Stellar Lumens (XML) is a rather ordinary looking cryptocurrency with a very impressive and deep-pocketed benefactor IBM (NYSE: IBM).
Stellar is a blockchain-banking platform designed to facilitate remittances, micropayments, mobile money, and other services for the “unbanked.” The unbanked are the 1.7 billion people who lack access to brick and mortar banks.
Strangely enough, providing financial services to the unbanked and underbanked is big business. The volume of one popular service for the unbanked was $429 billion in 2016, the World Bank estimated.
Remittances are funds that people working in country like the United States or Japan send to the folks back home in nations like the Philippines or Nicaragua. The amount of remittances actually exceeds the volume of foreign aid sent from developed to developing nations.
Lots of Competition for Remittance-based cryptocurrencies
More importantly, remittances are actually more stable than private capital flows; which is why Stellar and IBM are interested in them. The drawback is that there is a seemingly unlimited number of blockchain startups with similar plans.
Blockchain organizations planning services for the unbanked include the NOAH Project, Rubius, BitMinutes, BAAB, and Nebius, name just a few. Like Stellar Lumens, each of these organizations plans to offer a suite of financial services for the unbanked.
The NOAH Project, the organization behind NOAHCOIN (NOAH) seems to be farthest along. NOAH has reportedly tested remittances between the Philippines and Japan. Remittances were tested with the Ark Wallet from SCI (Satoshi Citadel Industries) and Nippon Pay.
The idea behind cryptocurrency-based remittances is to reduce costs by eliminating the fees charged for wiring money. Most remittances are still sent the old-fashioned way through expensive way through wire-transfer services such as Western Union (NYSE: WU).
Apps and cryptocurrency would save a lot of time and money by eliminating the need to convert the wire transfer into paper cash. Remittance recipients would no longer need to go to a brick and mortar store to get the money.
More importantly, remittance recipients would not have to risk their lives by carrying cash around. Being unbanked is dangerous because the world’s thugs know that a poor person walking out of a wire-transfer office is probably carrying cash.
Distributing Cash will be Big Business
The ultimate goal of Stellar Lumens is to build a bank in the blockchain. That bank would be accessible anywhere through smartphone apps.
An obvious use of the bank on the blockchain would be to send basic income and other payments directly to individuals all over the world. Another is to distribute benefit payments such as welfare, pensions, Social Security, and annuity payments.
An interesting use for Stellar Lumens would be to pay employees all over the world. A company might use something like Stellar Lumens to pay traveling salespeople or technicians working in developing nations like Kenya.
Charities might use Stellar to send cryptocurrency payments straight to poor people in developing nations. GiveDirectly is already testing such a system in Africa by distributing basic income through the M-Pesa digital wallet.
One of the most intriguing plans at Stellar Lumens is mobile banks, possibly a bank in a vehicle or on a tablet. The mobile branch would go directly to the unbanked in rural areas, or neighborhoods.
A logical use for the mobile bank would be to distribute money to people after a disaster. The mobile bank might distribute cash or cryptocurrency to refugees or people fleeing a fire.
The bottom line is that distributing cash and facilitating payments to the developing world will be big business. IBM recognizes that and wants to cash in with Stellar Lumens.
Is Stellar Lumens is a Questionable Cryptocurrency
Despite IBM’s backing Stellar Lumens (XLM) is a questionable cryptocurrency. An obvious problem I see with Stellar is that is not ER20 compliant or Ethereum compatible.
That can increase costs because the Lumens cannot be easily converted into Ethereum (ETH). This means Lumens cannot participate in Bancor’s liquidity network which tries to guarantee some value for altcoins.
Lack of convertibility it can be difficult to convert Stellar into fiat currencies. An obvious drawback to Lumens is a direct link to the banking system like Ripple (XRP) is trying to build. Liquidity and convertibility will be necessary for any cryptocurrency used in the banking system.
Therefore, Lumens is useless in its ultimate goal as a gateway to the financial system for the unbanked. Stellar looks more like a blockchain software solutions company than a platform.
This has translated into a lot of value for Stellar Lumens. The XLM had a Coin Price of 27.3¢ and a Market Capitalization of $5.123 billion on July 20, 2018. That produced a 24-Hour Market Volume of $142.18 million on the same day.
There was a Circulating Supply of 18.767 billion XLM and a Total Supply of 104.125 billion Lumens on 17 July 2018.
The only real value in Stellar right now is the connection with IBM. I would recommend staying away from this cryptocurrency until Stellar demonstrates some working Fintech solutions.
The sorry truth is that the Stellar Lumens will not have any real value until people starting using them for payments in the real world. Keep away from Stellar until it sounds sending remittances and micropayments through its system.