What Stellar Lumens Teaches Us About Token Economics


Our Working Hypothesis

The Lumens (XLM) Token Model

  1. Operation Fees — write to the Stellar network’s distributed database
  2. XLM as Medium of Exchange — Lend or sell Lumens as a ‘step-through’ currency
  3. Asset-pair Trading
  4. Commercialization of the Protocol

Revenue Source 1 — Operation Fees

Table1 — Peak XLM usage in Operations Fee per Year (source: Austere Capital)

Revenue Source 2 — Medium of Exchange

Figure 1 — USD as Step Through Currency (source: Austere Capital)
Figure 2 — XLM as Step Through Currency Requires Creation of Additional Markets (source: Austere Capital)
Figure 3. FX Market Structure (source: www.babypips.com)

Revenue Stream 3 — Asset Pair Trading

Revenue Stream 4 — Commercializing Stellar protocol

Figure 4. Lightyear is Stellar’s commercial arm (source: www.lightyear.io)

Explaining XLM’s Multi-Billion ‘Market Cap’

Alice, Bob and a Lead Pipe

Figure 5. One gold nugget at a time (source: Austere Capital)

A Constant Flow of Gold Nuggets

Figure 6. A Steady Flow of Nuggets (source: Austere Capital)

The LeadCoins Obfuscation

Figure 7. The Lead Coin Obfuscation (source: Austere Capital)

Revenue Sources — Our Conclusion

Stellar — Further Challenges

  • access to financial services (or banking the underbanked); and
  • helping small businesses thrive through access to credit

Banking The Under-Banked

Figure 8. Simplified Domestic Borrowing (source: Austere Capital)

Enabling Cross-Border Investments

Figure 9. INR Investor Lending in NGN (source: Austere Capital)
Figure 10. Borrower borrows in INR (source: Austere Capital)
Figure 11. Borrowing in XLM (source: Austere Capital)

One Last Thing — How Many XLM are Enough?


  • A hard cap of 0.00001 XLM ‘write’ fee per operation
  • Airdropping XLM required for atomic swaps to anchors
  • Protocol efficiency with high token velocity and future dilution
  • External revenues generated in trading XLM / Asset Pairs
  • External Lightyear revenues from commercializing protocol
  • Real world barriers to “Banking the Unbanked”
  • A lack of pricing power over end-user pricing




Economist, Ocean Lifeguard, Founder of Austere Capital Advisory (https://austere.capital/)

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Brian Koralewski

Brian Koralewski

Economist, Ocean Lifeguard, Founder of Austere Capital Advisory (https://austere.capital/)

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