InvestorPlace columnist Josh Enomoto recently stated that Stellar Lumens (CCC:XLM-USD) had a long way to go to obtain mainstream acceptance.
While he’s probably right, I believe there’s a way that Stellar Lumens can get there.
Specifically, I think that the currency can use stocks, ETFs, mutual funds, private capital, and all other possible investments to become widely used.
StellarLumens and DSTOQ
The last time I wrote about Stellar Lumens was in mid-March. In the world of cryptocurrencies, three months is an eternity. A lot has happened to the currency since then.
Back then, what most captivated me about Stellar was its investment in DSTOQ, an app that provides commission-free investing in emerging markets like Brazil and Nigeria.
On the surface, DSTOQ seems like a perfect example of how to effectively utilize cryptocurrency and blockchain.
However, as Enomoto said in his June 2 piece about Stellar, the currency’s utility is only hypothetical at the moment.
“When it [Stellar Lumens] was released in July 2014, one of its goals was boosting financial inclusion by reaching the world’s unbanked — but soon afterwards, its priorities shifted to helping financial firms connect with one another through blockchain technology,” he wrote.
“In plain English, the Stellar Lumens architecture may finally make microtransactions commercially viable. But sometimes, reality has a way of putting a dent into aspirations.”
Enomoto used the example of moving money to Mozambique to argue that Stellar Lumens is enabling transactions that are not very popular. That’s because, he argues, not that many people want to send money to such far-off places.
DSTOQ Around the World
If Stellar Lumens and DSTOQ do provide many investors who are located in emerging markets with the ability to buy stocks in every major developed country globally, I believe the value of XLM would skyrocket.
No one wants to send money to Mozambique from Brazil. However, there are plenty of Brazilians who have the wealth and the desire to buy stocks other than those trading in Brazil or the U.S. The same is true for all the other major emerging markets.
As a result, many investors will be banging down the doors of anyone who provides that service.
Unfortunately, the statistics provided by Stellar Lumens in its case study on DSTOQ are less than convincing.
While Stellar posted some impressive numbers — 25,000 downloads in the first two months, 10,000 monthly active users, and more than 300,000 new customers investing through its B2B partners — Stellar did not provide any information about the time periods in which these transactions occurred. As a result, it’s hard to know just how much progress DSTOQ has made in 2021.
Further, a quick look at DSTOQ’s website shows that its latest blog post was on Jan. 20. In that post, it discussed integrating with the DSTOQ API. There have been no other entries on the blog since then.
On the Google Play store, most of the reviews of the DSTOQ app are from 2020, suggesting that it might indeed be having trouble gaining traction with users.
However, one response to a user’s query from DSTOQ in November 2020 did state that the app is available in more than 100 countries, so I can’t definitely say that it’s been unsuccessful.
What I do know is that I can’t sign up for it from Canada, where I live, so I have no way of trying the app. DSTOQ really should have a demonstration account that’s open to anyone.
The Bottom Line
After reading Stellar’s projects page, it’s hard not to get excited about all the different pies that it’s got its hands in at the moment. For example, Smartlands is a Ukraine-based real estate investing platform that enables investors to own fractional amounts of commercial real estate properties.
However, at the end of the day, I don’t see how Smartlands is much different from existing real estate platforms such as Fundrise and others, except for the fact that, on Smartlands, investors can purchase holdings using cryptocurrencies.
InvestorPlace Senior Analyst Luke Lango recently discussed why Stellar Lumens lives in the shadow of Ripple (CCC:XRP-USD). Lango feels that Ripple’s work with big financial services companies such as Bank of America (NYSE:BAC) and American Express (NYSE:AXP) have put it on a much better growth trajectory than Stellar Lumens.
While I need to do a lot more research in this area, I feel that Ripple Labs delivers superior utility to its users than Stella rLumens.
At the end of May, I said partnerships like the one that Ripple formed with the National Bank of Egypt suggest that the currency has what it takes to become a leading cryptocurrency. As it stands today, it’s solidly in the third spot by market capitalization.
As for Stellar, it sits well behind Cardano (CCC:ADA-USD), which is probably my favorite cryptocurrency at the moment.
To answer the question posed in my headline, I don’t think that Stellar Lumens has mainstream credibility as either a network or an investment opportunity. It will need to bring something bigger to the table to move the needle.
I thought DSTOQ was the answer. Now I’m not so sure.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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