Stellar (XLM) Vs Ripple (XRP); Let’s examine the differences

If you’ve been in cryptocurrency for a while or you just joined the crypto family, you must have heard of Ripple as it is among the popular coins there is. In this article, I will be comparing ripple, a centralized cryptocurrency coin and stellar Lumen which is a fork of ripple even though it is more decentralized than ripple.

Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network. The Ripple Transaction Protocol (RTXP) or Ripple protocol is built upon a distributed open source Internet protocol and consensus ledger.

Stellar on the other hand, is also a real-time gross settlement system (RTGS), currency exchange and remittance network. The Stellar protocol (SCP) is built upon a distributed open source Inte et protocol and consensus ledger. Both networks support tokens representing fiat currency, crypto currency, commodity or any other unit of value such as freduent flier miles or mobile minutes. Both Ripple and Stellar are separately based around a shared, public database or ledger which uses a consensus process that allows for payments, exchanges and remittance in a distributed process.

Ripple

The predecessor to the Ripple payment protocol, Ripplepay, was first developed in 2004 by Ryan Fugger. Ryan Fugger conceived Ripple in 2004 after working on a local exchange trading system in Vancouver. The intent was to create a monetary system that was decentralized and could effectively empower individuals and communities to create their own money. Fugger later built the first iteration of this system.

Stellar

Stellar was founded in early 2014 by Jed McCaleb and Joyce Kim. Initially, Stellar used the Ripple protocol. A fork in Stellar network prompted SDF to take steps to build a new consensus protocol, which resulted in the SCP. SDF claimed the fork resulted from a flaw in the Ripple protocol. Ripple maintains that its consensus network is not vulnerable to the issue encountered by Stellar.

The Stellar Development Foundation with the help of Stanford University Professor DAVID MAZIERES then created an updated version of the protocol with a new consensus algorithm called federated Byzantine agreement (FBA), based on entirely new code. The code and whitepaper for this new algorithm were released in April 2015, and the upgraded network went live in November 2015. Tech giants IBM forged a partnership with Stellar to use their Decentralised consensus protocol as they are investing heavily in Blockchain technology.

Ripple will be tested by Saudi Arabia Central Banks. This is without any doubt the greatest success this blockchain system has had since it was first raised after the original drop from its all-time high. This is already the second central bank to be testing this system for performance regarding global transactions. The first central bank to have tested ripple was the UK’s Central Bank, which occurred during the last year when this bank also started to work with Ripple.

Stellar on the other hand is looking forward to getting new investors which brings more opportunities for this blockchain system. Lots of companies are getting interested in investing in Stellar, too. Stellar have been also linked to acquring other start-up blockchain projects such as ‘Chain’ for an estimated $500m. Chain is a blockchain development platform that aids financial institutions and banks to create their own private networks.

Mission and Use Cases of both XRP & XLM

Ripple works with banks to transform how they send money around the world. Ripple provides global financial settlement solutions to enable the world to exchange value like it already exchanges information – giving rise to an Inte et of Value (IoV). Ripple solutions lower the total cost of settlement by enabling banks to transact directly, instantly and with certainty of settlement. Ripple has developed mainy collaborations is the recent past and more notably known for one of the most well marketed cryptocurrencies. Recentley they had a well known actor Ashton Kutcher on the famous Ellen Degeneres Show promoting Ripple.

Majors banks and financial services are currently in the piloting phase testing out the XRapid technology such as Santander group, Western Union, MoneyGram, Abu Dhabi National Bank etc. There are considerable rumors future of major credit companies looking to get on board using Ripple’s technology.

After parting ways in 2014 with, Jed Mcaleb (CEO) struck a deal with Stripe for $3m for the exchange of 2 billio Stellar Lumen STR (the then native currency of Stellar) and also keyed in major advisors to get on board such as Patrick Collison, (Stripe), Sam Altman (President at Y Combinator) and Matt Mullenweg (Founder of WordPress).

The major difference between the two is that Stellar has built and Integrated ICO blockchain platform for Smart Contracts wihin their system. Ethereum is known for being the Godfather of Smart Contracts/ ICO Blockchain platform which is reflected in it’s current price and its 80x factor growth since February 2017. Launching a cryptocurrency token on Stellar is very easy. Simple tokens can be created in a matter of hours and more complex ones take a day or two. Because Stellar supports simple programming and because they facilate very fast and cheap transactions it’s a no brainer why they are attracting new blockchain start-ups, you don’t need to hire expensive solidity smart contract developers.

Growth of Stellar's blockchain for smart contracts is just like Ethereum. The first ICO to be built on Stellar platform was Mobius Network. Mobius Network is paving the way for the next generation Decentralised Apps (known as DApp). Also in recent histoy we saw KlickEx moving from Ethereum to Stellar Network to facilitate cheaper and quicker cross cross-border transactions in the South Pacific region. More commonly both Stellar Lumens (XLM) and Ripple (XRP) are found on most of the well-known exchanges like Coinbase and Binance.With the number of users that Coinbase has (approx 14milion) the rumor or the next big awaiting announcement is whether they will list XRP as it’s a popular cryptocurrency. This will have some impact on current price of both assets.

Corporate Disbursements: Banks can offer real-time, on-demand, completely traceable and data-rich international payment services to their corporate customers, allowing them to achieve superior working capital management, high Straight-Through Processing rates and automatic reconciliation.

Retail Remittances: Ripple enables banks to provide a low-cost remittance service with a drastically improved customer experience. With Ripple, banks can offer their customers real-time remittances with up-front visibility into rates and fees, payment status tracking and delivery confirmation.

Stellar mission is to expand financial access and literacy worldwide. It is a platform that connects banks, payments systems, and people. Stellar connects people to low-cost financial services to fight poverty and develop individual potential by moving money quickly, reliably, and at almost no cost.

Micropayments: Decrease the cost of smaller transfers. Offer incremental payment options to customers.

Remittances: Send money to different countries duickly, for a fraction of a cent. Facilitate low-cost payments between different currencies. Both Stellar and Ripple mission is to help the underbanked and unbanked in thrid world countries. A tangible example would be someone in Bangladesh (native currency TAKA) would send any amount of money to someone Nigeria (native currency NAIRA) almost instantly and a fraction of cent of cost per transaction. Stellar and Ripple act as the anchors to conduct the transaction. This has always been an oppurtunity and challenge in our financial ecosystem.

Mobile Money: Make mobile money platforms interoperable. Let customers send MM to recipients with different providers.

Social Enterprises + NGO Projects: Use low-cost financial services to bring about sustainable social change.

Native Currency of both cryptocurrencies

Ripple Labs currently plan to distribute XRP primarily through business development deals, incentives to liduidity providers who offer tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP. Ripple Labs expect to hold approximately 50 billio XRP by the end of 2021.

XRP is a deflationary coin. 100 billio XRP were created. When a user conducts a financial transaction in a non-native currency, Ripple charges a transaction fee. The purpose of the fees is to protect against network flooding by making the attacks too expensive for hackers. This transaction fee is not collected by anyone; the XRP is destroyed and ceases to exist.

Originally, the native coin of Stellar network was called Stellar STR. After the network was upgraded in 2015, STR was replaced with XLM to avoid confusion between the Stellar network name and its native currency.

XLM is an inflationary coin. The Stellar network has a built-in, fixed inflation mechanism. New lumens are added to the network at the rate of 1% each year. The network also collects a base fee for each operation in a transaction. The funds from base fees are added to the inflation pool.

As a balancing measure for the ecosystem, anyone who holds lumens can vote on where the funds in this pool go. Each week, the protocol distributes these lumens to any account that gets over 0.05% of the votes from other accounts on the network. The votes are calculated based on total XLM.

Lumens Distribution as per Stellar mandate

50% for the world via the direct signup educational program

25% for nonprofits to reach underserved populations via the increased access program

20% for the Bitcoin program

5% for operational costs

Finally, XLM is supposed to be a protection for the Stellar Network against spam and DoS attacks, Stellar accomplishes this by requiring a minimum balance of XLM to participate in the network and assessing a per transaction fee to be paid in XLM. Inflation (devaluation) of XLM means cheaper network participation and transactions, which is good as long as it doesn't get so cheap that the spam and DoS attacks it's meant to prevent are not achieved.

There is no doubt both companies are in direct competition with both of them being placed in top 10 cryptocurrencies by current price. If we factor in sustainability, helping the unbanked and underbanked in third world countries, mission to create cheaper and faster services for finanacial services and institutions (which is an underlying issue in the financial & banking world), long-term steady growth, I can confidently say that both projects will add a lot of future economic value. These two Alt-coins have both utility and potential to revolutionize how we send money and currency, like Stellar moto goes ‘Move money like an e-mail’.

Original Source: https://ekzaga.com/blog/post/cryptocurrency-stellar-xlm-vs-ripple-xrp-lets-examine-the-differences/