Ripple vs Stellar: A Comparison

This article will attempt to address the “Ripple vs Stellar” question that I’ve seen pop up multiple times across the internet. Over the past few years, the cryptocurrency space has seen a meteoric rise in terms of popularity and widespread adoption. With familiar names such as Bitcoin, Ethereum and Litecoin always dominating the news, people sometimes overlook the other myriad of projects offering valuable use-cases. Two such projects, namely Ripple and Stellar have been making some serious advancements in terms of partnerships with major financial and business entities around the world.

Both Ripple and Stellar have several similarities both in terms of use-case and usage. However, they also differ in quite a lot of respects and have become a topic of comparison between crypto-enthusiasts and investors alike.

Ripple: A Brief Introduction

Ripple, whose cryptocurrency is XRP was first introduced by Chris Larsen and Jed McCaleb, a couple of American programmers that conceived the idea and created it in 2012. Apart from being just a cryptocurrency, Ripple is also a real-time gross settlement system, serving as a cross border remittance network backed by Ripple Labs. Before moving any further, it is important to understand the difference between Ripple and the XRP token, where the former represents the technology while the latter represents the token itself. Ripple was created with the aim of overcoming the challenges in the existing cross-border settlement network, tackling plaguing issues such as speed, high cost of transfers and general inefficiencies.

In terms of technology, ripple relies on a system known as distributed ledger technology, thereby eliminating the need for third parties while making cross-border payments, while also reducing costs and the time required. This has also rendered them very useful to banks across the globe, because of its ability to provide liquidity.

Stellar: A Brief Introduction

Stellar, originally called Stellar Lumens, is another blockchain based, cross border payment system which was created by one of the co-founders of Ripple, the Jed McCaleb at 2014. Just like Ripple, Stellar refers to the technology while XLM refers to Stellar Tokens. There are some remarkable similarities between Stellar and Ripple, including its use case, its speed and the fees involved. The coding is also similar to that of Ripple.

Key Differences (Ripple vs Stellar):

Despite the aforementioned similarities between the two projects, there are some striking differences as well, which define the need for both of these technologies to co-exist. Some of these aspects are explained in brief below:

  1. The Difference in Target Audience and Goals: The first major difference between the two projects is seen in terms of goals and target audience. While Ripple was specifically targeted towards banks and other financial institutions, Stellar’s main aim was to extend the reach of financial services around the world, even reaching individuals who are un-banked. Thus, Stellar refers to itself as “not for profit”.
  2. Consensus Algorithms: The two projects employ two different types of consensus algorithms, with Stellar using its unique consensus protocol versus Ripple’s proof of correctness protocol.
  3. Inflationary vs deflationary: Ripple’s XRP tokens are deflationary, meaning their circulation decreases with time. Stellar’s tokens on the other hand inflationary which results in an increase in circulation.
  4. Parent Companies: Ripple, the company behind the XRP token is a large-scale organization at the moment, with the leverage of attracting much more capital than other companies like Stellar. Stellar on the other hand, has a much more technologically knowledgeable staff with a team of experts who focus more on technology rather than marketing their product.

Which one is Likely to Succeed?

Because of the presence of some crucial differences, the majority in the crypto community believes that there is little reason why both of them cannot co-exist. At the time of writing, Ripple is ranked 3rd according to CoinMarketCap, and is valued at 0.395042 USD, while Stellar is ranked 10th, valued at $0.121721 USD as of 11/6/2019.

That being said, it is difficult to predict a winner accurately between the two projects in an increasingly volatile and unpredictable cryptocurrency market. At the time of writing, Ripple has a marketcap which far exceeds that of Stellar, owing to the number of high-profile partnerships Ripple has achieved over the past 2 years.  With more than 100 banks reportedly working with Ripple, it trumps Stellar in this respect.

However, to combat Ripple in this aspect, Stellar’s technology provides a cheaper and much more seamless way of exchanging currencies. This, along with the fact that Stellar is more decentralized, can certainly help it gather the number of users it needs to increase its adaption.

Final Thoughts

With a common goal of providing an easy way to complete cross-border transactions involving multiple currencies, both Ripple and Stellar seems to have bright prospects in the future cryptocurrency landscape. With both garnering popularity and ranking high in terms of market value, Ripple and Stellar have enough differences that should allow them to co-exist and grow in the years to come.

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