ICOs on Stellar: Can Lumens compete with Ether?

Stellar Lumens

When the Mobius Network CEO, David Gobaud, made the decision to launch Mobius’ ICO on the Stellar Network in January, Ethereum had just experienced some scaling issues, including the CryptoKitties debacle of December 2017. These scaling problems were cited as one of the reasons he decided to launch the ICO on Stellar instead of Ethereum.

Up to this point, few people knew that tokens could even be issued on the Stellar network. This is not surprising- Stellar was designed primarily as a payments solution. These payments, however, can be made subject to various conditions which allow the creation of tokens and the programming of simple instructions using a limited set of commands.

But can Stellar really be called an alternative to Ethereum? In some ways, yes, but its ability to compete with Ethereum is limited. The contracts that can run on Ethereum using Solidity are Turing complete, which means they can be far more complex than those running on Stellar. On the flipside, the greater complexity and flexibility of Ethereum contracts means that there is more possible attack vectors and that more energy has to be put into security.

Stellar’s average time for a transaction confirmation is currently around 5 seconds, while Ethereum takes upwards of 4-6 minutes for verification.

With security considerations and transaction speeds in mind, Stellar may in fact be a more attractive option for teams working on payments solutions, and this is actually what founders Jed McCaleb and Joyce Kim, with the support of Stripe CEO Patrick Collison, originally intended.

Also important to consider are financial scaling barriers that could come up in the future. In particular, if we continue to see the price of ETH increase, the cost of running smart contracts, including ICOs, will also increase. This may make Stellar an increasingly attractive option for projects looking to build applications and launch ICOs. Stellar, with it’s massive coin supply of over 100 billion is not likely to reach anywhere near ETH levels any time soon.

Stellar has been criticized for being overly centralized. Tokens are 100% pre-mined and all in the hands of the Stellar Foundation, much like Ripple, where co-founder McCaleb once worked. Big corporations and banks don’t really take issue with this, but the core of talented developers that make the Ethereum network what it is today, do. Stellar, unlike Ripple, claims a more altruistic vision than the for-profit Ripple, but time will tell how sincere these intentions are. In any case, they have already made a huge pile of money and are well positioned to make even more.

The fact that the Stellar foundation is sitting on this huge pile of tokens translates to massive power for manipulating the market price. In the same way countries devalue their currencies to encourage exports and boost employment, Stellar has the power to devalue Lumens to make running applications on the network more affordable. All they need to do to lower the price is flood the exchanges with tokens.

Ethereum still has the top spot among application platforms, but Ethereum developers are going to have to take some lessons from their competitors if they want to keep on top- and Stellar is no exception. The most likely outcome, however, is that we will see increasingly specialized blockchains, as the needs for different types of applications become more clear.

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