Stellar Jumps 20% as 50% of the Supply is Burned
Stellar has seen a significant price increase from around 7 cent to a recent high of 9 cent before currently settling at around 8 cent.
The jump was in response to a surprise announcement by the Stellar Development Foundation made on Monday.
They said Stellar’s supply is to be reduced by 55 billion XLM which they have now burned.
This reduction mainly came from 68 billion XLM that had been earmarked for giveaway programs administered by SDF.
Some 50 billion has been taken off, leaving now just 6 billion for giveaway programs and 12 billion for partnership programs.
Another 5 billion has been taken off the holdings of the Stellar Development Foundation (SDF) itself, leaving them with around 12 billion XLM from the previous 17 billion.
As supply has decreased by 50%, you’d think price would increase by 50%, but that’s not quite what happened once this announcement was made public.
Curiously, Stellar’s price did briefly double last month on Coinbase, with it unclear whether that was insider trading.
This reduction in supply, however, still leaves more than half of it as non circulating.
The total supply is now 50 billion XLM, but only 20 billion of it is circulating, with the foundation itself holding nearly as much in addition prior to the burn, and now not far off from it.
While about as much as the current circulating supply is to be given away somehow, diluting current holdings by 50%.
Hence the effect on price has not been very considerable because while previously a 4x dilution could have been expected, now a 2x dilution should be expected.
Unlike bitcoin where there’s a set algorithmic distribution of supply, Stellar is more of an Initial Exchange Offering (IEO).
They’ve basically “printed” all the XLM like a token, then they gave it away or sold it, so raising funds for the founders.
The innovation in the Stellar network itself appears to be non existent in as far as it is largely a copy clone of XRP, including now in the way the holdings are distributed with Ripple Labs too holding some 50% of the supply.
Stellar’s ostensible innovation is that arguably anyone can join the network, but for you to be able to join you need to be given permission by current validators.
That’s to prevent a sybil attack whereby you spur up many nodes and so control the network, with such attack vector usually addressed through Proof of Work or stake, while here it is addressed by requiring permission.
They ostensibly have tokens too, but these are like colored-coins, similar to Tether on the bitcoin based Omni layer.
They don’t have smart contracts like ethereum, with Stellar more trying to compete on the payments aspects.
Published at Tue, 05 Nov 2019 16:41:29 +0000