What is Stellar crypto?
Summary
Stellar is a network for issuing, sending and exchanging digital assets. A payment can start in a euro-linked asset and arrive in a dollar-linked one. XLM is the network’s own crypto-asset for fees and minimum account balances, not the asset being sent in every payment.
- Stellar can transfer and exchange assets issued by different organisations.
- XLM pays network fees and funds minimum balances; issued euro or dollar assets have different issuers and claims.
- Virtune Stellar ETP is a physically backed security linked to XLM, not to every asset on Stellar.
What is Stellar?
Stellar is a network on which organisations can issue digital assets, move them and exchange them. XLM is its native crypto-asset and pays fees and funds minimum balances; it is not every asset sent on Stellar. Suppose an issuer creates a token representing euros. A customer can receive that token on Stellar rather than waiting for each transfer to pass through a bank. An anchor can connect the token to an ordinary payment system, including redemption under the issuer's terms. The token's claim depends on its issuer; a balance on Stellar is not automatically a bank deposit.
Stellar can also convert between issued assets during a payment. A sender could pay with a euro token while the recipient receives a dollar token. That makes the network useful to a service handling several currencies, even though the assets being exchanged are not Stellar's own coin.
Where XLM fits
Stellar is the network. XLM, also called a lumen, is its native crypto-asset. An issued asset represents something defined by an issuer, such as a claim linked to euros. XLM pays fees and funds minimum balances; someone receiving a euro token does not receive XLM as the payment itself.
The amount of XLM needed for fees is only one aspect of potential demand for XLM. Activity in issued assets does not, by itself, tell an investor what XLM should be worth.
Stellar and XRP
Both networks can be used in cross-currency payments. Stellar emphasises assets issued on the network and exchange during a transfer; XRP can act as a bridge asset between currencies on the XRP Ledger. The XRP explainer shows that bridge step. Neither comparison means that an issued dollar or euro token is the same as XLM or XRP.
XLM directly or through an ETP
Directly held XLM can be used on Stellar and requires a wallet or custody arrangement. Virtune Stellar ETP instead provides XLM price exposure through a listed security without the investor handling keys. It is physically backed with XLM held as collateral. The investor owns the Stellar ETP, not spendable XLM or any of the issued assets on Stellar.
Stellar ETP buying routes shows where the XLM security trades in Stockholm and on Xetra.
Costs when buying Virtune Stellar ETP
| Cost | Charged by | When |
|---|---|---|
| Brokerage commission | Broker | On every purchase and sale |
| Difference between bid and ask price | Market | On every trade |
| Management fee, 1.95% per year | Issuer | Ongoing, from the product's value |
| Currency conversion | Broker, if applicable | If the product trades in another currency |
Risks to understand
XLM can lose value even if people use Stellar for other assets. An issued token also depends on its issuer's redemption terms. Direct XLM ownership has wallet or custody risk; the ETP adds issuer, collateral custody and exchange-trading risks. Physical backing does not protect against an XLM price fall.
Virtune products in this area
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Sources
- Stellar Development Foundation: Assets Overview & Comparison
- Stellar Development Foundation: Lumens (XLM)
- Stellar Development Foundation: Anchors
- Stellar Development Foundation: Path payments
- Virtune Investor Relations: Collateralization Methodology
