Ripple vs. Stellar

Ripple vs. Stellar

Ripple and Stellar both share many similarities. In fact, they have so much in common that people have mistakenly been led to believe that Stellar’s XLM token was a fork from Ripple’s XRP. In this article we will dive into the similarities and differences between Ripple XRP and Stellar XLM.

Project Goals

Both Ripple and Stellar are both cryptocurrencies which share a similar codebase. They are both cross-border payment systems which aim to facilitate growth and adoption within the crypto-space, and both projects were heavily influenced by Stellar’s founder, Jed McCaleb. Where the projects begin to differ is in their target markets.

Ripple goes after corporations, payment providers and financial institutions such as banks. Stellar – on the other hand – is aimed at providing low-cost financial services, geared towards aiding developing countries. Essentially, Ripple focuses on big targets, while Stellar focuses on the individual. They both however want to build fast and secure cross-border payment networks, and both projects are disruptive to the ecosystem of traditional payment systems.

How Does Ripple Work?

Ripple functions within a closed source network known as RippleNet. RippleNet is a somewhat newer addition to the Ripple ecosystem, which is a combination of its xRapid (where XRP gets its name) and xCurrent technologies. If you were familiar with Ripple in its early days, these are two names you will likely remember, as they are also independent products. RippleNet essentially offers frictionless access to global payments, payout options and on demand liquidity for over 40 different currencies, through a decentralized system for transactions. Payments on the RippleNet are processed through pre-validated transactions, which keeps costs at a minimum for worldwide transactions.

How Does Stellar Work?

Stellar is an open source and ownerless network. Stellar’s claim to fame is that it allows any user to settle payments, issue assets, or trade on the network. Stellar is designed for its users to be able to interact with international markets, by operating above local economies. Stellar’s network is also currency-agnostic, which means it can interact with any currencies, including fiat currencies. The Stellar network essentially makes it so its users are not limited by their borders. Like Ripple, Stellar is also incredibly cheap to use. Stellar’s network makes it easy to send payments across the world, as stellar transactions are performed on a peer-to-peer basis.

Ripple’s Consensus Protocol

Ripple uses what is referred to as the XRP Ledger for its consensus mechanism. The XRP ledger focuses on three principals:

• Agreement

• Correctness

• Forward Progress

Participators on the XRP network select a server. Each server is responsible for participating in the consensus protocol and consists of validator nodes. Servers use their validators to agree upon the transactions included in that ledger. A transaction is approved when a large enough number of validators agree that the transaction is valid. If 80 percent of the validators on the network agree, then consensus is achieved. If less than 80 percent of the validators agree, the network does not make progress.

Stellar’s Consensus Protocol

The Stellar Consensus Protocol, or SCP behaves somewhat differently, yet utilizes some structural similarities. Within SCP, well-behaved nodes can sustain transactions, even in the presence of potentially nefarious nodes. This consensus protocol is commonly referred to as a Federated Byzantine Agreement System. Progress on this type of network stops in the presence of a partition and once again resumes when consensus is reached.

SCP can be broken down into four key identifiers:

• Asymptomatic Security

• Flexible Trust

• Decentralized Control

• Low Latency

XRP Supply and Distribution

XRP is a pre-mined token with a maximum supply of 100 billion. XRP was created in 2012, and 20 billion tokens were divided amongst the developers. Ripple placed 55 billion tokens into an escrow – AKA impound account – in 2017. This account sells one billion tokens – every month – to users over a 55-month period. The remainder of what has been sold from each month’s one-billion-dollar sale offering is redeposited into the escrow account to add to the remaining balance within the account for later disbursement.

Ripple has been in hot water over their XRP utility token, as many regulators argue that it is technically an unregistered security, rather than a cryptocurrency. Rulings have been made in many parts of the world, legally classifying XRP as a cryptocurrency, although the United States SEC lawsuit against Ripple is yet to be resolved.

XLM Supply and Distribution

In a similar fashion to XRP, 100 billion XLM tokens were pre-mined in the genesis phase of Stellar. The Stellar Foundation oversees the distribution of XLM. Over the next decade or so, Stellar plans on giving away 50 percent of its remaining XLM tokens to Stellar users, in an effort to make the cryptocurrency more decentralized. Stellar also plans on giving another 25 percent of its remaining tokens to nonprofit organizations across the world which may not have the same financial ease of access as others. Furthermore, Stellar plans on donating 20 percent of their remaining tokens to both BTC and XRP holders, as the Stellar project believes it owes a gratitude to these cryptocurrencies. Stellar will continue to hold five percent of the remaining supply for the purposes of its own research and development.

In Conclusion

The big takeaway from this article is that Ripple and Stellar are both unique projects. The XRP and XLM tokens are utilized for different purposes, even though they share many of the same similarities. Both Ripple and Stellar are fantastic projects which have shown incredibly bullish action in the past, and even continue to show bullish action in the market, as it is now!

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