Stellar – Investment Report December 2017


Stellar is a decentralized payment network similar to Bitcoin. However, unlike Bitcoin, it supports transactions in FIAT and other arbitrary currencies. On the Stellar network one can use Dollars, Euros, Bitcoins, or any other currency.

Stellar implements something very close to the idealized “IP Layer for Money” idea that has become popular in discussions in the last few years. The development for this network is led by Jed McCaleb and Professor David Mazières in collaboration with a small team of others (more details on the entire team later in the report).

The technology is based on the open-source project Ripple, originally created by Jed a few years ago. This document is a detailed report that should help you understand various aspects of STELLAR better, and hopefully help you decide whether to invest or to stay away for now. This is NOT a trading recommendation for quick returns, instead it is an Investment Report for people who are interested in evaluating this as an option for long-term investment.


Jed McCaleb, a co-founder at Stellar, has already been responsible for building out two Cryptocurrency companies from scratch and taking them to scale. In 2010, he got excited by Bitcoin and the possibilities of decentralized currency and realized that it needed a marketplace to trade and went on to create one of the world’s first Bitcoin exchange – Mt. GOX. Within three years it was handling more than 70% of the World’s Bitcoin transactions. Jed later went on to sell off Mt. GOX, post which the exchange was re-coded and mismanaged by its new owners and unfortunately hacked.

After Mt. GOX, Jed founded what became Ripple. He worked hard to bring on Chris Larsen, David Schwartz and Arthur Britto to help create this new network. It was a dream team. With Mr. Larsen presenting a suit-wearing, responsible front to the bankers and Mr. McCaleb cast as the mad genius who would innovate and disrupt, Ripple quickly became the consensus successor to Bitcoin.

However, in a classic twist (similar to Apple) things did not go too well within the group and Jed left after disagreements with Chris Larsen. For a year, he went missing in action but made a meaningful return later to reveal what he had spent his time thinking about: STELLAR.

Investments & Advisors

Stellar uses the same open source code base from Ripple (Symbol XRP), but this time Jed was able to strike the deal with Stripe for investments, giving Stellar a whole different level of validation. Unless one has been living under a rock, one would know that Stripe is often labelled as the Blue Eyed Boy of the FinTech Industry with prominent backers like Y Combinator, Andreessen Horowitz, Sequoia Capital and several PayPal cofounders.

In any case, Greg Brockman from Stripe posted here on why they decided to invest in Stellar. Also, in a statement back in 2014, the Stellar Development Foundation’s Executive Director Joyce Kim suggested that Stellar will act as a bridge between Fiat and Digital currencies – a key requirement if the latter are to be adopted by mainstream users.

Stellar was created in 2014. Stripe invested USD 3 Million, which was repaid later with 2 Billion Stellar coins called Lumens (Symbol XLM). The Stellar team managed to attract prestigious advisors like Patrick Collison (Stripe), Sam Altman (President at Y-Combinator) and Matt Mullenweg (Founder of WordPress). Stellar was now poised to create a solution that would make people rethink how to interact with payment systems and banks. Dogecoin co-founder Jackson Palmer and AngelList co-founder Naval Ravikant also serve as advisors for the project.


From the Stellar Website: The mission of the Stellar Development Foundation (SDF) is to promote global financial access, literacy, and inclusion. SDF accomplishes this by expanding worldwide access to low-cost financial services through the development of technology and partnerships.

SDF — also known as — was incorporated in 2014 as a non-stock nonprofit corporation in the U.S. State of Delaware. SDF has no stock, no profits given to individuals, and no private inurement.

Responsibilities (quoted verbatim from

To promote global financial access, literacy, and inclusion, SDF shall:

  • Develop and maintain a secure and low cost global transaction network (“Stellar Network”) and protocol (“Stellar Protocol”) that is high quality, open-source, and publicly accessible to everyoneDevelop and maintain a secure and low cost global transaction network (“Stellar Network”) and protocol (“Stellar Protocol”) that is high quality, open-source, and publicly accessible to everyone.

  • Provide guidance and direction for the Stellar ecosystem.

  • Promote adoption of Stellar as a worldwide payment standard.

  • Distribute the native currency of the Stellar ecosystem, lumens, to the world to expand the reach of the network and create a more inclusive digital economy.

  • Create and support technical and non-technical partnerships and educational initiatives to boost digital financial literacy and development efforts at the institutional and community level.

Stellar’s Features: An Overview

At a high level, Stellar connects banks, payments systems and people around the world. One can think of it as an infrastructure framework for payments — designed from the start to make it really easy for financial institutions to issue tokens representing Fiat currencies.

However, what makes Stellar really interesting is that it also features a built in distributed exchange which allows people to not only buy and sell currencies as a typical foreign exchange would, but also to seamlessly convert from one currency to another during cross border or cross currency transactions. From the foundation’s website, here is a Stellar Slideshow that explains “How it Works”!

What makes Stellar a strong & stable platform?

Described well on a post by Micha Benoliel on Hackernoon, here are the features that make Stellar robust as a framework, and one with potential to find adoption in FinTech.

  • Performance

    Stellar is much faster than other protocols including more popular ones like Ethereum. Ethereum has a 3.5 minute median settlement time, while Stellar is able to do it within 5 seconds. It is also significantly cheaper and costs just 1 cent to make 100,000 transactions on Stellar.

  • Security

    Stellar’s expressive but purposely limited system for smart contracts limits the potential to write exploitable code. Ethereum has a Turing-complete programming language, which means you can write any complicated smart contract; whilst the flexibility is nice, in practice it allows the developers to write exploitable code. There are allegations that anonymous hackers have stolen millions of dollars by exploiting vulnerabilities. The simplicity of the Stellar model helps avoid these situations. It’s ideal for applications that don’t require the full generality of Turing-complete smart contracts (which applies to the vast majority of ICOs).

  • Liquidity

    There are thousands of tokens being issued right now and each one is going to want to be issued on these 3rd party exchange. But the exchanges don’t have the capacity to list all these coins or they make you wait a long time or they charge a fortune. With Stellar you don’t need to depend on these 3rd part exchanges to list your token because Stellar’s built in distributed exchange allows you to list your token yourself as you issue it — that means you can have day one discoverability and transferability. Token issuers can customize tokens to satisfy securities, consumer protection and AML regulatory requirements. A Stellar token can also be added to a 3rd party exchange.

  • Ease of Use

    Launching a token on Stellar is super easy. Simple tokens can be created in a matter of hours and more complex ones take a day or two. Because Stellar supports simple programming, you don’t need to hire expensive solidity smart contract developers. Investors can also participate in Stellar-based ICOs using ETH or BTC just like they’re used to.

A video on Stellar

Here is a video that explains Stellar a little more. 10 minutes but worth the watch. Also attached below are some notes that highlight the primary points discussed / brought up in the video.

  • 3 Primary Advantages of Stellar:

    3-5 second confirmation time

    Supports thousands of transactions per second

    Can be used to send or trade any currency, asset or token

  • Stellar does not use Proof of Work that Bitcoin uses, it uses SCP (Stellar Consensus Protocol)

  • Stellar’s code IS a Fork of Ripple

  • Not mine-able, all Lumens are created from the start

  • His opinion “Sacrifices a bit of decentralization for speed and efficiency”

  • There are always trade-offs between Speed and Security in each Protocol

  • Some important applications are Remittances and Mobile Money

  • Recently IBM and Stellar made an announcement to handle Cross Border payments

  • Lumens is the native token / asset / currency of the Stellar network, and are all premined

  • Currently 6.99 Billion lumens in play, shy of the 100 Billion that will eventually be created by the Foundation. (This is an important point to note, as lumens might be prone to inflation till all 100 Billion tokens are all in play).

  • The design is really to facilitate transfer, hence intermediary in nature

  • Stellar and Ripple – Competition is heating up and both camps have some harsh things to say about each other.

Ripple vs Stellar

Since Stellar started with the Open source code base of Ripple and built additional features on top, while also making some modifications, and also because both are targeting a similar market, comparisons between the two are unavoidable. Although both networks cannot be labeled as traditional cryptocurrency networks by any means, the technology is of great value to financial service providers.

As it turns out, there are differences, but also a few similarities.


The Stellar project was originally created as a fork of the Ripple protocol back in 2014. It is only reasonable to assume there are some parts of the original Ripple code base that made its way to Stellar. Many of the functionalities are also very similar. Both projects use a distributed ledger to track accounts and offer native asset and currency support.

However, Stellar uses a consensus mechanism known as Stellar Consensus Protocol. This particular feature is outlined in the following whitepaper, for those who want to learn a little more about the technical aspects of the protocol / framework. This method allows for solving problems through reaching consensus among network nodes, though not one as tough as the Proof-of-Work from Bitcoin. Which is why the transactions being faster, do not consume as much electricity as Bitcoin and essentially makes it possible to run things cheaper. The Stellar project also uses a strict API based on the External Data Representation Standard.

Furthermore, Stellar’s native currency is known as Lumens whereas Ripple uses XRP. Stellar is mainly designed to target individuals and focuses strongly on technology, rather than making a name for themselves among financial institutions. In this regard, they are the opposite of what Ripple tries to do. Though not completely accurate, Stellar does seem to play to the B2C space while Ripple plays in the Enterprise (B2B) space.


Though not a very accurate description, most people refer to Ripple as a centralized blockchain. It has a false reputation in the market for this reason and gets a lot of negative publicity due to this. Ripple is a project designed to target financial institutions and provide a distributed ledger-based solution to facilitate cross-border payments. Additionally, the company is working together with regulators and central banks to make this project a reality.

Ripple was introduced several years ago, and the organized effort to engage with financial industry leaders has made them quite the prominent technology provider so far. Moreover, they use a different consensus mechanism compared to Stellar, which uses probabilistic voting, according to this whitepaper. This model is not that very different from Bitcoin, as it relies on majority validation. Hence consumption of electricity and time taken are bound to be higher.

It is also worth noting Ripple has a deflationary currency model, which is contrarian to most cryptocurrencies, and another reason why it gets negative press. The number of XRP tokens in circulation will gradually decrease as it is used more often to facilitate cross-border currency transactions. However, Ripple has already formed several partnerships with banks and other financial institutions all over the world, which is important from the perspective of becoming one of the Blockchain solutions that last in the long term.

FAQs on Lumens

The mentality and mindset of the Stellar.Org foundation becomes apparent through how they handle the distribution of Lumens. The following parts (from their website) is quite revealing, we suggest you spend some time in understanding this well, since your interest should be, after all, in trying to understand whether you should be investing in Lumens…

  • What are Lumens?

    Lumens are the native asset of the Stellar network. Native means that lumens are built into the network. One lumen is a unit of digital currency, like a bitcoin.

    Lumens contribute to the ability to move money around the world and to conduct transactions between different currencies quickly and securely. The symbol for Lumen on Crypto Exchanges is XLM.

  • Why does the Stellar Network need a Lumen?

    The Stellar network’s built-in currency, the lumen, serves two purposes:

    First, lumens play a small anti-spam role. Each transaction has a minor fee—0.00001 lumens—associated with it. This fee prevents users with malicious intentions from flooding the network (otherwise known as a DoS attack). Lumens work as a security token, mitigating DoS attacks that attempt to generate large numbers of transactions or consume large amounts of space in the ledger. Similarly, the Stellar network requires all accounts to hold a minimum balance of 20 lumens. This requirement ensures that accounts are authentic, which helps the network maintain a seamless flow of transactions.Second, lumens may facilitate multi-currency transactions. Lumens sometimes facilitate trades between pairs of currencies between which there is not a large direct market, acting as a bridge. This function is possible when there is a liquid market between the lumen and each currency involved.

  • What is the Lumen Auction & how does it work?

    The mandate reserves 5% of the original lumens to support the operations of

    It covers its own operational costs via its own lumens in the following ways: Auction: periodically offers portions of the reserved lumens at auction and refers to this public process as the lumen auction. The initial auction launched in March 2015 on Poloniex, Kraken, and Haste. Lumens entered these exchanges at the 30-day trailing average price. The current auction began December 2015 on the Kraken exchange. As an ethical safeguard, no one formally associated with—e.g., employees, consultants, or board members—will participate in the auction.

    Batches. also periodically auctions larger batches of the reserved lumens to parties interested in supporting the mission. For anyone interested in acquiring a larger batch of lumens from the reserve, they can contact the foundation directly (mailto:[email protected]).

  • What is the Lumen giveaway?

    95% of the lumens created when the Stellar network began will be given away to the world. 5% remains with for operational designed the giveaway program to ensure that lumens are given away to diverse groups:

    50% to individuals who want lumens

    25% for nonprofits to reach underserved populations

    20% to bitcoin holders

    For more information on this breakdown, see the mandate.

  • Why should I buy Lumens if you are giving them away FREE?

    As an integrator or anchor (an integrator that is trusted to accept deposits and honor withdrawals, usually a licensed money services provider), you may need lumens to cover base fees for transactions on the network. As a supporter or community member, you may wish to support the work of and invest in our future success. In the future, after we have given away all the lumens—which will happen over the next 10 years—everyone will need to procure lumens from exchanges.

    For up-to-date statistics on the number of lumens given away, you can check out the leaderboard

Clearly Foundation’s point of view is about making a difference in the world, and a positive one at that, and not a short-term view about making money. It would be better to get involved with Lumens as an investment if one had patience and a slightly longer-term view on how things played out.


By their own admission, Stellar has had challenges on marketing the platform in the past. In an interesting conversation online, the following was posted recently on Reddit. Follow the link to read the response from Stellar’s marketing head, who admits to the problem, mentions he/she has joined recently to try and improve things and then goes on to ask for ideas and suggestions. The entire thread here.

Here is the initial post (verbatim) from the page which explains the challenges on the marketing front…

Stellar has a major marketing problem…

submitted 6 days ago * by legalalien8

… part of the reason it’s relatively undervalued. Jed is clearly no Steve Jobs when it comes to public facing stuff, and apparently has yet to hire someone to be that in his stead. (EDIT: I just learned he did hire a new marketing lead, 2 months ago, and that person replied to this thread).

The obvious thing is: Stellar is so far ahead of other cryptos in terms of fast, cheap transactions (PAYMENTS) built on solid, time tested code. Maybe a handful of crypto projects can boast this sort of substance, and yet…

And yet, the account viewer is buried somewhere on the website, I don’t even know how to get there. The FIRST thing I see when I go to (and on the Twitter/Reddit/etc. banners/bios) should be a big banner that says something like “SEND MONEY ANYWHERE IN SECONDS, FOR NOTHING” and then a big red button that takes me to a) somewhere to buy Lumens with fiat and b) the account viewer/web wallet creator. OR both of those things should simply be front-and-center available on that home screen. I’m sure a solid front end designer could have that all sorted in a week. And yet… minimal calls to action inspired or even available on the current marketing assets.

(for case in point of how most people are unaware of just what Stellar does and how valuable it is, read this post about this guy’s friends using the account viewer first time:

I shouldn’t have to go to Bittrex to buy/send/receive Lumens — those capabilities should be right there on the homepage, or as close as possible to that.

Stellar’s value proposition is fast, cheap payments, for everyone, NOW, something no other cryptocurrency of its age or codebase or esteem or backing has. But I would have little idea that’s the case by going to the website, unless I dug and distilled myself (what marketing is supposed to do for you). The website is a wordy maze that doesn’t amplify the value proposition or the power of the tech that lies behind it.

Stellar has built an incredible vehicle. But is hasn’t bothered to give it a paint job (overall visual design, social media properties, all on the weak end of the spectrum), and it forgot the power steering (how to use the damn thing!)

They need to get their act together and not think “build and they will come” which seems to have been their approach so far (besides a couple of key partnerships, which, I would argue, are the only thing keeping them competitive in the marketplace right now). Going to market is key, and it’s time they light a fire under that (because IBM can only do so much).

HIRE SOMEONE JED! Your HR budget should be a bit bigger after this last pump 😉

Looking at the “competition” (of which there is none besides Ripple that can at present deliver instant payments), this should already be a $10 billion project, with possibilities of becoming the PayPal of crypto and capitalizing on Bitcoin’s continued lag in creating a decent payments infrastructure. That LTC pump should have been ours this week — and would have been were more people aware that Stellar already does what BTC and LTC do, faster, cheaper, better.

It is heartening is to see that the challenges are acknowledged and the Stellar foundation has hired someone to actively look into it. Also heartening to see many offering to help pro bono. One can hope with some strong leadership and the community coming together, Stellar will be better known in the market and a solution many will actively consider going ahead.

Partnerships & Use Cases

While the technology, features, performance marketing and PR are all important, one has to judge cryptocurrencies by the market penetration and how many people and organizations are willing to work with them and implement the crypto as part of their overall Blockchain solution. Let us now take a look at some places where people have moved beyond evaluation and actually started implementing Stellar’s solution.

  • IBM & KlickEx

    On Oct 16 2017, IBM and Stellar jointly declared a formal partnership on their websites:Article from

    Article from

    It is heartening is to see that the challenges are acknowledged and the Stellar foundation has hired someone to actively look into it. Also heartening to see many offering to help pro bono. One can hope with some strong leadership and the community coming together, Stellar will be better known in the market and a solution many will actively consider going ahead.

    Stellar’s partnership with IBM and KlickEx is to facilitate a blockchain-based cross-border payments solution proven to significantly reduce transaction costs and increase transaction speeds. This solution would help financial institutions and consumers eliminate inefficiencies and frustrations in current cross-border payment systems, including high fees, slow processing, error-prone transactions, and inefficient capital utilization.

    While currently limited to cross-border payments involving British Pounds and Fijian Dollars, the early-stage platform has been designed to scale to handle seven Fiat currencies in the long term within the South Pacific including the Australian dollar, the New Zealand dollar and the Tonga pa’anga.

    Perhaps the platform’s most distinguishing characteristic, however, is that the project showcases how private and public blockchain technologies are increasingly being used in tandem. While IBM’s blockchain solutions (using Hyperledger) are designed to complete much of the workflow around transaction clearing, the actual settlement will be conducted using Stellar’s blockchain. In this case, Stellar’s lumen serves to digitally connect Fiat currencies, allowing for nearly instant exchange without the consumer or buyer ever touching the cryptocurrency itself.

    This was the first big attestation of Stellar as a solution and the markets responded accordingly. On 16th October, Stellar jumped as high as 132%, with its trading volumes rising to $215 million, following the announcement of a new partnership with IBM. Some reports stated that this partnership solution could apparently process 60 percent of all international payments in the South Pacific, using Lumens for payments, which are then converted into local currency by market makers.

    Not only is the partnership an outside-the-box move for IBM, which has largely focused on its own blockchain platforms, it’s a big win for Stellar, which having emerged from the Ripple founding team hasn’t had quite the same growth, perhaps attributing in part to its focus on developing markets.

    The partnership is also evidence of the extent of collaboration between blockchain firms and the wider financial world. To make the project work, IBM had help from partners including National Australia Bank, TD Bank and Wizdraw (HK) of WorldCom Finance.


    In another piece of news reported by Cointelegraph in April this year, Stellar’s Blockchain had another live use case. A technology firm (Bext Holdings Inc.) had decided to utilize Stellar’s Blockchain network to provide fair coffee sales from grower to consumer, numbers which can be managed and self-audited by the Blockchain.

    “By using Stellar, the oft-touted benefits of fair trade are brought to their conclusion, with a party further along the chain able to ‘know down to the cup’ where the coffee came from and whether a fair price was paid”, CEO Daniel Jones told TechCrunch about the current fair trade market. This successful implementation is a further boon for Stellar, whose network is seeing increasing updates and international use cases come to fruition.


    SatoshiPay recently announced that it was adapting Lumens, Stellar Lumens (XLM) native cryptocurrency, as the underlying cryptocurrency for their settlement scheme. SatoshiPay, which is headquartered in London and is partly owned by Blue Star Capital, has been using Bitcoin since they launched in 2015 for their micropayment transactions called nano-payments. As stated by SatoshiPay in their press release, Bitcoin’s fees used to be negligible but this has changed in recent months as its popularity increased. Bitcoin’s scaling problems have also made it unsuitable as a peer-to-peer electronic cash system for everyday transactions.


One of the things to look for before investing in a venture/foundation/enterprise is the team that is responsible for the solution, their past experience and credibility, and their plans and vision for the future. The Stellar team has made available their profiles through their website… [the following appears exactly as it does on their website], and from the looks of it, they have a good strong team that should inspire confidence.

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