Will Reducing Supply Increase Demand in the Long Term?
Stellar was founded in 2014 by Joyce Kim and Jed McCaleb, who was also known as the founder of Mt. Gox & co-founder of Ripple. This might be the reason why Stellar and its currency XLM bears so many resemblances to Ripple & XRP. Unlike Ripple, Stellar is a non-profit and their platform is open source.
The Stellar team, as well as fans, developers and entrepreneurs are attending Stellar's first conference ever, in Mexico City today. The Meridan Stellar conference just wrapped up its first day with some major announcements. Hopefully the second day of the event will be just as exciting.
Stellar to Burn 55 Million Lumens?
As key part to their conference, Stellar's CEO and Executive Denelle Dixon and her talk on the Stellar Development Fund's next steps. What many did not expect was Dixon's big announcement.
She announced that 55 Billion Lumens will be burned.
The Lumens were burned by being sent to an address with no signers.
As per their announcement:
"Just before this announcement, we burned 5 billion lumens from our operating fund. It now stands at 12 billion lumens. This reduction isn't in any way a retreat from our mission. It's an acknowledgement that we owe it to the ecosystem, to the network, and to ourselves, to be as efficient as possible in our work. We've plotted the next ten years of Stellar's growth and even with our greatly increased ambitions for SDF, we're confident these funds will be enough to see us, and the network, through.
At the same time, we're ending Stellar's World Giveaway Program (for individual airdrops) and our Partner Giveaway programs, both of which were created at the network's inception. 50 billion of the 68 billion lumens in those programs have also been burned. We believe the number of lumens we hold now aligns better with our mission. SDF will not burn any additional lumens."
Stellar and the Burn Effect
Stellar's XLM, like Ripple's XRP is not a minable coin. There is a fixed number of XLM in existence and no more will be created. As such, the basic economic law of supply and demand dictates that a cut in the supply might increase prices.
Since the news of this announcement broke several hours ago, XLM had a pretty major price increase. XLM rose 17% vs the U.S. dollar and 16% vs Bitcoin.
The big question is "How long will this rally continue?"
Written by Jonathan Ganor
Writer & cryptocurrency aficionado