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Comparisons// 6 min read

Compared: Ripple (XRP) vs Stellar (XLM)

Compared: Ripple (XRP) vs Stellar (XLM)

There has always been drama in the cryptocurrency industry, but the story of Jed McCaleb, Arthur Britto and Chris Larsen – founders of Ripple – takes the whole thing to a new level. In truth, the three founders have made strange bedfellows from the start.

Chris Larsen is your typical Silicon Valley entrepreneur and is touted as the richest man in crypto by Forbes. He amassed his staggering wealth by founding E-Loan in 1996, which was later sold, and co-founding the wildly successful Prosper lending platform ten years later. Having worked closely with modern and traditional financial institutions, Larsen is probably the most suitable candidate to launch a cryptocurrency for banks.

Jed McCaleb, on the other hand, is a Berkeley drop-out who launched the legally dubious eDonkey2000 and co-founded the now infamous MTGox Bitcoin exchange. In May 2011, MaCaleb began working on a new type of digital money that did not require miners and subsequently offered much more efficient transactions.

From the public Github repo we can see that 100 billion XRP were created in April 2012, marking the real beginning of what we now consider to be Ripple. Four months later McCaleb hired Larsen, and Britto must have joined at a similar time. From this founders agreement we can see that they agreed to work together and allocated 20% of the 100 billion XPR tokens to themselves.

It didn’t take long for Ripple to build up momentum, but it was clear that ideological differences existed between the founders. Larsen saw Ripple as the perfect challenger for the antiquated SWIFT network used by banks all over the world. McCaleb however, wanted Ripple to be used as digital cash, helping individuals to gain sovereignty over their finances.

Both perspectives clearly have merit, but McCaleb decided to copy Ripple’s codebase (although he disputes this) and create Stellar instead. This move was controversial at the time because McCaleb was still working with Ripple and had just seemingly created a competitor.

Unsurprisingly things turned ugly very fast and a lengthy court battle ensued. Although this was concluded in 2016, McCaleb caused tempers to flair again when he began selling his remaining XRP at a rate of nearly 700,000 per day. At the time of his departure, McCaleb still owned 7.3 billion XRP thanks to the generous terms laid out in the Founders Agreement. Again unsurprisingly, this was seen as an effort to tank XRPs price and further harm his ex-employer.

As you can see the story is fraught with emotion and drama. One aspect that usually gets overlooked however is the story, or lack thereof, of the third member of the Founders Agreement – Arthur Britto.

In an industry dedicated to transparency, openness and limitless communication, it is ironic that Arthur Britto seems to have mastered the art of being invisible. Not a single photo or online profile exists of someone who played a vital role in developing one of the world’s most precious digital assets. No wonder that people are even speculating whether he is the real Satoshi Nakamoto.

Now that we’ve indulged in the drama, let’s take a closer look at the tech.

Ripple (XRP) vs Stellar (XLM)

Ripple (XRP)Stellar (XLM)
Token NameXRPXLM
Maximum Supply100,000,000None
ServesBanksIndividuals & organizations
Consensus AlgorithmThe Ripple Protocol Consensus Algorithm (RPCA)Federated Byzantine Agreement (FBA)
Transactions per second1,5004,000
Transaction speed3-5 seconds4-8 seconds
Block explorerXRP ChartsStellar Dashboard
Suitable for ICOs/STOs?NoYes
Requires mining?NoNo
Original AuthorJed McCaleb and Ryan FuggerJed McCaleb


What is Ripple?

Ripple is primarily a cryptocurrency protocol for Banks.

In order to understand the value of such a solution, it makes sense to first outline how Banks have historically transacted amongst each other.

To illustrate this let’s imagine you want to send $10,000 to your Brother’s Bank account in Brazil.

I have bad news: expect a horrible user experience.

Bank employees will use SWIFT terminals to coordinate the money transfer, update the various Bank ledgers and apply an aggressive exchange rate. As a result, your user experience involves a lengthy waiting process for the money to arrive, unfair exchange rates and a hefty transfer fee.

Importantly, Banks have to charge fees and apply unfair exchange rates to cover their own operational cost and pay the SWIFT membership fees. Additionally, the SWIFT network requires $27 trillion to be parked in the network in order to provide liquidity for seldom used currency pairs. In short, both the users and the Banks would benefit from a frictionless, international payments solution.

This is what Ripple aims to be – and has admittedly made significant progress already.

As of June 2019, Ripple has launched pilots with Santander, Standard Chartered and ATB Bank, and has built an impressive suite of solutions. These are:

  1. xCurrent – a settlement layer that can be used by Banks to complete cross-border payments with end-to-end tracking
  2. xRapid – a liquidity layer using XRP
  3. xVia – a payments solution that provides a single interface for multiple payment providers

Exactly how powerful these three features are is hard to tell, but Ripple claims to be working with over 200 customers. If this number is true Ripple is easily the most successful business-facing cryptocurrency in the world.

What is Stellar?

In marketing lingo, you would say that Ripple is B2B (business to business) while Stellar is P2P (person to person).

More specifically, Stellar is a blockchain protocol that enables fast and frictionless transactions. Whereas Ripple focuses almost exclusively on Banks, Stellar is focused on the individual.

The technological innovations introduced by Jed McCaleb and his team cannot be underestimated. The Stellar network has a processing capacity of around 4,000 transactions per second and has almost negligible transaction fees. Perhaps uniquely in the blockchain space, Stellar wallets come with an integrated exchange meaning tokens can be bought and sold independently of exchanges.

Setting up a Stellar wallet is also incredibly easy and intuitive compared to most other digital assets, making adoption far more likely. Excitingly, Stellar is also proving to be a strong platform for ICOs and STOs, as it provides much more scalability than Ethereum and other blockchains.

Additionally, the Stellar Foundation offers attractive grants to businesses that improve the Stellar ecosystem and recently announced an airdrop of $125 million in XLM to blockchain Wallet holders.

As a result, Stellar has grown to be a top 10 digital asset by market cap with a clear positive trajectory.

How does Ripple work?

Now that we know what Ripple is, it’s time to think about how it works.

At the foundational level, Ripple is a semi-permissioned blockchain which elegantly bridges the gap between cutting edge tech and antiquated financial institutions. The ecosystem comprises:

  1. XRP – The native token which is designed to provide liquidity and enable lightning-fast transactions between institutions.
  2. Wallets – These are typically free and allow users to manage XRP on mobile or desktop
  3. Gateways – These are financial institutions which allow digital assets to move in and out of the Ripple network and often provide credit services as well.
  4. Trust lines – In order to send or receive a digital asset the receiver needs to give the issuer permission to send the token. This permission is called a trust line.
  5. Nodes – these are servers which collect and broadcast transactions across the Ripple network.
  6. Unique Node list (UNL) – this is a group of trusted nodes (servers) which can vote on the validity of a transaction.

Collectively, these are the building blocks of the Ripple network which are needed to process transactions and create consensus. Perhaps unsurprisingly, Stellar works very similarly.

How does Stellar work?

The comparison between Ripple and Stellar is particularly apt due to the history we discussed in the intro. As we will see now, the two cryptocurrencies work almost identically. The Stellar ecosystem comprises:

  1. Stellar Lumens – the native token which helps to fight spam and enable multi-currency transactions.
  2. Wallets – these are free and required to manage your Stellar assets
  3. Anchors – fulfill the same role as the Gateways in Ripple; they act as a bridge between different currencies and facilitate the flow of money throughout the network
  4. Decentralized exchange – Stellar comes with an inbuilt exchange meaning new digital assets can be bought and sold immediately
  5. Nodes – servers that communicate transaction balances and broadcast new transactions to the network.
  6. Quorum slices – these are sets of trusted nodes which are needed to reach consensus
  7. Inflation – Stellar is one of the few cryptocurrencies that has inflation. New lumens are added to the network at a rate of 1% each year.

Conclusion – Ripple vs Stellar

It’s obvious looking at the history that Ripple and Stellar are very similar. Taking a more detailed look at the technology that underlies the two cryptocurrencies, it’s clear that both work in a very similar way.

Both use businesses to facilitate money transfer and serve as Gateways/Anchors for their respective networks. Both use similar consensus models and rely on trust lines to enable frictionless transactions. Neither requires miners or employs smart contracts.

In short, Stellar is the open-source, bitcoin-inspired brother of Ripple’s banking solution. Despite Ripple’s concerns in 2014, Stellar is not a competitor but instead focuses on a completely different market.

It has to be said that both are doing an incredible job. Ripple has clearly found a captive audience and already boasts significant adoption in the Banking world. Stellar on the other hand offers revolutionary features (decentralized exchange, inflation, etc) while also being significantly more user-friendly than any of the other top 10 tokens.

As a result, we may soon live in a world which is powered by Stellar on the frontend, and Ripple on the backend.


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