50 billion Stellar lumens just got burned — why?
By now, you’ve probably heard that the Stellar Development Foundation has just burned massive amounts of lumens. Around 50 billion XLM were snapped out of existence — an equivalent of $4.7 billion. What happened? And why did the founders make such a drastic decision?
As we wrote before, Stellar started out in 2013 by generating 100 billion lumens at once. The plan was to distribute most of these coins to XLM holders in a series of airdrops, as well as to partners and to promising projects in the form of grants. About 15% was allocated to the Foundation itself to develop the network.
After the initial distribution, SDF was left controlling about 85 billion lumens. Some said that it wasn’t right — the power in the network was too centralized. In any case, SDF followed up on its promises with regular token giveaways, an infrastructure grant program, etc. The market was optimistic about Stellar, and at some point its price even rose to $1.
Unfortunately, the recent crypto winter hit Stellar just as hard as it did other cryptocurrencies, pushing its price down to $0.08. But the most important issue wasn’t the price volatility. Rather, it became very clear that mass adoption of crypto will take much longer than everyone previously believed. Back in 2013 and 2014, crypto enthusiasts thought that in five years or so, hundreds of millions people would switch to digital money. But that didn’t happen. It’s just like old sci-fi movies : the original Blade Runner predicted that in 2019, we’ll have androids walking around, but instead the only Android we’ve got is the OS on our smartphones. Technology has still developed rapidly, but it didn’t take the direction people thought 30 years ago.
By the time of the great XLM burn, there was about 20 billion lumens already in circulation, plus the 80 billion left from the 2013 launch, plus 5 billion generated through the mechanism of inflation. The Stellar Development Foundation, led by Jed McCaleb, realized that the huge amounts of XLM they had in store were just too much, considering the current realities. So the Foundation decided to cut the supply. As a result, the total number of lumens in existence was cut to 50 billion. Instead of the 43 billion destined for airdrops, only 6 billion XLM remain. The reserves for partnership programs were cut from 24 billion to 12. The part least affected was the one allocated to SDF itself: from 17 bln it’s now down to 12 bln.
The price of XLM spiked by about 25% after the announcement. But this is not the limit: according to the well-known crypto analyst DonAlt, Stellar could gain another 50% in the next few months. Especially since SDF also announced it would get rid of inflation altogether. Once the total supply of Stellar is capped and can’t increase anymore, the price is bound to increase. Add to this the upcoming Bitcoin halving in May 2020, which can dramatically raise the price of BTC — and other coins will surely follow.
Overall, now is a great time to buy some Stellar lumens as a mid-to-long-term investment. And the best place to store them is the XLM wallet — a secure and easy-to-use wallet that lets you make the most out of your XLM. Try it now at https://xlmwallet.co/
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