mobile Money could be big business for Stellar (XLM)
Remittances are not the only existing big business Stellar (XLM) could cash in on. Uniquely, mobile money is already a big business.
The world’s most popular mobile currency Vodafone’s M-pesa, processed 614 billion transactions in December 2016, for example. Uniquely, there were 29.5 million M-pesa users in 10 countries in March 2017, CNN estimates.
In addition, M-pesa is widely used for micropayments including utility payments, installment plans, topping up mobile phones, loan payments, and ATM withdrawals. Charities are using Mpesa to send cash to poor people in Kenya and Tanzania.
Importantly, there is a proven market for mobile money, Vodafone claims 297,400 “agents” (brick and mortar businesses) accept Mpesa payments and sell Mpesa. The unencrypted Mpesa is transmitted by SMS messaging.
A Stellar (XLM) Micropayments network could be very Profitable
The Stellar (XLM) business plan is to create a micropayments network similar to Mesa’s. Mpesa’s success shows that a Stellar micropayments network; or remittance corridor, might generate a lot of cash.
To clarify, a remittance corridor is a digital pipeline that carries remittances money between financial institutions in different nations. Notably, Ripple (XRP) is building RippleNet corridors between several nations. RippleNet corridors will apparently make money by charging far lower fees for remittances; around $1 rather than $45 or $50.
Kenyans, for example, made 1.7 billion Mpesa transactions valued at 3.574 trillion shillings ($3.7 billion USD) between June 2016 and June 2017, the Central Bank of Kenyan reports. Therefore, Stellar (XLM) could generate real cash in the real world.
The Problem with Stellar (XLM)
The problem with Stellar (XLM) is that there are apparently no real world uses of it occurring. For example, nobody is actually sending or receiving Stellar (XLM) remittances.
On the other hand, Ripple (XRP) remittances are a reality. In particular, Team Ripple claims that its Ripple Net remittances could reach 40 countries. Notably MoneyTap is offering Ripple (XRP) remittances between Japanese banks and Thailand. For instance, InstaRem and RationalFX are offering Ripple remittances from the United Kingdom to Malaysia, Vietnam, Indonesia, Sri Lanka, and Bangladesh.
Moreover, Remitr and Flutterwave have reportedly established a RippleNet remittance corridor between Canada and Nigeria. Additionally, BeeTech and InstaReM are building RippleNet remittance corridors connecting Brazil with Spain, Portugal, Italy, Germany, and France.
The remittance corridors are probably sidechains between countries. To explain, a sidechain is a shortcut around the blockchain that allows high speed transmission of large volumes of payments.
Has Stellar (XLM) lost the Sidechain and Remittance Race to Ripple (XRP)
Sidechains like RippleNet solve the blockchain scalability problem. The problem is the speed and volume limits that plague traditional cryptocurrencies.
For instance, Ethereum (ETH) is limited to 10 to 20 transactions a second and Bitcoin (BTC) can only move 5 to 10 transactions. In contrast, Mpesa was reportedly processing 529 transactions a second in December 2016.
Therefore, to succeed in remittances Stellar (XLM) will need a sidechain with speeds similar to Mpesa’s. Stellar.org is building a Stellar Network; a sidechain, but there is no evidence it is moving payments.
An obvious conclusion is that Stellar (XLM) has lost the sidechain deployment race to Ripple (XRP). I think the Ripple Team has won because they are apparently sending remittance payments via RippleNet corridors right now.
The RippleNet corridors are important because it could use them for far more than remittances. For instance, e-commerce companies like Amazon (NASDAQ: AMZN) or Netflix (NASDAQ: NFLX) might accept payment through them. In like manner, banks could send loans to customers in developing nations via a RippleNet or Stellar Network corridor.
Is Stellar (XLM) a Good Speculative cryptocurrency?
Presently, Stellar (XLM) is a good concept for a cryptocurrency rather than a good speculative altcoin. The basic idea is great but Stellar.org has not executed it yet.
Despite that, Stellar (XLM) is a good long-term speculative asset because it is cheap right now. For example, Stellar XLM) achieved a coin price of 21.66¢ on 13 October 2018.
The Coin Price was complimented by a $4.092 billion Market Capitalization and a 24-Hour Market Volume of $50.390 million on 13 October 2018. Those figures reveal a lot of market interest in Stellar (XLM).
Furthermore, there was a Circulating Supply of 18.889 billion XLM and a Total Supply of 104.364 billion XLM on 13 October 2018. Those figures reveal a large supply of Stellar (XLM) at a realistic price.
Under these circumstances, Stellar (XLM) is a good risk for speculators that want to buy and hold a cryptocurrency for a long time. Everybody else should stay away from Stellar (XLM) until Stellar.org offers evidence of real world use for Stellar.