Buying Lumens with Credit/Debit Card or Bank Transfer (DEX)

bkolobara

Hi community!

When Kraken removed the XLM/EUR pair it became more difficult to buy Lumens without going through Bitcoin first. Not only is it hard to buy directly Lumens for fiat, but most exchanges require a long verification process and for someone that wants to grab quick Lumens with their Credit Card it can be a difficult, expensive and long process.

Soon other exchanges will be adding XLM pairs, but in the meantime you can use the Stellar DEX (decentralised exchange) to buy your Lumens. This has also the side-effect that you will become more familiar with the Stellar network. More trades directly on the network also will provide liquidity and allow for more efficient trades. Arbitrage traders can use the current low liquidity on Stellar in their advantage and earn more.

The beauty of the Stellar protocol is that it's open (like email for money). You get the same tools as big financial organisations doing their settlements. I think that we should encourage more users to directly use Stellar for their trades. Therefore, I will provide here a quick overview about the most important information you need to know when trading on Stellar.

Getting your fiat on the Stellar ledger

Maybe the most confusing part for newcomers is the connection between a distributed ledger and their bank account/credit card. To trade on the Stellar DEX you will need to turn your USD/EUR/CNY/etc into equivalent tokens on the Stellar network. It is important first to get familiar with the concept of anchors.

Anchors are financial institutions that hold your fiat/commodities/sheep/etc and issue an equivalent amount of tokens on the Stellar network. Because anchors hold onto your fiat it's important to find an anchor you trust. Depending on your country (note that some anchors operate in multiple countries) you can choose one from the list on Stellar's website.

Every anchor has a different way of depositing and withdrawing fiat. I really like Tempo. They offer Credit Card/Bank Transfer/Cash deposits and withdrawals and operate in more than 40 countries. Here are some instructions how to get your Tempo EURT tokens into your Stellar Wallet.

NOTE: You can buy the EURT tokens with USD, you don't need to use Euros.

Trading on Stellar

Now that you have your fiat tokens on Stellar you can send it around the world to anyone for an ultra low fee. It's like magic. Anyone who receives your token will need to use the same anchors to withdraw the fiat to their bank account or trade it for a token of a different anchor that is supported in their country. Mostly, users will want to trade it first for XLM (Stellar's native asset) before going to another token. That's also why XLM is called the bridge currency. If you have good TOKEN<>XLM liquidity you can easily trade for any other tokens on Stellar.

Trading is supported in many wallets, but there are also dedicated Stellar trading clients. My favourite is Stellarterm. If you look at the order book of XLM<>EURT you will see that the rate is really good for smaller amounts (up to $600). Even better than some big exchanges (Kraken) at the moment of writing this article. With more traders it will just keep getting better.

Conclusion

Getting your fiat to a Stellar anchor is usually much faster than getting approved by an existing exchange. It also has many other benefits: no trading fees, completely decentralised network, etc. I think that the Stellar DEX is just an amazing tool that is about to be discovered by the wider trading community. As you are part of the Stellar community you can be one of the first using it and having an advantage over other traders.

Cheers,
Bernard

sim1981

The weak point in the system is the anchors.
Stellar network can make transactions fast and cheap.
Making transactions to anchors to be able to use the Stellar network is funny because Stellar network itself should be a substitute of these transactions.
Transaction to Anchor will be slow and expensive which will negate the advantages of Stellar network of being fast and cheap.

Local anchors will have problem with regulations, high fees and covering small geographic areas.
If 2 different anchors in 2 different countries are used for a transaction, the fees will become double.

This problem of IN and OUT can be solved when One of the big companies starts using the blockchain technology.
Same as IBM/Stellar project, if banks and companies like Western union, moneygram, credit cards company etc... started using Stellar network for transactions. They will act themselves as anchors with huge presence, resources and tools.

You just deposit your cash money or execute the payment online through their system, transactions will be executed very fast and cheaper than before.
Once the network is being used by big companies, there's possibility that different merchants will accept payment with tokens issued by these companies or XLM itself.
I read that all payment systems worldwide are testing blockchain. Which one they will use and how blockchains will connect together is another story. Stellar is one of many.
At the end, Competition will force all financial, remittance and payment companies to use the Blockchain tech as people will use the company with most reliable, cheapest and fastest service.

At the moment, using anchors or exchanges is mostly useful to invest in XLM.
If people need to pay a high fee for anchors to send money, then they will send the money through traditional payment systems. No reason to change what they're used to do.

bkolobara

sim1981 Making transactions to anchors to be able to use the Stellar network is funny because Stellar network itself should be a substitute of these transactions.

No.

sim1981 Transaction to Anchor will be slow and expensive which will negate the advantages of Stellar network of being fast and cheap.

This is not true. Transactions between EU banks are super fast and basically free.

sim1981 Local anchors will have problem with regulations, high fees and covering small geographic areas.
If 2 different anchors in 2 different countries are used for a transaction, the fees will become double.

There are already existing anchors and we don't have this problems.

fiatjaf

sim1981 The weak point in the system is the anchors.

The whole point of the system is to have anchors.

Hotbit

I agree with sim1981 that anchors are a weak / problematic / costly point. I've visited tempo website - to send 100GBP to 113EUR fee is 6.5 euro - over 5%. Cost within stellar network might be < 0.00001 cent, but overall cost is the same or similar to traditional solutions.

andruby

Thanks for the great tutorial @bkolobara. I've wanted to Tempo before but couldn't find information for using them as a simple anchor for buying EURT. I'll try them out soon. If it works well, I'll add them and the DEX to http://stellar-price.com

I have a problem with the wording on the Stellarterm XLM<>EURT order book. It seems wrong. I think they've got bid/ask the other way around.

Screenshot: https://www.evernote.com/l/AHw41viqeuRDZ6heOUT_o9uYIN8V8laRXx8

The wording suggest that I can but 10 XLM for 1.36EUR, and then sell those 10XLM for 1.46EUR. That's a negative spread and can't happen.

fiatjaf

andruby I believe this is the traditional wording for exchanges. The "buy offers" are offers for people that want to buy at that price, the "sell offers" are offers from people that want to sell at that price.

If you want to buy you must fulfill an existing "sell offer", or you can place a new "buy offer" at a lower price, but it will be unfulfilled until someone backs it with a new "sell offer".

sim1981

fiatjaf I never said we don't need anchors.
I was talking about existing anchors.
Tempo and some anchors could be good but currently they cannot trigger a big adoption of the system as their fees is still high and they don't exist worldwide. Current Stellar anchors are not present in each country and each city.
Maybe with time, this will change but i doubt it will happen with small anchors.
But if a huge existing remittance company becomes anchor, things will be very different.

Stellar network is fast and almost free.
Getting money IN and OUT of anchors should be fast and almost free. If not, there's no reason to use the system for sending money.
Using a credit card or bank transfer to deposit in anchor is not efficient. It should be cash, debit or online system.

For example:
I'm currently living in Gulf area Middle East. Most people use local remittance companies to transfer salaries as bank transfers and their currency exchange rates are bad.
(Same as other countries if you're not sending in a popular path)

When you use a local remittance for sending money:
You just give them cash or use your Debit card in their office or use your debit card online on their page.
Your money will be in the hand of remittance company in few seconds.
You pay fee and get good currency exchange rate. Your money reaches your bank or another person in your country.

Indians, Filipinos for examples pay only 3 USD as fee and receive their money in their currency after few hours in India/Phil with best exchange rate. This is because remittance companies already have bank accounts in India/Phil and their service is fast.
Few other receiving Asian countries are same situations.

For other countries that have much less numbers of workers in Gulf, we have to send Euros and USD through remittance office Bank existing in Europe or USA.
I pay much bigger fee to remittance office and pay the cost of International bank transfer between remittance office bank account and my account. In total, I spend around 40 USD but i get good currency exchange rate.
My money reaches after 3-5 days. If i do a transfer direct between the 2 banks, it will cost 100 USD at least.

So in summary:
People will choose the AVAILABLE cheapest, fastest and safest way to transfer money.
They don't care how Stellar network works and how anchors work. They only know they want to transfer money from A to B.

As for using existing anchors instead of existing exchanges to buy/trade Lumens and various cryptos, I wasn't commenting on this particular idea as i didn't try all services to compare.
I was just giving my general opinion about anchors.

bsakweson

Tempo and most of the Anchors on your link caters for customers and not app dev guys who are building applications on the stellar platform. We are a small startup eager to use the Stellar network because of all the other great things that come with it, security, low transaction fees and the fact that it is independent of the current financial rails that are too expensive and leaves many developing countries out of their operational space. Our challenge is that we can hardly find an exchange or way to convert say USD or other FIAT currencies to XLM and then to destination FIAT currency through the stellar network. Is there an Anchor with an API that provides this kind of service to developers. Any advice would be helpful.

Thanks.

6lackknight

bsakweson did you come right with this? 4 years later I know.