Stellar is an open-source protocol that can be used as a medium of exchange. Like many other cryptocurrencies, the system uses blockchain technology. The system uses a distributed ledger that is maintained by an algorithm, allowing for decentralized control. Computer servers run the software, and communicate with other servers running the software via the internet. Every server stores a record of all accounts on the network. All servers on the network reach an agreement on transactions posted through a process called “consensus.”
The idea of decentralized, digital currencies is not new. These currencies have, however, gotten a lot more popular in recent years. The king of cryptocurrencies, Bitcoin, has drawn significant investor attention in the last two years as prices reached almost $20,000 per unit. With the rise of Bitcoin, other currencies have also begun garnering more attention.
Cryptocurrencies can potentially offer consumers some significant benefits compared to more traditional payment methods such as bank wires, ACHs and credit/debit cards. One of those potential benefits is speed. A transaction using Stellar is typically settled within a matter of seconds. A bank check, on the other hand, could take anywhere from 14-30 days to be considered cleared. Another potential benefit is cost. The average bank wire in the U.S. costs about $20. A transaction facilitated using Stellar may only cost a fraction of a penny.
Sending money overseas is also way easier. With Stellar and other cryptocurrencies, there is no need to perform a currency exchange which can add to the cost. There is also no need to wait for funds to clear, since transactions are considered “settled” within a matter of seconds.
Digital currencies like Stellar are still only in the very beginning stages of what could become a far greater rise to prominence. Some merchants already accept various forms of cryptocurrency, and that number could potentially grow significantly as more and more consumers prefer the low-cost and convenience associated with these payment types.
Stellar can be purchased on numerous coin exchanges, you can follow the current value using our Stellar charts. Coins can be bought and sold at any time. For investors looking at the long-term potential of Stellar and other cryptocurrencies, however, a cryptocurrency IRA may be the best choice. This type of IRA account is a self-directed IRA account that allows the holder to invest in alternative asset classes outside of traditional stocks and bonds. Using this type of account can have numerous potential benefits. Perhaps the largest benefit of an IRA account is the potential for tax-deferred growth on investments. Not only can investments grow in the account tax-free, but making contributions to an IRA account may also save you money on your tax bill now as such contributions may potentially be deductible. The process for setting up this type of account is simple and convenient. Not only can you purchase Stellar in this type of account, but you also have the ability to diversify with other currencies or even other alternative asset classes. This type of account can be a very powerful tool for long-term savings if all rules and guidelines are strictly adhered to.
Any questions about potential tax implications, rules and eligibility should be directed to your tax professional.