Ripple vs Stellar

Two blockchains which are not competing to replace fiat.

by Hedy Bi & Arjuna @ EliteX Media

The brave new world of crypto is upon us. Like most so-called ‘disruptive’ technologies, there’s an ongoing tension between the old way of doing things and the new: the old way of fiat currency, in which centralised authorities (government banks) ultimately control supply, access to, and the transfer of money. And the new way of cryptocurrencies, where trust in an opaque centralised authority is removed in favour of a decentralised network of peers, running a cryptographically secure, immutable, and public ledger of transactions otherwise known as the blockchain.

However, not every digital token in the crypto world pits itself in direct competition with the fiat-based economy. Both Ripple and Stellar make it their goal to facilitate fast cross-border transactions, greatly improving upon the existing cumbersome and expensive system of international money transfers. But each does it in its own way. Ripple — arguably the most infamous among crypto purists — works with banks and connects them to payment providers. Ripple’s official website claims that it already has 200+ customers. On the other hand, keeping to the general ethos of the blockchain community, Stellar chooses to relegate banks to the sidelines. However it has still garnered significant mainstream traction by establishing a vital business partnership with IBM in 2017.

Ripple and Stellar: a quick look at the facts.

According to FXempire, Ripple’s XRP was premined and distributed at the time of Ripple’s launch. As such it is more comparable to company shares than a true cryptocurrency. XRP coins do not compete with fiat money.

Unlike Bitcoin and other true cryptocurrencies, Ripple’s network is more well-known than its cryptocurrency XRP. That is to say, what many people up to now have casually referred to as Ripple, is more accurately the digital currency XRP, created as the means to faciliate transactions on the Ripple network. Ripple, the company, was founded to address the time it takes to make cross-border money transfers, with the aim to reduce it from 3–5 days to near instantaneous, as well as significantly reduce the estimated $1.6 trillion in annual costs associated with global transfers.

For Stellar, Lumens are the native asset linked to the Stellar blockchain, developed to facilitate fast, low-cost transfers of value between various assets both fiat and digital, including but not limited to payments. In a similar fashion to XRP, it is not built to compete with and replace fiat currency, in the same way that Bitcoin (arguably) aims to. Rather, Stellar aims to create a financial system for multi-currency transactions with low barriers for entry, and open to all.

As units of digital currency on the Stellar network, Lumens (XLM) act as a bridge, or medium of exchange between other currencies or assets, facilitating remittances, transactions, and other payments quickly and securely, while also functioning specifically to minimise the cost.

For comparison, check out the transaction speed info:

source: Aimstone Youtube

Referring to the above graphic, the combined features of decentralisation, transaction speed, and the potential for widespread accessibility, it could be argued that Stellar offers the best cryptocurrency solution for ordinary users when it comes to transfers and remittances.

We can see that Ripple has nearly 20 times the market cap compared to Stellar. But Ripple also currently has much higher supply. That constitutes part of the reason why Ripple has bigger market cap.

Daily range on the secondary market for both XRP and Stellar Lumens is generally kept to between 5% — 6% on the secondary market, which is relatively stable compared to other assets.

Similarities and Differences

Points in Common

1. They do not compete with fiat money.
2. They are used for money transfers delivering near instant, low-cost transactions.

Points of Difference

1. Ripple is a solution for geared towards larger, instiutional cross-border payment systems, whereas Stellar is built with the average user in mind. Although banks could utilise Stellar if they wanted to, it is designed specifically for individual users, and in particular the underbanked; those in the developing areas of the world. The focus of Stellar is to provide financial services and mobility to those in poor or less-developed countries, and the ability to participate in the the global economy. It facilitates this by providing a platform for incredibly cheap and near instant multi-currency transactions.
2. Ripple is more like a company; a for-profit entity. Stellar, on the other hand, is a community-based non-profit organisation; closer to the original decentralised model for blochchain projects. Ripple Labs is owned by the company board, made up by the founders and employers who started the company in 2012. But the digital currency, XRP, is owned by anyone who uses XRP. After XRP rebranded in 2018 and started using the new logo, the separation between Ripple as a company and XRP as a digital currency was made clear.
3. These two projects have very different cultures. Ripple has raised over $93.6 million, and that has translated to a team of over 200 employees. By comparison, the Stellar Development Foundation (SDF) raised $3 million via seed funding from Stripe, an online payment processing platform for online businesses at its inception. SDF hasn’t been playing the marketing and PR game.
4. XRP is a deflationary currency, while XLM uses a 1% inflationary model. Ripple addresses the issue of transactions between banks, which currently relies on SWIFT, which is old and slow. Stellar addresses the unbanked, facilitating financial access and mobile payments between people. So one is solving an internal problem for the banking industry at large, and the other is fulfilling the kind of role that ‘development banks’ used to do. There are lots of differences between the companies.

Hedy Bi is CEO Assistant at EliteX Exchange www.elitex.io, email: hedy.bi@elitex.io

Arjuna is Community Head at EliteX Exchange www.elitex.io, email: media@elitex.io.

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