About Stellar Lumens (XLM)
The stellar blockchain network was started in 2014 and minted 100 billion stellars into circulation at its inception.
The next major update came in 2015 with an upgraded network and a change to its native assets.
The network changed its cryptocurrency from stellars to lumens. This change was done to distinguish the tokens from the network to stellar.org, the platform’s non-profit organization.
Lumens have an important role in the platform’s ecosystem.
First, lumens are required for paying transaction fees to prevent the network from being overwhelmed by fake or fraudulent attacks.
Each transaction fee costs 0.00001 lumens, which prevents those with bad intentions from flooding the network.
At the same time, the Stellar network needs all accounts to hold at least 0.5 lumens. This threshold declutters inactive accounts and ensures that each account has at least some degree of economic activity.
Last of all, lumens may help facilitate multi-currency transactions between different asset types.
Buying and using Lumens
As the Stellar network is open source, it’s available to the general public.
Users will, however, be required to own lumens to pay for transaction fees on the Stellar MainNet.
Stellar has a simple fee model that can be broken down as follows:
Transaction Fee = (# of operations × base fee)
The ledger collects the funds and redisburses the base fee during its periods of currency inflation.
The stellar network is one of the few inflationary cryptocurrencies with new lumens being added to the network at a rate of 1% per year.
The network also collects base fees from each transaction and adds it to the inflation pool.
Any Lumen holder can vote on where the funds in the pool are spent.
Each week, the protocol distributes the said lumens to any account that gets over .05% of the votes from others in the network.
Stellar Lumen Distribution
Stellar intends to give away 100 billion lumens to its community.50% will be given away to individuals.
Although this figure accounts for half of the total 100 billion, only a small number (50-300 XLM) will be given away to individual persons. People can acquire XLM by signing up via an invitation link. Links are generally given out by one of Stellar’s partners or through attending one of Stellars meetups and workshops.25% will be given to partners.
Stellar will reportedly give away XLM to “businesses, governments, institutions, or nonprofit organizations that contribute to the growth and adoption of the Stellar ecosystem.”20% will be given to bitcoin and Ripple (XRP) holders
Stellar distributed XLM to holders of both currencies (19% for bitcoin and 1% for XRP holders). The first giveaway round was completed in October 2016 and the most recent giveaway was in August 2017. So far, Stellar does not intend to conduct another round of giveaways (or airdrops) to either bitcoin or XRP holders.5% for operational expenses
Stellar Lumen’s Giveaway
The rationale behind Stellar’s giveaway project is to create “a more inclusive digital economy.” Specifically, Stellar wants to connect people with “low-cost” financial services by giving away XLM to communities. The currency’s broader vision is to “eventually have global citizens own and use XLM, in both developing and developed economies.”
As of January 2018, the network has now given away over 8 billion lumens.
Reasons for purchasing and holding lumens were also provided.
A bank, company, or firm that transmits money may need a large number of lumens to cover the base fees. Using smart contracts is also expensive in lumens, as well as for creating new accounts.
Also, market makers may need a large number of lumens to help facilitate trades of different asset pairs on the network.
The Stellar Auction and Batches
Stellar’s constitution stipulates that 5% of the original 100 billion lumens will be used to support the operations of the company.
The organization covers the cost of its operations in two different ways.
The first is through a lumen auction, where portions of the reserved lumens are sold to the highest bidder.
The second is through batches. Stellar may sell large amounts of lumens to private parties who are interested in the project and its constitution.