Welcome to the BlockchainAIForum
by Yogi Nelson
If you are new to blockchain and cryptocurrencies, you might have come across two popular tokens: XRP (by Ripple) and XLM (by Stellar Lumens). Though they may seem similar at first glance, they have different goals, designs, and use cases. This article will help you understand how they compare, in simple terms.
🌐 Origins and Purpose
XRP (Ripple):
Ripple was founded in 2012. Its primary goal is to help banks and financial institutions move money quickly and cheaply across borders. Imagine a bank in the US sending money to a bank in Japan—it often takes days and costs a lot in fees. Ripple aims to make that transaction nearly instant and very affordable.
XLM (Stellar):
Stellar was created in 2014 by one of Ripple’s co-founders, Jed McCaleb. Unlike Ripple, Stellar focuses on helping individuals, especially those in developing countries, move money easily. Its mission is financial inclusion—making sure everyone, even without a bank account, can send and receive money.
💰 Who Are They For?
XRP:
Designed for banks, payment providers, and big institutions. It acts as a bridge between different currencies. For example, a bank can convert dollars to XRP and then instantly convert XRP to euros or yen.
XLM:
Focused on regular people and small businesses. Stellar’s network lets users send money in any currency, helping people with little access to banking services. It’s popular for peer-to-peer payments, remittances (sending money home to family in another country), and micro-payments.
⚡ Transaction Speed and Cost
Both Ripple and Stellar are known for being much faster and cheaper than traditional systems like SWIFT.
- XRP: Transactions settle in 3–5 seconds. Fees are extremely low, often a fraction of a cent. This speed is crucial for banks that need to move large sums quickly.
- XLM: Similarly fast—transactions also complete in a few seconds, with very low fees (often fractions of a cent). Stellar is designed to be accessible and affordable even for small transfers.
In practice, both networks are excellent for fast, cheap payments, but Ripple tailors its system more to institutional needs.
🏛️ Centralization vs. Decentralization
One major difference is in how they run their networks.
XRP: Critics often say Ripple is more centralized. Ripple Labs created most of the XRP supply (100 billion tokens), and it still holds a large portion. The company manages much of the network’s development and even releases XRP from its escrow accounts in planned amounts.
XLM: Stellar aims to be more decentralized. While the Stellar Development Foundation supports the network, they don’t hold as much control over the supply. Stellar burned (destroyed) over half its token supply in 2019 to reduce concerns over centralization. While neither is as decentralized as Bitcoin, Stellar generally has a reputation for being more open and community-oriented.
🌎 Use Cases in the Real World
XRP:
- Ripple once partnered with MoneyGram between 2019 and early 2021 to pilot using XRP for cross-border payments. The partnership ended in March 2021, partly due to Ripple’s ongoing regulatory challenges in the US.
- Ripple’s primary focus is serving banks and payment providers looking to save money on foreign exchange fees and move large sums instantly across borders.
- It is built for high-value, institutional-grade cross-border transfers between banks and large remittance companies.
XLM:
- Stellar has an active partnership with MoneyGram (launched in late 2021) to enable crypto-to-cash and cash-to-crypto services using USDC on the Stellar network.
- This partnership allows people in over 170 countries to deposit or withdraw digital dollars (USDC) at MoneyGram locations, improving access to digital payments and financial inclusion.
- Stellar is also used for remittances, micro-finance, and local payment solutions in developing regions, and by NGOs and charities to distribute aid efficiently.
In short and in overly simplistic, Ripple works with big banks. Stellar works with people and smaller organizations.
📈 Token Supply and Economics
XRP:
– Fixed maximum supply of 100 billion.
– Ripple Labs controls a significant amount.
– No mining; all tokens were created at the start.
XLM:
– Originally 100 billion tokens but reduced by a large burn to around 50 billion.
– No new tokens created.
– Stellar’s goal is to keep fees low and supply stable.
🛠️ Technology and Consensus
Instead of mining, both networks use a consensus mechanism—a way for participants to agree on transaction history. While both methods are fast and energy-efficient, Stellar emphasizes user choice in validation.
- XRP Ledger: Uses a Unique Node List (UNL) of trusted validators chosen by Ripple and others.
- Stellar: Uses the Stellar Consensus Protocol (SCP), which lets participants choose their own set of trusted nodes, aiming for greater decentralization.
🤝 Conclusion: Which One Is Right for You?
- Choose XRP if you are interested in the big-bank use case: institutional transfers, currency exchange between banks, and high-value settlements.
- Choose XLM if you care about peer-to-peer payments, remittances, and financial inclusion for unbanked populations.
Both XRP and XLM have solid technology for fast, cheap payments, but they serve different audiences and philosophies. XRP wants to change the plumbing for banks; Stellar wants to make sure everyone, everywhere, can send money with ease.
Until next time,
Yogi Nelson
Blockchain & AI Forum 