My thesis is that Stellar Lumens (CCC:XLM-USD) is one of the DeFi projects which will emerge stronger following this most recent downturn.
One indication that it may flourish is simply that even after crashing 57% over the last month, it remains up overall. Year-to-date XLM is up 135%. The number of accounts also increased by 11% between the first quarter of 2020 and the first quarter of 2021. An appreciating price, coupled with a growing user base, suggest that XLM is headed in the right direction.
Popularity, though, is little reason for XLM to flourish over the longer term as a name in the DeFi space. As I continue to suggest, I believe the tide is turning and cryptocurrencies can’t survive indefinitely on vague promises of democratizing finance if they lack utility.
Fortunately for Stellar Lumens, it does have just that. Stellar is used for remittances and cross-border payments. In that regard, it bears similarities to Ripple (CCC:XRP-USD). That isn’t by coincidence alone. Jed McCaleb, co-founder and CTO of Stellar, was formerly the CTO of Ripple. There’s a lot more that could be said about that, but let’s get back to Stellar’s progress in building its remittance and payments network.
Building Remittance Footprint
One of the broader hopes for decentralization is that it expands financial services to developing areas of the world with less robust financial access. The Stellar Development Fund (SDF) made an investment through its Enterprise Fund to expand its crypto remittance operations in Nigeria. In March the SDF gave $750,000 to Nigerian fintech company Cowrie. The funding will allow Cowrie to further build out the Stellar-powered platform that allows Nigerians in the diaspora to send money into the west African country.
Money is converted on the Stellar platform into NGNT which is a token based on the Nigerian naira. The token is then converted back into money which is sent to local bank accounts. About $27 million has flowed through the platform since 2018.
Stellar is hopeful that the funding will further bolster the early success of the project and that it can duplicate the project in other African nations.
This case study should serve to at least let investors know that Stellar is progressing. It is a concrete example of how XLM and crypto have utility.
Stellar is setting broader goals which it is using to define its success moving forward. It has a three-pillar Roadmap it is following to guide its progress in 2021. The third pillar is to “Foster and develop sustainable Stellar use cases for cross-border payments and securitized assets.” Clearly it is working on that with its investment into Nigeria and Cowrie.
Roadmap Moving Forward
In 2020 Stellar focused on bringing what it calls anchors into its network and connecting them with one another. First, you’re probably wondering what an anchor is. Anchors are simply mechanisms which connect Stellar to the traditional banking system. The term also refers to any of a number of different institutions which issue fiat tokens and a fiat on/off ramp.
So Stellar worked in 2020 to increase its network of anchors in number and also to one another. In 2021 it is working to improve those nodes – like Cowrie in Nigeria – and further strengthen XLM overall.
I can’t say that there is definitive proof that Stellar will succeed or fail. The longer term success of Stellar and XLM remains to be determined. But even though that is the case, there’s definitely reason for optimism.
Stellar is acting in a strategic manner based on a strategic plan rooted in the realities of today’s financial systems. You have to give it kudos for that because it remains far ahead of many other projects receiving much more hype.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.