Most people who are invested into either Ripple or Stellar know that, both have the same co-founder and are top transaction Cryptocurrencies. But exactly how in details are Ripple and Stellar different? And are they actually competing with each other? Also in the future, which coin is likely to see the greater gains? Is Ripple centralised or decentralised? We try to answer all these questions and more in this episode of Cryptolite.
Most people who are invested into either Ripple or Stellar will know that, both Stellar and Ripple had the same co-founder Jed McCaleb and Stellar was originally a fork of Ripple started by McCaleb. This post is not trying to change your opinion, in fact, it might reinforce your opinion, but because these two coins are such big players on the market, (the 3rd and 7th biggest marketcaps), especially for people who are new to cryptospace, I believe it is worthwhile knowing the relationship and fundamentals of both coins, so that we can each have an educated and accurate opinion of each. So without further ado, we will now try to do the most comprehensive summary of Ripple and Stellar.
Let me cover abit of history about how Stellar was born out of Ripple, before going into a deep comparison of both and finally ending with a price prediction.
There are two versions of history of how Stellar was born out of Ripple. One is pro-Ripple and revolves more around interpersonal relationships, the other is pro-Stellar and revolves around technical differences.
- The first version which is pro-Ripple, states that a major part of why the Jed McCaleb left was due to his complicated relationship with co-founder of Stellar Joyce Kim. Apparently whilst McCaleb was still working in Ripple in 2014, he was introduced to Joyce Kim who was CEO of her company SimpleHoney. Shortly after that he bought over her company and brought her into Ripply. Whilst at Ripple, insider said she made things difficult by trying to play up her importance and that of McCaleb. And her tenure at Ripple only lasted 6 weeks and was part of the reason McCaleb lost interest in the project.
Around the same time, Wells Fargo a US banking giant was considering becoming the first bank to embrace cryptocurrency. Now McCaleb was also the founder of MtGox, and Mt Gox had collapsed not long ago. Ripple labs CEO, Christ Larsen had more than 20 years relationship with Wells Fargo and was keen to make a deal with them, however they told him that because of the Mt Gox incident and McCaleb’s connection with Mt Gox, they had to get him out of the company or they wouldn’t bank Ripple.
The ensuring turmoil within the company, ultimately led to a meeting where McCaleb tried to remove Ripple’s current CEO Chris Larsen by a vote. Apparently every single person on the board had begged him not to choose between him and Chris, but he went ahead anways. The end result was everyone chose Chris, and McCaleb was outvoted.
This account came from New York Observer and was reposted on coindesk. I’ve placed the link below for you if you’re interested to read it for yourself. Not surprisingly, McCaleb indicated the article failed to capture the facts of the real story.
- Now, the second version which is pro-Stellar is that Ripple as a blockchain project was targeting centralised instituitions like banks. The team realised that they needed a separate branch to reach out to the smaller companies and individuals who needed day-to-day transactions and that is when McCaleb started Stellar. Initially Stellar’s coding was very similar to Ripple, however, increasingly the team found that the Ripple’s coding did not suit the purposes of Stellar in reaching out to their target population and after a year, in 2015, Stellar launched its own coding (which we will talk more about later) and thus became a new project. Stellar’s current concensus algorithm/ coding is so different from Ripple that it is no longer a fork, but a separate project.
Rumors thrown in to this version also report that McCaleb was bullied at Ripple due to his different ideas, and that When McCaleb left Ripple, he tried to dump all his XRP quickly, but was stopped by Ripple through a series of lawsuits. Thanks to Ripple’s efforts though, McCaleb will probably be the first self-made billionaire against his best efforts.
This version was pieced together from various sources, but the last bit on the rumors was from a Quora article back in end of October 2017 that was written by David Schwartz, chief cryptographer of Ripple, but even he admitted he could not claim to be unbiased that are parts of the account of which even he was uncertain even though he was there.
I guess there are 2 sides to every coin and unless you are one of the people personally involved, we will never know the complete accurate truth. Mostly likely the truth is a combination of everything involving relationships, philosophy and technical differences.
Lets now take a look at the differences between Ripple and Stellar. We will split their differences into 4 categories, philosophical, technical, token use and partnerships.
Philosophical:
Ripple is essentially a profit-body with the aim to create payment networks with large financial institutions like banks. The people who will benefit the most from the profits will be the owners of Ripple.
Stellar in contrast, is a not-for-profit organisation with altruistic aims to provide greater access to the world’s unbanked population and connect people to low cost financial services to fight poverty and develop individual potential. So theoretically, the bulk of the profits of its systems, goes to users.
In terms of Stellar’s aim to develop individual potential, they are an open source network, and have an open ledger that anyone can view, access, and join. Anyone could be a transaction validator on Stellar, though some validators may not be relied upon by all parties.
In contracst, Ripple is a closed source network, where the general public cannot look at it or change it. It runs a permissioned ledger where Ripple itself determines who may act as a transaction validator on their network.
This is one of the reasons why Ripple is considered “centralised”.
- Stellar is also much friendlier towards third party developers. It hosts programs such as the Stellar Build Challenge to reward builders who create useful technologies on the Stellar network. They also released a Partnerships Program that offers partners up to $2 million in lumen grants.
Technical:
- As mentioned above, initially Stellar shared a lot of ripple coding and its code was called “Stellard”, however, about a year into it’s existence, they launched an entirely new payment system protocol called “Stellar Core”—which uses Stellar Concensus Protocol (SCP).
In contrast, Ripple’s protocol is the “Proof-of-correctness” concensus mechanism.
For the next few seconds I’m going to get really technical in terms of the differences between the two systems, because there is no simple way to explain it. So if technicality doesn’t appeal to you, feel free to skip this section. If it does though, these are the differences.
Stellar Concensus Protocol is a very flexible system in terms of how nodes configure their quorums (rather than blocks), and is explicitly designed to accommodate Byzantine failures (where bad nodes lie) and different nodes trusting different subsets of the system. By contrast, ripple uses a fixed 80% threshold, and their analysis does not apply to cases in which different nodes have different sets of nodes to trust. So Stellar Concensus Protocol biases towards correctness at the expense of liveness; whilst Ripple follows a model similar to Bitcoin allowing ledger forks to occur temporarily and relying on majority validation.
There are numerous other differences between the two systems at both the implementation and protocol level. For instance ripple allows freezing currency one has issued, which Stellar does not seem to support (at least yet).
Stellar uses the Ed25519 signature scheme (basically Schnorr) and 32-byte public keys as addresses, while ripple uses ECDSA and 20-byte hashes as addresses.
At the implementation level, stellar's protocol is specified using Sun XDR, whereas ripple uses a combination of google protobufs and hand-written marshaling code.
Alright guys, technical stuff over. Phew! We can start talking English again. Even I didn’t understand some of that. I’ve posted below the links below where I got all this information, feel free to pour over it at your own time.
Performance wise, Ripple boasts the bigger number at 15,000 trx/ sec, and Stellar is 1000trx/ sec. However, practically, Ripple is sitting around 3-4000trx/ sec and so is Stellar. Both have proven actual transactions times of 2-3 seconds, so transaction performance, my opinion is currently they are about the same.
Token
The 3rd difference between the two lies in their token mechanics/ distribution.
Stellar is explicitly inflationary, with 1% new coins being created every year and all fees being recycled, while Ripple destroys fees, meaning the total number of ripples in existence is slowly diminishing over time.
XRP is the currency for Ripple Labs, and currently Ripple labs has 2 products in the mareket, the first is xcurrent. Xcurrent- does cross border transfers cheaply and quickly and most of Ripple’s bank partners are using this technology, but the big catch is you don’t need to use XRP in Xcurrent, so a bank could be using Ripple technology, but the token price won’t go up because its not being used. Xrapid is the next product that does require XRP to be used and it greatly increases liquidity, but at the moment, I believe only 4 out of over 100 of Ripple’s partners are using it. This is the major criticism and concern that will hinder XRP token’s price.
Stellar on the other hand uses fees for every transaction and it collects the fees to distribute to account holders which account for the 1% new coins every year. The thing with Stellar though is that every transaction is very very cheap 600,000 transactions cost about $0.01. So there is concern from its users that the transaction fees is too cheap to have any meaningful returns.
About 62% of Ripple’s coins in circulation are held and owned by Ripple, and they have a choice to sell it to the public. Whereas Stellar foundation only holds 5% of its tokens and uses it for developmental costs. Where Ripple sells its coins, Stellar gives the collected tokens to account holders for free. This is another reason why Ripple is seen as centralised and Stellar is seen as decentralised.
Ripple argues that because Ripple labs and XRP are technically different entities, even if Ripple labs was to collapse, XRP as a currency would still exist. That is why they are technically a “decentralised” currency.
The thing is this, the fact that Ripple and XRP tokens are separate entities, is not XRP’s benefit, it is to Ripple’s benefit. It is more likely that XRP will die and Ripple labs will survive then the other way round. Especially with the way Ripple is building partnerships with banks in agreements that don’t require the use of XRP. And even though technically, Ripple could put a case that it meets the technical definition of “decentralised currency”, when you look at the fact that they are holding 62% of the tokens in current circulation, they are a closed source network where the the general public cannot look at it or change it and the fact that they are primarily targeting banks who are large centralised institutions and Ripple technology is coming under those banks, not the other way round. It seems to me that in spirit at least, they are a centralised instituition. This is just my personal opinion, and I’m very neutral. I don’t think poorly of Ripple at all, in fact just a few days ago, I listed it as my top coin for the month of March. But in all impartialness, I feel the project has a centralised way of working. Again that’s just my own opinion, and it doesn’t make Ripple a bad coin.
Partnerships
Ripple’s main partners are Banks, and now they have American Express, Moneygram and Western Union on board as well. In terms of momentum and partnerships, to be honest, Ripple is second to none. It outperforms even Bitcoin.
Stellar’s biggest partnership is IBM, other notable partners include Deloitte, Stripe, Wanxiang etc.. The main target group for Stellar remains small businesses and individuals, which is why, in terms of names, their list of partners will not be as impressive as Ripple.
It is probably worth pointing out here that for the bulk of their businesses, the two do not compete with each other. Where they do overlap is in cross-border transactions. As far as big companies go here, Ripple definitely has the lead, but IBM as Stellar’s partner is a very significant player as well, so Stellar’s definitely still a competition. And also, you gotta remember there are many other popular cryptos e.g. OMG etc.. who are competing for a piece of the pie. But the pieces of this pie is not evenly distributed. Between moneygram and western union, apparently they account for 70% of cross border monetary transactions in south America and south east asia. So if Stellar and the other transaction currencies want to have a chance, they are going to have to market hard and create alternative attractive options for cross border transactions for the unbanked. Stellar has the lowest fees and very competitive transaction times, so personally if it was me, Il be using Stellar over other currencies. For now.
Last thing to talk about is price prediction. Both coins are top 10 on the marketcap and doing really well. They are both solid projects who are proving solid results in the market and realistically speaking, they are both likely to see rise in the future. Who is likely to see bigger gains? My prediction is this.
In the very short term future- Both their prices depend on bitcoin. If bitcoin tanks because of the Mt Gox sell-off, every coin including Stellar and Ripple are going to tank. If Bitcoin rises both of these coins will rise.
In the medium term—I believe Ripple will outperform Stellar, simply because of the partnerships that are bearing fruits starting with Caullix’s announcement last week to use them in cross border payments to Mexico. Ripple’s marketing is outstanding and when the market starts to recover, they are going to be super attractive to new investors.
In the long term—I think Stellar will offer better returns that Ripple. Why do I say that? For comparable technology, Stellar is currently 1/6th the price of Ripple. It is undervalued and under-recongised. I believe it will close the gap. Whether of not it can catch up to Ripple, I believe it will close the gap because Stellar is more careful, so it seems to me to implement actual use of its tokens. Stellar is now a platform for ICOs, and this year it also launched its own exchange where Stellar is the pairing. Both of these initiatives introduce massive use of Stellar token and as we always say, the more a currency is being used, the more it’s price will go up. But seriously though, Stellar needs to do a lot more marketing, their marketing sucks.
Anyways that’s my take for now. Anything can change in the future, Ripple might introduce a mechanism that introduces its token as a requirement in all its products, that would be totally game changing. Who knows?
Anyways, this has a been a long post, and I’m sorry I don’t have any pretty pics or charts to put up. It’s just one of those posts that is all narrative. There are some links in the description if you’re keen to look up more information. But otherwise, thank you so much for joining us.
If you liked this post, give us a like and subscribe, also drop us a comment or request, we love to do videos we know are relevant to you guys like this one, and tomorrow we will be doing a coin review, I think it’s QASH, so make sure you tune in for that! Have an awesome Sunday, and catch you tomorrow!
Some of our resources links:
https://www.coindesk.com/history-ripp...
https://www.quora.com/What-is-the-mai...
https://www.quora.com/Why-did-Jed-McC...
http://www.valuewalk.com/2018/01/stel...
https://www.reddit.com/r/Stellar/
https://www.stellar.org/
https://ripple.com/
https://www.reddit.com/r/Ripple/
https://steemit.com/cryptocurrency/@o...
https://www.investinblockchain.com/st...
https://bitcoin.stackexchange.com/que...
https://www.finder.com/ph/ripple-vs-s...
http://bitcoinist.com/ripple-vs-stell...
https://galactictalk.org/d/242-differ...
https://stocksgazette.com/2018/01/20/...
https://coincentral.com/what-is-stell...
https://hackernoon.com/why-stellar-co...
https://en.wikipedia.org/wiki/Ripple_...)
https://ripple.com/files/ripple_conse...
https://www.stellar.org/papers/stella...
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