I continue to educate myself about cryptocurrencies such as Stellar Lumens (CCC:XLM-USD). While my progress is slow, I’ll admit that I do find blockchain technology fascinating.

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As an investment vehicle, I have a hard time wrapping my head around cryptocurrencies. But I’m 100% behind any solution that can make financial transactions of every kind easier and cheaper than they’ve historically been.

Another InvestorPlace columnist, Josh Enomoto, recently discussed Stellar Lumens and the XLM cryptocurrency token. I was especially taken by his comments about the archaic and staid nature of the financial services industry:

“Recently, I had the displeasure of having to make a wire transfer to another U.S.-based bank. The cost to me was $25 to make the transfer. Additionally, the time it took for the wire transfer to process, along with associated filings was about one week — that’s an eternity in our supposedly advanced society.”

I live in Canada, but write for two U.S. publications, including InvestorPlace. Getting paid cheaply and efficiently is difficult doing business with American companies. And that has nothing to do with either organization’s speed of payment.

My problem is the wire-transfer fees that the organizations’ U.S. banks charge them to wire money to my Canadian bank account. Those fees make Enomoto’s transfer look like a walk in the park.

So I’m understandably interested in blockchain technology that can truly democratize investing.

The Future of DeFi

 I continue to watch the so-called democratization of investing from the cheap seats. Unimpressed by previous efforts, I believe decentralized financial services (DeFi) will be the breakthrough that leads to actual progress for retail investors.

In a February 2021 article in FinanceMagnates.com, Constantinos Pavlides, the Chief Marketing Officer for gt.io, a Cyprus-based online Forex broker, discussed the growth of DeFi in 2021.

Pavlides said that the total value of DeFi assets had grown from $683 million at the start of 2020 to more than $14 billion by the end of last year. He specifically mentioned that smart contracts would be a big trend in financial services and beyond. Those smart contracts are also the foundation for cryptoassets like non-fungible tokens (NFTs).

And as a result, Ethereum (CCC:ETH-USD) could be the big winner.

“Decentralized finance (DeFi) is a blockchain-based financial infrastructure that has recently gained a lot of traction. The term generally refers to an open, permissionless, and highly interoperable protocol stack built on public smart contract platforms, such as the Ethereum blockchain,” University of Basel finance professor Fabian Schär wrote in a paper published by the Federal Reserve Bank of St. Louis.  

But what about Stellar Lumens? Does it have a part to play in DeFi?

The Democratization of Investing in 2021

In a December 2020 CNBC article by Oppenheimer financial advisor Jonathan Shenkman, the author discussed implementing “Investor Alpha,” a financial strategy that advocates owning a tax-efficient portfolio, increasing one’s savings rate in a low-rate environment, automating portfolios and reducing investment fees.

Shenkman discussed how the introduction of low-cost exchange-traded funds (ETFs) has allowed regular Joe’s like you and me to invest in companies traded on stock exchanges in almost every market in the world. In many cases, buying those ETFs is totally commission-free.

I would argue that offering investors the opportunity to buy fractional shares is almost as important as the introduction of ETFs through the launch of  SPDR S&P 500 ETF Trust (NYSEARCA:SPY) in January 1993.

With fractional investing, an individual can take 25 of his favorite companies, plunk down $100 on each of them, and have an affordable, equal-weighted portfolio.

Now the tricky part is if that individual wanted to do the same thing, only instead of buying a fraction of a share in 25 U.S.-listed companies, they wanted to buy 25 companies trading on 25 different stock exchanges around the world.

Get me that reality and then we’re talking about the democratization of investing. Until that time, it’s just companies like BlackRock (NYSE:BLK) and Vanguard capturing more of the investor’s wallet.

Stellar Lumens’ Take on the Subject

The Stellar website lists all of the projects the open-source network for currencies and payments is involved in. One of those projects is DSTOQ, an app that allows investors in emerging markets to buy stocks, bonds and ETFs with zero fees.

In February 2020, Stellar Development Foundation, the non-profit behind the Stellar network, invested $715,000 in DSTOQ, paid for with lumens. Based in Liechtenstein, DSTOQ focuses on cross-border investing, precisely what I’m looking for from the financial services industry. 

Clearly, the biggest hurdle for the true democratization of investing will be the coordination of legal and regulatory issues across multiple borders. A January blog post from DSTOQ discusses that process.  

Unfortunately, I’m unable to try the app living in Canada. If I lived in Vietnam or South Africa, I would be. But that’s not the answer I was looking for.

However, this October interview with DSTOQ Chief Executive Officer Craig McGregor presents a better idea of how the company intends to build its decentralized trading platform

As my colleague Josh Enomoto stated in his article about Stellar Lumens, the world will continue to develop the blockchain technology behind the Stellar open-source network, turning it into a global presence in the financial services industry.   

As for the token itself, I’m less enthusiastic about investing in it for speculative purposes. But if it can enable me to buy 25 stocks on 25 stock exchanges using my iPhone, I’m all in.

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