There isn’t much digital currency like Ripple on the market. Ripple was the third most valuable digital currency in terms of market value in a very short time.
But despite this rapid and dynamic growth, Ripple tends to confuse many investors.
The main reason people are confused is that Ripple is different from many digital currencies that want to attract investors. Unlike Bitcoin and Litecoin, Ripple is nothing more than a peer-to-peer digital currency.
In fact, Ripple’s parent company, Ripple Labs, is revolutionizing blockchain technology with significant improvements, such as improving cross-border payments. But Ripple isn’t the only one doing this anymore.
Today, another digital currency, Stellar Lumens, doesn’t just do anything like Ripple does, it also pushes Ripple’s throne.
Although Ripple and Stellar are quite similar to each other, there are some important differences between the two.
What is Ripple (XRP)?
Chronologically, the first technology on the market is Ripple. So it’s best to start talking at Ripple first.
Many investors hear a lot, like dozens of big bank organizations are among Ripple’s clients.
It is true that banks interact with Ripple, but these banks do not buy Ripple’s digital currency, XRP. Banks use blockchain-based financial instruments provided by Ripple Labs, the company behind the digital currency XRP. For example, one of these blockchain-based technologies is the Ripple Transaction Protocol.
The development of the Ripple Transaction Protocol began in 2004, long before the digital currency world.
Ryan Fugger has developed a secure online payment system called RipplePay. Jed McCaleb, who was completely separate from RipplePay in 2011, would start working on his own digital currency. This system was based on centrality rather than decentralization; that is, a system where blockchain-based books are managed entirely by the company, not by miners or mining operations.
If you are a digital money enthusiast, the name McCaleb will look familiar to you. Apart from playing roles in Ripple and Stellar, McCaleb is a bitcoin stockbroker in history that has become known as Mt. He was the founder of Gox.
In 2012, another person named Chris Larsen joined McCaleb. Together, they approached Fugger and took over his RipplePay project. McCaleb and Larsen combine RipplePay with their digital payment systems to form a new company called OpenCoin.
OpenCoin quickly attracted attention from major investors, including Andreessen Horowitz and Google Ventures. Within a few years, OpenCoin became Ripple Labs, a company committed to providing state-of-the-art financial instruments for a large bank market.
One of these tools is the blockchain-based Ripple Transaction Protocol using Ripple’s local digital currency XRP.
The Ripple Transaction Protocol using Blockchain technology worked.
If banks use the Ripple Transaction Protocol, it is possible to make cross-border money transfer transactions safely and quickly. However, transfers take place at low wages, which allows banks to significantly reduce their expenses in cross-border transfer transactions.
In 2014, MIT Technology Review chose Ripple Labs as one of the smartest companies of the year. The company continued to grow in line with the growing interest of the financial community.
First of all, Ripple was a bridge between banks and blockchain technology and showed how financial institutions could use blockchain technology.
Everything sounds great for Ripple, but unfortunately the story doesn’t stop there. In the world of Ripple, things have become very confusing, and Stellar is the result of this mess.
What is Stellar (XLM)?
Stellar appeared in 2014 exactly three years after McCaleb began working on Ripple’s foundation.
Stellar was created after McCaleb and Stellar ortaks co-founder Joyce Kim’s differences with the Ripple team. However, it is based on Stellar Ripple’s codebase and there are similarities between currencies.
Unlike Ripple, a company interested in profit, Stellar emphasizes that it is not for profit and that surpluses belong to the Stellar Development Fund.
So how does the Stellar network work?
The Stellar network enables financial institutions that use this technology to perform cross-border money transfer transactions with the digital currency Stellar Lumens. For example, this technology can accept foreign currency (say USD), convert it to Stellar Lumens, and then convert it back to the intended fiat currency.
The Stellar network also performs these operations on a decentralized system, unlike Ripple.
In 2017, IT giant IBM announced that it will start using Stellar Lumens for cross-border money transfers in the South Pacific regions, along with a bank network.
Who will win? Stellar or Ripple?
To be honest, one of the most important differences investors have to look at in Ripple and Stellar is philosophy.
Many investors and digital currency analysts said they were worried about Ripple Labs, which is holding excessive amounts of XRP. How and when the company plans to circulate this amount is still a hot debate. People who are worried about this may see Stellar as a potential option.
Ripple, on the other hand, stands out with more market experience. Ripple couldn’t attract IBM, but he soon got the support of more than 100 major banks, including Santander and UniCredit.