On November 5, the Stellar Development Foundation shocked attendees of its first Stellar Conference in Mexico City by announcing that 55 billion of the 105 billion lumen (XLM) in existence had been “burned” by sending them to a wallet with no key.
A day earlier, the Stellar Development Foundation (SDF) held 85 billion XLM. Trading at 7 cents per share at the time, that worked out to almost $6 billion. After burning 55 billion XLM, the price went up to just 8.5 cents, though it’s now down slightly to 8.3 cents. Thus, the remaining 30 billion XLM they have is worth only $2.5 billion.
The rest of the world—those not in the SDF—held 20 billion XLM. That means the SDF sacrificed $3.5 billion so everyone else could gain a paltry $260 million.
Which perhaps explains why the move was seen by both the Stellar and broader cryptocurrency community as a shock.
However, the Stellar conference attendees—many of whom, one would presume, are lumen owners—gave Danielle Dixon, the CEO and executive director of the SDF, a big round of applause after the announcement.
The SDF said in a blog post that it did this because “the number of lumens we hold now aligns better with our mission.”
Yet, Stellar could have accomplished this windfall by simply airdropping about 372 million of those 7-cent XLMs to existing non-SDF lumen holders. That would only have been about two-thirds of 1% of the 55 billion lumens burned.
What’s more, the vast majority of that burn—50 billion lumens worth—came from a 68 billion XLM fund earmarked for giveaways to partners and to individual airdrops. Those have been “reimagined” as a more focused, 10-billion-lumen program, according to the SDF release.
So, you’ve got to wonder if the SDF wasn’t hoping for a bigger price bump for its $3.5 billion.
As eToro Senior Analyst Mati Greenspan pointed out, that “beautiful green triumphant candlestick” of a rise that appeared on the lumen price chart in the hour following Dixon’s announcement was “still a long way to go from the all-time high [of] 93 cents per coin.”
Greenspan added that Dixon described the burn as “a way to reorganize and refocus… [that] will help them achieve their goals.”
The way the SDF put it, it believes “we should only keep what we’re confident we can actually use. And use relatively soon, at that—in the next 10 years. We were never meant to be and would never want to be a perpetual custodian for Stellar’s programs. Getting to our goal and still having lumens at the end would serve no purpose.”
And speaking of resources that may actually get used, the remaining 5 billion lumens burned came from the SDF’s 17 billion lumen operations fund. That despite its stated intention to double the size of its roughly 60-person staff by the end of 2020.