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Ripple vs Stellar: How are These Blockchains Different?

The YouHodler Team
May 27, 2022
Ripple vs stellar over a blue logo

Bitcoin's rise to challenge the way we look at traditional finance is one to admire. However, since its inception, many other projects looked at Bitcoin in awe and saw the other different ways and forms in which they can shake up traditional finance as we know it, such as Ripple vs Stellar. They are often in the same category. But why exactly? We analyzed the history and technical aspects of both to deliver a clean comparison of the two.

What is Ripple (XRP)?

When it comes to Ripple, it was first introduced into the blockchain sphere in 2013. This happened through the sale of the formerly known Ripplepay. When it came into the hands of Jed McCaleb, Arthur Britto, and David Schwartz in 2012, they shifted it towards more of an open-ledger for financial institutions.

Ripple is a for-profit company that uses the Ripple Protocol Consensus Algorithm (RPCA). This established what we now know as the “Internet of Value”. The vision behind Ripple was always to make it easier for people to send money globally.

In 2013, Ripple Labs launched 100 billion XRP into existence, which is the token name of Ripple. It is a decentralized network that enables fast, low-cost international payments. Ripple “seeks to revolutionize the global financial system” by providing a trusted, distributed ledger that allows for secure money transfers in any currency.

Its goal was to use less energy that Bitcoin with faster transactions. In fact, Ripple does not use mining like other cryptocurrencies, so there is no need for energy-intensive hardware. Rather, Ripple validates transactions through a consensus process between network participants. This means Ripple can handle a large number of transactions quickly and cheaply.

Who uses Ripple?

Ripple is a payment network. Individuals and businesses both use it. For example, banks and financial institutions adopted Ripple to quickly settle cross-border payments. Because Ripple can settle payments in real-time, it has the potential to disrupt the entire banking system.

More specifically, Ripple sought to challenge the traditionally known and widely used SWIFT system, which allows the exchange of transactions between banks. However, while SWIFT usually takes two to three days to confirm a settlement, Ripple can confirm a transaction within seconds. Since it uses a distributed ledger, there is no need for a third party to make transfers.

Thus far, major banks such as Santander, American Express, and UBS use Ripple. Some central banks are also testing it. In addition, Ripple has partnered with money transfer companies such as MoneyGram and Western Union.

What is Stellar (XLM)? 

Jed McCaleb created Stellar in 2014. Funny enough, he also helped create Ripple. Now, the Stellar Development Foundation runs Stellar as a non-profit organization. Stellar Lumens (XLM) is the network's native currency.  Stellar’s goal is to make it easier for people to send money globally, similar to Ripple.

Furthermore, Stellar serves individuals and businesses that are underserved by the current financial system. Stellar is a decentralized network that uses the Stellar Consensus Protocol (SCP). SCP allows for fast and cheap payments. Like Ripple, there is no need for energy-intensive hardware because it does not use mining. Rather, it uses a consensus process to validate transactions. This means that Stellar can handle a large number of transactions quickly and cheaply.

Stellar Lumens is also one of the most recognized projects in the crypto world. It is a decentralized protocol that enables you to send money to anyone in the world, quickly, reliably, and for fractions of a penny. Furthermore, Stellar is an open network that allows anyone to build financial products on top of it. XLM,  facilitates transaction fees and rewards users who verify transactions. For the average joe, stellar is more accessible.

What are Stellar Lumens used for?

People who want to send or receive money quickly and cheaply would use Stellar. Because Stellar is an open network, developers can build financial products on top of it, such as mobile wallets, payment processing applications, and lending platforms.

Stellar also works similar to the SWIFT system. When, for example, you want to transfer EUR to a GBP account, SWIFT uses USD as an intermediary. Stellar, on the other hand, uses its native token, XLM, for the same reason. However, transfer times differ greatly (Stellar has a two-second average per transaction) and costs are relatively minimal (0.00001XLM per transaction). Quite the bargain when compared to SWIFT.

The use of XLM is mostly directed toward the average individuals rather than big banks, particularly those in less developed countries. Stellar themselves claim that they consider themselves to be a "not for profit" company in the sense that their goal is to help people rather than make a profit.

Ripple vs Stellar: What are the key differences?

The debate of Ripple vs Stellar is one of two different blockchains. Ripple is a network that enables fast, low-cost international payments, while Stellar is an open network that allows anyone to build financial products on top of it. As noted before, both blockchains have their own cryptocurrency, XRP and XLM, which are used to pay transaction fees and reward users who verify transactions.

Here is a list of notable differences between the two cryptocurrencies:

- Stellar is an open network that allows anyone to build financial products on top of it. Meanwhile, Ripple is a network that enables fast, low-cost international payments.

- Ripple is used mostly by banks and financial institutions to settle international payments, while people who want to send or receive money quickly and cheaply generally would use Stellar.

- XRP is Ripple's native currency. It is is used to pay transaction fees and reward users who verify transactions. Stellar also has its own cryptocurrency, XLM, which is used to pay transaction fees and reward users who verify transactions.

- Ripple does not use mining like other cryptocurrencies, so there is no need for energy-intensive hardware. Rather, Ripple validates transactions through a consensus process between network participants. This means Ripple can handle a large number of transactions quickly and cheaply. Stellar also does not use mining, but it uses a different consensus algorithm called the Federated Byzantine Agreement, which allows for quick and cheap transactions.

- Ripple is a private company, while Stellar is for “non-profit” purposes. In other words, Stellar is seen to be not as centralized as Ripple.

Ripple vs Stellar: Which one should I choose?

Stellar and Ripple are both great blockchains with their own strengths. The former is a good choice for banks and financial institutions that want to settle international payments quickly and cheaply. Stellar is a good choice for people who want to send or receive money quickly and cheaply.

If you are looking for a blockchain that is more decentralized, then Stellar might be the better choice for you. If you are looking for a blockchain that is based in the US, then Ripple might be the better choice for you. Ultimately, it depends on your needs and preferences.

About the Author
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The YouHodler Team is the collective mind of the platform. It's a hive of creativity and diversity in the form of one singular blog author. We are united as one.

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