Developing the Ecosystem and Creating Scarcity?
It’s been revealed that over 55 billion XLM tokens (worth over $4 billion) have been “burned” by the Stellar Development Foundation (SDF). In doing this, the total supply of XLM is now reduced from over 105 billion to 50 billion.
“So: we’ve decided to reduce our lumen allocations, and to rededicate what remains to what we now think Stellar needs most.
There are now exactly 50 billion lumens in existence. Slightly under 30 billion of those are still administered by SDF. That pool is a resource for the whole network.” – SDF Announcement
The SDF burned/removed 55 billion XLM from the supply by moving the tokens to a permanently locked account: GALAXYVOIDAOPZTDLHILAJQKCVVFMD4IKLXLSZV5YHO7VY74IWZILUTO. Within this address, the burned XLM can be viewed publicly but may never again be sent or accessed.
The move to burn over half of the supply is part of the SDF’s long-term vision for developing the Stellar ecosystem. It COULD also be a move to gain favor with regulators by wielding less control and impact on the respective ecosystem and the XLM token.
The SDF originally owned approximately 68 billion XLM before the burn. Out of the remaining 50 billion, the SDF now owns just under 30 billion, a considerable amount of the current supply.
The SDF’s XLM balances, before and after; Source: https://www.stellar.org/blog/sdfs-next-steps/
Ripple, XRP, and Stellar’s XLM share a similar origin: XLM is derived from XRP’s protocol, and one of the original founders of Ripple is a founder of the Stellar Foundation. It’s safe to say there has always been rivalry between the two cryptocurrencies!
Markets React Positive, But Will it Create Upward Pressure on the XLM Price?
Since news of the reduction in supply, the markets reacted positively and XLM rallied over 20% on the day of the announcement. The question everyone asks is how much of an impact this would have on the long-term price of the token.
The SDF also announced the removal of inflation from the network several months ago because the foundation claimed it was no longer useful to participants of the network. The XLM cryptocurrency is not a mineable token, and new tokens were introduced to the network through the inflation feature.
XLM in the recent years; Source: https://www.worldcoinindex.com/coin/stellarlumens
Currently trading at $0.08, XLM is still 90% down from all-time highs of $0.87. By becoming a non-inflationary and scarcer token it could increase demand, but volume and liquidity will also be key for driving real value.
Gold, silver, and Bitcoin’s fundamentals are built around scarcity and demand. Finite supply drives the price as the initial work to find/mine or create these assets is what drives the prices and adds authenticity to them.
This post is for educational purposes. All information used is referenced accordingly. This is not investment advice; please always do thorough research and only invest what you are willing to lose, especially in times of uncertainty.