Stellar is a promising borderless open-source blockchain payments platform aimed at connecting financial institutions and individuals to create, send, and trade digital representations of all forms of money. Stellar exchanges enable users to transact using Lumen (XLM), Stellar’s native cryptocurrency.
Cryptocurrency has gained overwhelming popularity in the last couple of years. This has led to the emergence of a large number of global crypto exchanges aimed at helping users navigate and trade in the crypto market.
To help you choose the best Stellar exchanges in 2021, we present a comprehensive guide that examines the most popular choices.
Our List of The Top Stellar Exchanges
With several exchanges dealing with digital assets available today, it is indeed a tough task to choose one that fits your requirements while offering efficiency, accuracy, and up to date features. Thus, we present to you our list of best Stellar exchanges that have been curated after examining and analysing them on a wide range of qualitative and quantitative criteria.
What is a Stellar Exchange?
A Stellar exchange is a platform that enables users to trade Stellar tokens for other cryptocurrencies and allows the transaction of fiat money into Lumen and vice versa. It acts as an intermediary between those who want to sell and purchase digital currencies by matching buyers and sellers.
You can either trade digital assets directly or through peer-to-peer networks using a crypto exchange. Different Stellar exchanges offer different sets of options and functions. While some are designed for traders, others are customised to suit the needs of prompt crypto-fiat exchange. These platforms usually charge a commission fee on trades along with a small withdrawal fee. You can understand the types of crypto exchanges and examine their advantages and disadvantages in the coming sections.
How do Stellar Exchanges Work?
Most Stellar exchanges are very user-friendly and only require you to register yourself through a simple sign-up form on the exchange’s website. Here you will be asked to fill in your personal details including your name, email address, and phone number. It is important to understand the crypto laws and regulations in your region to examine the legality of a particular exchange, the kind of tax rules that apply to your earnings and your identity verification requirements.
Most countries have comprehensive Know Your Customer (KYC), and Anti-Money Laundering (AML) requirements from crypto exchanges. This means that you will be required to verify your identity using an official government-issued document or ID to access the services offered by the exchange. While some exchanges bypass these rules and allow you to trade XLM without completing your KYC to protect your identity, we strongly suggest against the same as such platforms carry high risk and might not be fully regulated.
Your account is live as soon as your verification process is complete. However, before you start buying and selling, you will need to add funds into your account using Lumens and other tokens. As soon as this transaction is reflected in your wallet, you can start buying and selling. You can withdraw at any point of time using a method of your choice and contact the customer support in case of any troubles in deposit, transactions or withdrawal.
Using an Exchange Vs a Broker
While a typical Stellar exchange provides an online platform for buyers and sellers who trade cryptocurrencies with each other based on current market prices, crypto brokers enable buying and selling for customers at prices set by the broker. In essence, this is because through an exchange you will be trading the asset itself while brokers usually help you transact in the derivative products of Stellar.
Experts recommend using Stellar exchanges for traders with the knowledge of the cryptocurrency market and offer better security and compliance. Stellar brokers, on the other hand, are perfect for traders who are looking for a wide range of features. Further, in brokerage platforms, financial instruments are offered through leveraged CFDs to allow traders to boost their capital.
Types of Exchanges
In this section, we examine the different types of exchanges available to better understand their functioning and determine whether they fit user-requirements.
- Centralised Exchanges
Targeted at inexperienced traders, centralised exchanges enable you to buy and sell Stella Lumen tokens through a trusted third-party platform that monitors the transaction and secures the assets on behalf of the buyer and the seller. Centralised exchanges are highly regulated and run on the firm’s private servers, which means that deals are not tracked on the blockchain.
You are required to pay a small fee to use their services. Further, such exchanges also typically require all users to register and verify their identity. Your withdrawal quota is dependent upon the level of personal details you provide to these exchanges. Despite being widely popular, centralised Stellar exchanges are often considered against the Stellar’s open-source platform’s decentralisation aspirations.
- Decentralised Exchanges
Decentralised exchanges allow peer-to-peer (P2P) trading using assets, proxy tokens, or an escrow system which eliminates the need for an intermediary. All of the funds in decentralised Stellar exchanges remain stored on the blockchain. Decentralised exchanges are not regulated due to the absence of a central entity and thus enable trading anonymously.
However, decentralised exchanges require some advanced cryptocurrency industry knowledge and lack the liquidity of centralised platforms, occasionally leading to delay in transactions. Thus, decentralised exchanges are not as popular as centralised exchanges, though most experts believe that decentralised exchanges will eventually give their centralised counterparts a run for their money as they develop their infrastructure.
- Local Exchanges
Local crypto exchanges are P2P platforms that connect people from the locality to facilitate easy transactions. They abide by the crypto laws and regulations of that region and support local currencies, avoiding the foreign exchange fee. Local exchanges are non-custodial crypto marketplaces where people buy and sell crypto on their terms, using a payment method convenient to both parties. Messages between the buyers and sellers are encrypted and escrow accounts are secured by the blockchain of the respective cryptocurrency.
- Fiat Vs Pure Exchanges
While fiat exchanges facilitate the transaction of cryptocurrency using fiat currencies, pure crypto exchanges strictly only trade crypto for crypto. Fiat exchanges are perfect for beginners as they support a wide range of fund deposit and withdrawal options that the user can choose from to execute their first few trades. Pure crypto exchanges require you to own some amount of any cryptocurrency which is then used to trade directly from your online wallet.
Key Things to Consider When Choosing The Best Stellar Exchange
Each Stellar exchange is equipped with its own unique set of features that are specifically designed to better your trading experience. These features must be studied and understood to choose an exchange that best meets your needs. However, here is a list of universal key criteria that will help you determine the best Stellar exchange:
Transaction fees add up quickly especially if you trade regularly in large amounts. Thus, it is important to compare the transaction fee percentage, commissions and withdrawal fees for crypto exchanges to choose the most cost-efficient one. It is also beneficial to check what payment methods are supported by the platform.
Usually, centralised exchanges transact in milliseconds while decentralised platforms can take up to a minute. The transaction speed will have a major impact on your trading potential, especially while dealing with the volatile crypto market and thus must be a significant criterion in making your choice.
While regulated platforms require users to verify their identity and other personal details based on local KYC norms, there are Stellar exchanges that also allow you to trade anonymously. Users choose based on their own needs in a trade-off between regulatory compliance and cryptocurrency’s spirit of privacy.
You must also consider the security features of the platform in terms of how funds are stored and personal data is protected while selecting your Stellar exchange. Insurance options and offers are also another key determinants, to protect your interests in case of a safety breach.
Pros and Cons of Using Stellar Exchanges
It is important to understand the gains and pitfalls of investing through the different types of Stellar exchanges to choose one that best fits your requirements.
Most exchanges follow a simple process of registration, followed by an identity verification post which you are allowed to start trading. The best Stellar exchanges are also packed with advanced features to help experienced traders use their skills. While centralised exchanges offer speed and liquidity, decentralised exchanges are more privacy-friendly and transparent. Local Stellar exchanges are a great option if you are looking for convenience and want to avoid foreign exchange fees.
It is recommended to evaluate a prospective crypto exchange based on various factors including transaction time, transaction fee, registration and verification process, security, and design before making the final call.
Frequently Asked Questions
Stellar is an open-source blockchain platform aiming to provide efficient and low-cost global financial services. Lumen is Stellar’s native cryptocurrency.
You can use any of the Stellar exchanges by creating an account, verifying your identity and transferring funds to your online wallet.
You can verify your identity either through a government-issued photo identity document or through a utility bill.
The KYC process is a mandatory requirement for all regulated exchanges and protects consumers from fraudulent entities.
Use only regulated exchanges and activate the two-step authentication to prevent misuse.
Most exchanges complete the verification process within 24 hours.
Most exchanges allow their users to contact customer support through email or phone.
You can withdraw your tokens either to your hardware wallet or to another platform by paying a small withdrawal fee.