Last month I made a video where I covered the similarities and differences in Stellar and Ripple. I wanted to share my write up and comment on some of the feedback I received and resolve any issues people seemed to have.
Stellar
1. Stellar did get awarded a non-profit status: source
2. Stellar is very very transparent about the distribution process of their lumens: source
3. Stellar partnered with IBM in 2016: source
3. Yes only 5% of lumens are held by the Stellar Foundation and yes technically a portion of the other 95% that have not been distributed yet are under the foundation's control. However they are transparent about their wallet addresses, where the lumens are held, and that they are allocated to different programs. source
Ripple
1. I left out the fact that Ripple is in fact an open-source project.
2. Ripple does in fact have the ability to freeze funds. Please show me a source that states Stellar can do the same. source
3. At 6:12, I meant to say "Holds 61% of XRP in circulation" not Ripple.
Jeb McCaleb
1. I was criticized for my statement on Jeb the creator. I would like to clarify that I state I have no personal biases against him. He is very intelligent - clearly as he created both cryptocurrencies and built two communities. I stand by my statement that his past history in the crypto community is a bit tumultuous and he is a controversial figure. I am not speaking about his morality, his personal views, or him as a human being - I am simply stating people either love him or dislike him.
2. He is also the creator of eDonkey, "The eDonkey Network (also known as the eDonkey2000 network or eD2k) is a decentralized, mostly server-based, peer-to-peer file sharing network created in 2000." source
3. I mention him creating Mt. Gox, I'd like to add he left long before the company went insolvent and stole from their users. He was not implicated in any of those issues.
Overview of Ripple:
Ripple Labs was founded by Jed McCaleb on 2011 and is a financial tech company that sells payment software to banks worldwide. Their goal is to create a network where money and value can move around as fast, secure, cheap, and global as possible. The crypto currency XRP is separate from Ripple Labs. XRP is the native digital asset of the Ripple Network If we think of Ripple, we often think of the cryptocoin XRP. Ripple is completely separate from XRP, which often causes confusion.
Ripple has created XRP in order to be able to deliver products (more easily) to its customers. However, it should be noted that the XRP is not required for the network to work nor is it required for banks to use it if they choose to adopt Ripple as they multiple software they offer.
Ripple uses the Ripple Protocol consensus algorithm (RPCA) and it runs a permissioned ledger where Ripple Labs due to regulations has to maintain a unique node list that is a list of 'trusted' nodes on the network. Anyone can start a validator and anyone can choose whatever validator they wish, but the UNL by Ripple is considered the standard.
Transactions are grouped into sets and sets are voted on by validators, every set must progress through 4 sequential rounds of voting. and not everyone can run a node.
xCurrent
This is their main product. It gives banks the ability to efficiently move money across borders. It uses RippleNet, the Ripple blockchain, but does NOT use XRP. Banks like this software because it allows them to save money and time when sending payments.
xRapid
This product helps banks improve liquidity when trading in emerging markets. It is the only Ripple product that does requires XRP to be used. Banks could benefit from this because it could help with liquidity and movement of their funds, but dislike it because it introduces unknowns — such as the volatility of XRP.
xVia
This is still in development and scheduled to come out in early 2018. It’s similar to xCurrent, but allows entities besides banks (such as corporations and payment providers) to send money through banks. xVia also does NOT use XRP.
Ripple touts an impressive list of 100+ financial institutions that they are working with. However those institutions are using xCurrent, and as mentioned xCurrent does not utilize the native asset XRP. source
There is a list of about 4 or 5 cooperating partners that use xrapid, thus only those partners actually uses XRP. Ripple Labs is a very successful company but people associate that success with the assumed success of XRP, and those are not one in the same.
Overview of Stellar:
Founded by Jed McCaleb in 2014 - yes that’s right the same person founded Ripple and also the same guy who founded Mt. Gox in 2010 but left the company in 2011.
It started out as fork of Ripple and was named Stellard. Stellar co-founder Joyce Kim claimed there was a flaw in the Ripple protocol this led the Stellar Development Foundation to create an updated version of the protocol called Stellar-Core with a new consensus algorithm, based on entirely new code. The upgraded network went live in November 2015 and was renamed to Stellar which is what is used and active today. Meaning it is no longer a clone of Ripple code.
Stellar is an open-source protocol for exchanging money. Where Ripple wants to target Financial Institutions as the user base, Stellar wants to target individuals as the user base. XLM or Lumens is the native digital asset of the Stellar network, Lumens can also be sent extremely quickly and with low fees. Lumens are necessary in order to use the bridge network network to conduct transactions in multiple currencies.
Stellar uses the Stellar Consensus Protocol (SCP) rather than Proof of Work which is an evolution of FBA or Federated Byzatine Agreement. Stellar is based on the concept of a quorum and not a block. The protocol works through the use of quorums and quorum slices, which are a set of nodes used to reach an agreement.
The Stellar network is able to process a large number of transactions quickly and for fractions of a penny because there is no mining involved. The quorums securely reach consensus by exchanging signatures. The Stellar Consensus Protocol (SCP) is a protocol that achieves optimal safety against ill-behaved participants. Basically, it aims to be more secure and offer better protection against malicious parties.
Similarities:
- They are both a currency created as a bridge to help utilize multi currency payments to individual parties or institutions.
- Jeb McCaleb founded both projects.
- Each with a premined coin with a circulating supply of 100billion
- Both with very fast transaction speeds and low fees.
Differences:
- Ripple states they can handle 1,500 transactions per second with a validation speed of 4 seconds, stellar states they can handle 1,000 tps but they’ve tested up to 3,000 with no issues. And they validate transactions in 3-5 seconds.
- Ripple allows freezing currency one has issued, which Stellar does not seem to support (at least yet)
- Stellar is inflationary, with 1% new coins being created every year and all fees being recycled, the network also collects a base fee for each operation in a transaction. Each week the funds from base fees are added to the inflation pool, and the protocol distributes these lumens to any account that gets over .05% of the votes from other accounts on the network.
- Ripple destroys fees, meaning the total number of ripples in existence is slowly diminishing over time.
- Ripple is criticised heavily for concentration of 61% of coins being held by Ripple labs. Whereas Stellar states only 5% of Lumens is held by the Stellar Development Foundation to pay for operation costs. You can see the Lumens distribution live via the link I left at the beginning of this write up.
- The major argument over Ripple holding a majority of the coins is that they put 55 billion in escrow meaning they can’t just up and sell it and they take out 1 billion every month to fund the project.
- Stellar allows anyone to choose whom to trust, that means freedom and decentralization whereas Ripple’s network is privatized, meaning that not everybody can participate in the systems, only trustworthy nodes are “selected”.
- The Ripple protocol does not allow you to choose whom to trust and their network may have a lot of nodes but all those nodes are connected to a Ripple node controlled by the company so they may not be considered decentralized.
Ripple has stated they are going to try to move to more decentralized nodes, but I’m unsure of how that will work.
Take aways
- To me the major differences are the fact Lumens are needed for the Stellar network to function, compared to XRP which is not needed for all of Ripple’s products.
- The argument of centralized versus decentralized is pretty intense too, Lumens seem to be better distributed than XRP and the Stellar Foundation doesn’t hold 60 some odd percent of their lumens like Ripple holds XRP.
- A major issue I see with both is the creator Jeb, not that I think negatively of him as a person but I believe his past crypto history may influence the way people see one project or the other.
- My assumptiom that I was going to get heat for my video was correct but I did my best to present facts and leave biases out of it.
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Sources:
galactictalk
coincentral
reddit
60to45
bitcoinist
quora
captainaltcoin
investinblockchain
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