The price of Matic is inching towards the 15, 20 & 25 moving averages The yellow lines represent the range between which Matic has been trading since July The expectation is for the price of Matic to drop to 0.76 in the next few days Note: Trading decisions should not be based on the opinion in this article, investors should conduct their own due diligence before buying the cryptocurrency. This article is purely based on my own research and understanding of the cryptocurrency in the article.
MARKET HIGHLIGHTS
Currency in circulation: 22.9 Billion
Market Capitalization: $12.2 Billion
Price per USD: $0.53 (20th April 2021)
Let's assume that you own a company in South America selling agricultural products imported from Mexico. You just ordered US$1,000 worth of agricultural products and now are nearing your payment deadline. You speak to your local banking partner informing them about your payment that's due.
The payment terms specify that the payment has to be made in US dollars. The bank quotes you an exchange rate to convert your local currency into US dollars for payment. The exchange rate quoted to you by the bank is an unfavorable one and does not work in your favor, however you have no choice but to accept the unfavorable price and conduct the transaction.
When the vendor in Mexico receives the US dollars, he goes to his local bank to convert the US dollars to Mexican Pesos. Similar to your situation the vendor is unquoted an unattractive exchange rate as well.
In this scenario both the buyer (you) and the seller are running an exchange rate risk on their transactions. What if the buyer could pay in their local currency and the vendor could receive Mexican Pesos in exchange for the agricultural products sold. That would eliminate a great portion of the exchange rate risk.
The above scenario was created to illustrate how the Stellar Network would benefit both the parties mentioned above. The Stellar Network is an open-source network for currencies and payments. The network makes it possible to create, send and trade digital representation of all forms of money .e.g. US dollar, pesos etc.
So what does a digital representation mean?
A digital representation simply means converting the physical or traditional money into a digital one. For example you can create a digital representation of the US dollar on the Stellar Network. Let's use an example to understand this better.
Let's say Mr. A has $100 in traditional currency. He goes onto the Stellar Network and using a one to one relation, issues 100 digital dollar token in exchange for $100 traditional dollars. Mr. A who lives in United States owes Mr. B who lives in Africa, $50 in payment. With the acceptance of Mr. B, instead of going through the banking network and transacting in traditional currency, Mr. A sends Mr. B 50 digital dollar tokens.
Mr. B owes Mr. C $25 and pays Mr. C in 25 digital dollar tokens. Since the digital dollar tokens were issued a one to one relationship with the traditional US dollars, Mr. C can send the 25 digital dollar tokens that he holds to Mr. A and redeem that for $25 traditional dollars. So while people hold the tokens, they can treat them just like traditional money, because they can be certain that the tokens can be exchanged for traditional money at the end.
On Stellar you could issue a token in not just in representation of traditional currencies but in any form that is acceptable by different parties. For example you could issue a token for corn bushels or gold bars or even create a currency to run your own economy, seems unrealistic right? Not really.
Akon the famous musician has launched an ambitious project to built a planned city in Senegal where the entire economy would conduct business and individuals would go about their day to day operation using a cryptocurrency called 'Akoin' instead of a traditional currency.
Given all that we just discussed, how exactly would the operation on Stellar work? Who would be responsible for redeeming and maintaining the actual traditional currency deposits? Who would conduct the necessary checks and balance and background checks?
The Stellar Network relies on 'Anchors' for that job.
Great!! But who or what are 'Anchors'?
Anchors are regulated financial institutions, money service businesses or fintech companies that would be responsible to maintain the reserves and redemption services or connect the anchors country banking system by maintaining a service that handles regulatory processes such as KYC/AML. An anchor could provide one or both the services.
LUMEN TOKENS & THE FUTURE OF STELLAR NETWORK
Lumen are the built-in token on the Stellar Network. Users of the network are required to hold a small number of lumens to use and access the network. Stellar Lumens as on 20th April 2021 traded at US$0.53 per Lumen.
Prime XBT predicts Lumen to reach $1 by the end of 2021 with a potential high of $10 by 2025
Capital.com forecasts Lumen to reach $0.77 by the end of 2021 & $1.132 by 2024
In 2019, Stellar signed a project the American multinational technology company IBM to examine ways to make it cheap and easy for financial institutions to send any currency anywhere in the world using Stellar. Western Union also announced a partnership with Stellar Network for cross border payments.
Given Stellar's recent partnerships with renowned companies and with 4.3 million accounts currently registered with the Stellar Network one could expect a bright future for the Network ahead. So keep an eye out for the Lumen, it might prove to be one of the Cryptocurrency's to invest in 2021.
Note: Price forecast are predicted using mathematical models and shouldn't be used for investment decisions. Trading decisions should not be based on the opinion in the article, investors should conduct their own due diligence before buying the cryptocurrency. This article is purely based on my own research and understanding of the cryptocurrency in the article.
If you liked my explanation of the Stellar Network, let me know in the comment which currency would you like to know about next.
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