While we talk about CryptoCurrencies than till date we have heard a lot about the Ripple(XRP) and now Stellar (XLM) as well, this guide is to differentiate between Stellar vs Ripple.
This time banking and financial industries are struggling with low transaction processing times and high transaction fees.
They are still using the old network like SWIFT message queues for secure payment gateways.
Since the first introduction in 1974, SWIFT is yet not updated and that cause still banks are taking longer than 1 day to process any cross-border banking transaction successfully.
The other issues with financial institutions are the security concern which prevents them to choose any new network on which they could move.
The solution of all their existing problems is resolved by Stellar and Ripple, how? Will discuss later in the guide.
Hence this guide is to understand Stellar vs Ripple which one is made for what and which one is the best.
Stellar and Ripple both focused to solve the cross border payment problems solutions but still, it seems that one will beat another in the near future.
If you are a crypto investor or interested to learn this revolutionary world of blockchain technology then read this guide till the end.
First, get an overview of both Stellar and Ripple.
Table of Contents
What is Ripple (XRP)?
Ripple was started back in the year 2004 but was not identified as a proper solution to the problem.
It came in limelight when in the year 2012, Jed McCaleb invited people to join this platform and create something innovative.
Ripple is created by Ripple Lab Inc, which is a team of people responsible for all Ripple network management and this is an Open source project can be used by anyone.
Ripple Net is a decentralized network which has its own digital asset called XRP in second term also known as Ripple coin.
Ripple blockchain network has the ability to process any transaction within 4-5 seconds and will allow to send or receive any type of currency on the network.
It has the ability to clear around 1500+ transactions per second.
Yes, Ripple is providing a decentralized network which is fully secure and quick to process any transactions within a seconds.
It allows transacting any cryptocurrency, fiat or digital asset on the Ripple network.
In case, if both parties agreed then they can also use a common currency called XRP to complete payments.
In general Ripple (XRP) is the solution for slow payment processing and security issues with current centralized banking or financial institutions.
Ripple is one of the great projects in the decentralized network, hence to learn more check our detailed guide on What is Ripple and how it works.
What is Stellar (XLM)?
Well, this will surprise you that the brain behind the creation of Stellar (XLM) is the same man as was for Ripple Mr. Jed McCaleb.
Stellar was founded back in the year 2014 after he left the Ripple, that is why people debating that Stellar has copied the code of Ripple.
But Jed McCaleb claimed that he has written everything from scratch.
Just like Ripple (XRP), where Ripple Net is the name of the blockchain network and XRP is the digital cryptocurrency running on the Ripple network.
In a similar way, Stellar is the name of the blockchain network and Lumens (XLM) is the digital cryptocurrency of the native Stellar Blockchain.
Stellar allows transacting any fiat, digital currency or Cryptocurrencies on the network and in case if both parties agreed can use the Lumens (XLM) as the common digital asset.
To learn more about the Stellar Lumens and how it works check our detailed guide.
Let me highlight the differences in between Stellar vs Ripple and XLM vs XRP.
Major Use case of XLM and XRP
Well in the above intro, you have seen that both are used to solve the major problems of the financial institution’s cross-border payment processing issues.
Both providing a decentralized platform to process any money transactions very fast and for cheap transaction fees.
Ripple is mainly used by the banking and financial institutions only to set up a decentralized secure and fast payment gateways.
However Stellar is focussed to get solution for the smaller retailers and banking institutions both.
Ripple is not providing any service to small retailers to transact their daily payments, hence it is limited to use by the financial institutions only.
The stellar aim is to reach to every single user who is already sending and receiving money using the centralized platform and also to remote areas where no financial institutions available.
This increase its broader scope of acceptance and real use of decentralized based money governing platform in remote areas as well.
Both Ripple and Stellar aim are to solve the cross border payment problems and build a fast and secure payment network.
Hence in Stellar vs Ripple, it seems like Stellar has a broader scope of acceptance.
Decentralized vs Centralized Debate
Well, the evolution of both Ripple and Stellar is to create a decentralized platform where no central authority will have any control over the network.
However, Ripple is having total circulation supply of 100 Billion coins out of which around 55 Billion are owned by the Ripple Lab Inc.
Which somewhere can manipulate the market in the future and looks like a centralized platform.
However, Ripple Lab claimed that they have deposited all 55 Billion coins to Escrow wallet to release 1 Billion coins every month for the next 55 months.
This somewhere ensures that now Ripple is also like another decentralized platform, but still, people are debating on this point.
However Stellar is a completely nonprofit organization and their all 100 Billion tokens are distributed in the market for circulation supply.
20% is distributed in giveaway happened in 2016 and 2017,25% of the total token is given to partners such as businesses, government, and Nonprofit organizations.
50% will be distributed as the partner program by simply signing up to the platform to which Stellar has tied up.
Rest 5% are reserved by stellar.org for operational expenses. Hence this proves that no one has any control to manipulate the Stellar market.
How Stellar vs Ripple Works
In the current decentralized blockchain network, if we talk about the validation of the transactions than mining is the only way to do so.
If you don’t know what is mining than check our detailed guide on what is mining and differences between POW vs POS.
But this is not the case with neither Ripple nor Stellar, in both, all the tokens have already been created and distributed.
Ripple has already authorized a few nodes in the world, which are responsible for validation all the transactions in the network.
All the initiated transactions will first be grouped in a batch then pass to all the validators node where every node will approve it.
If it got approval from more than 50% node than it will pass to next level approval and while it reached 80% approval than transactions get confirmed.
However, Stellar is also using the same mechanism they have authorized a few nodes all over the world.
Every node works on a consensus mechanism to approve any transactions happening in the network.
Stellar requires to maintain the minimum balance of 0.5 XLM in account to complete any operations, which creates a trusted network between two users.
This explains both Stellar vs Ripple working on the same mode of validating transactions.
This somewhere in control of Stellar Org or Ripple Lab to chose the validator, which was not the vision of Satoshi Nakamoto to create a fully decentralized platform.
Transaction Fees
To use both Stellar and Ripple network you would need to pay some transaction fees which ensure the security of the network.
If using a Stellar network than for every operation, you have to pay around 0.00001 XLM.
Operation is different than transactions, a transaction can have multiple operations.
For sending a payment you would have two operations.
- Create a trusted network between both nodes.
- Send the payment to node B from Node A.
In result, you would have to pay 0.00001*2 =0.00002 XLM as network fees. This fee will ensure or secure your network from any DDoS attack.
In the case of Ripple Network, you have to pay a transaction fee of 0.00001 XLM to secure your network from any spam attack.
Where paid transaction fees in the network will be destroyed and directly reducing the circulation supply.
Here transaction means every single action you take on ripple network such as payments, exchange orders, canceling the trade, enabling or disabling trust line.
While comparing the current price then the transaction is even less than 1 cent as compared to banks 3-4% transaction fees.
Use of Lumens (XLM) vs Ripple (XRP)
We have discussed, the importance of both in above as transaction fees to secure your payment network.
But both can be used as a mediator in the network. How?
Let say two banks, where A is using USD and B is using GBP. Where A wants to send payment to B.
Which require conversion of money from USD to GBP will require more conversion fees and network fees on an old network system.
However, the Ripple network will take USD from A and exchange that for XRP and to end B exchange back XRP to GBP.
Will reduce the transaction fees to just 0.00001 XRP instead of 3-4% charged by SWIFT or old payment network.
Another part is, what if you want to send money to a remote area where no fiat exists or no trading pair available.
Example what if no trading pair between USD -INR exit, then how to exchange money?
In such cases, XLM and XRP will act as a mediator to create a trading pair instead of direct conversion for USD to INR.
This would be like a common currency on which both parties could agree to use as a common asset to trade.
But the challenge with Stellar vs Ripple coins is its volatility and not enough circulation supply.
Future of Stellar vs Ripple
Ripple is one of the older network providing the best services to financial institutions and already most of the banking institutions have started using their network as listed below.
Ripple has categorized its Ripple network services into three categories.
- xRapid
- xCurrent
- xVia
Where mass adoption of the xCurrent has been done as a pilot project by 200+ companies like American express bank, standard chartered, Axis bank, etc.
However, adoption of xRapid is done by few such as Money Gram and Western Union.
xRapid mandatorily requires to use Ripple coin (XRP) to use Ripple Network, however, xCurrnet not.
Hence as an investor, you should look for mass adoption of xRapid which directly increase the price of the Ripple coin XRP.
Stellar is growing in its own way, recently IBM has launched a Stellar blockchain based product called Blockchain World-Wire.
IBM blockchain World wire is currently using Stellar Lumens (XLM) and USD only two currency to run on the network.
IBM World wire is about to use in 72 Countries,47 currencies and 44 banking endpoints, which is a very huge beginning.
This itself proves, how big stellar could be in the future, the Iranian government is planning to build a cryptocurrency based on Stellar network.
Stellar is the only cryptocurrency which has been Shariya certified, few companies like Irene which is a renewable energy supplier also using Stellar Lumens.
This proves how both Stellar vs Ripple expanding their reach to multinational business and Stellar is also reaching to remote areas where no financial institute exists.
But there are few competitors like Cardano which can rule the market in the near future.
Price History of XLM vs Ripple
While checking the CoinmarketCap past history since the origin of both Stellar and Ripple we have found below stats.
Ripple Coin XRP was initially traded around 0.005882$ but by the end of 2017 and beginning of 2018, it reached its all-time high of 3.28$.
But currently, XRP is trading around 0.30-0.35$/XRP, which is even in profit for the initial investment.
While checking the price history of Stellar Lumens (XLM), we have found that the initial trading price of Stellar was around 0.002$ in the middle of 2017 April.
Which reached its all-time high of 0.93$ by the beginning of Jan 2018 and currently trading around 0.10-0.15$.
We all know the price movement and volatility of the crypto market, which could change at any moment.
You can not predict the price of any coin, what you can judge is the progress of the project and how they are partnering with the big ventures.
If you got all ideas about Stellar vs Ripple and want to buy any, then find below detail about it.
How to Buy Ripple and Stellar.
Both Ripple and Stellar are available to buy directly in exchange of fiat or through the cryptocurrency exchanges.
For Direct buy to Ripple, you could refer CoinBase, where you can deposit fiat currency and buy Ripple and Stellar in exchange of fiat currency.
If you have a cryptocurrency and want to exchange that for Ripple or Stellar than you can choose the low trading exchange Binance.
How to trade on Binance. I have already explained in the detailed guide.
My View on Ripple and Stellar
It seems like both working on the same vision to solve the financial old system issues and planning to bring a decentralized solution which could ensure more safety and fast processing time.
Both focussed on solving the current cross border payment issues and also willing to set up a new network for remote areas, where no trading pairs are available.
With the introduction of Facebook Cryptocurrency Libra, it is going to be very competitive for Stellar or Ripple to be adopted by the market or financial institutions.
In terms of scope of wide adoption, yes Stellar has more to do than Ripple, but Ripple is a well-known name in financial institutions.
If even 5-10 institute start using Ripple network as a replacement of their current network will definitely boom Ripple to a new level.
Stellar has still much more to go, except IBM no more big partnership till date but have big potential to grow in future.
Stellar is the only cryptocurrency which is Sharia certified and this can increase the demand in the future that looks big achievement for Stellar.
Not you or I can guess the price but can understand how this could be the game-changer in the future if all looks good.
Let me know your comment about Stellar vs Ripple, are you bullish or bearish for future?
