The total supply of the tenth-largest cryptocurrency by market capitalization, Stellar Lumens (XLM) was literally just cut in half in an unprecedented move in the history of blockchain. This has resulted in a massive price surge for the altcoin, which is now trading up 20 percent in the past few hours.
Stellar slices supply of XLM in half
Announced in a blog post published on Monday afternoon, the Stellar Development Foundation (SDF)—”a non-profit organization founded in 2014 to support the development and growth of the open-source Stellar network”—has made the decision to burn—meaning discard— a massive majority of XLM it has control over.
Prior to this move, there were around 105 billion Lumens in existence, approximately 20 billion of which are already out in circulation, being traded on exchanges and used by companies and individuals of the Stellar blockchain. The rest were being held by SDF, 17 billion tokens for SDF’s operations and 68 billion for SDF-administered giveaways meant to catalyze the adoption of the cryptocurrency.
Now, there is a relatively mere ~50 billion in existence, the other 55 billion having been burned by the SDF sending coins to “a Stellar account with no signers.” The decision to burn some $4 billion worth of cryptocurrency is a result of SDF realizing that the number of XLM it held didn’t entirely align with its mission of “making Stellar the global payments standard.”
SDF still has 12 billion XLM for its operations, 6 billion for giveaways, and 12 billion for partnerships.
Blockchain tracking service Whale Alert has confirmed SDF’s decision to burn billions worth of cryptocurrency, with the service registering an array of multi-million-dollar transactions being sent from the organization’s wallets to the burn address stipulated in the blog post.
Altcoin’s price jumps higher
Due to this supply-slashing move, the price of XLM has jumped, surging due to this supply shock as the rest of the cryptocurrency market effectively flatlines. The altcoin now trades at $0.085 as of the time of writing this, up 20 percent from the $0.070 price point seen earlier today, Nov. 4.
While Stellar’s decision to burn XLM is undoubtedly bullish for the altcoin, it is unlikely to have an effect on the broader cryptocurrency market, including Bitcoin. Popular crypto trader “CryptoISO” made the following remark on Twitter in the wake of the announcement:
“And no XLM will not pump BTC.”
The SDF’s decision to reduce the supply of XLM comes shortly after it killed off the inflation feature built into the protocol. As reported by CryptoSlate previously, Stellar’s inflation mechanism, which resulted in XLM’s supply growing by 1 percent annualized, was formally deactivated late last month.
With other cryptocurrencies, like XRP, seemingly flailing due to high levels of inflation, the industry may soon see a trend of blockchain companies burning cryptocurrencies to maintain the price of their altcoin.