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Ripple vs Stellar: Comparing Two Crypto Payment Networks

Cryptocurrencies are used for many purposes, and one of the most important use cases today is in payments. Because cryptocurrencies are faster and less expensive to make payment than traditional methods, this use case is growing very fast.

Crypto payments are important especially for international transactions which can take days if not weeks to complete. Such cross-border payments can be settled within seconds with crypto, and two of the biggest networks for this use are Ripple and Stellar.

In this guide, we discuss these two networks, comparing their services to determine their similarities and differences. We’ll also show you what makes each project unique, so let’s jump in.

What is Ripple (XRP)?

Ripple is a blockchain payment protocol that aims to provide fast, secure, and low-cost cross-border payment solutions for financial institutions across the globe.

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Created by Ripple Labs, the company seeks to correct the slow and expensive nature of cross-border payments from traditional payment methods.

To achieve this, it uses blockchain technology to provide instant, secure, and low-cost transactions between banks and other financial institutions. Because of this, Ripple has become increasingly popular among financial institutions. 

Ripple uses XRP as the token that provides liquidity for these cross-border payments. There are 100 billion pre-mined tokens that are continually released into circulation. The token serves as a bridge currency for facilitating cross-border transactions.

Institutions like banks and other financial institutions can convert fiat currency into XRP quickly and cheaply before transferring it to the destination currency, costing much less than converting one fiat currency to another.

XRP also serves as a means of value transfer within the Ripple network, facilitating the transfer of assets across borders without the need for intermediaries or centralized authorities. 

What is Stellar Lumens (XLM)?

Stellar is another payment-focused blockchain network. It is a decentralized platform created to facilitate seamless international payments and offer other related products and services. 

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Stellar was launched in 2014 by two founders, one of which is Ripple’s co-founder. This tells you how similar the two networks are.

The network’s primary aim is to be an open, accessible infrastructure for low-cost, high-speed transactions, connecting people and institutions across the globe. 

Like RIpple, Stellar uses a native token, XLM, to facilitate value transfer. Being a decentralized network, Stellar is maintained by a network of nodes scattered all over the world. 

The nodes are run by validators who help to verify and confirm transactions on the network, allowing for fast and secure transactions. 

Similarities Between XRP and XLM

XRP and XLM have a few similarities. First, they are both tokens used to facilitate cross-border transfers and were both had Jed McCaleb play a vital role in their creation. 

They both make international payments faster and cheaper, as well as being reliable for both institutions and individuals. 

Also, both tokens’ total supply are pre-mined, meaning they don’t need to be released into circulation as is the case with proof-of-work or proof-of-stake networks.

Differences Between XRP and XLM

As much as they have some similarities, XRP and XLM also have fundamental differences, both in their Design and use.

First, XRP has a maximum supply of 100 billion tokens, while XLM has a total supply of 50 billion tokens, half the number for XRP.

Also while Ripple focuses more on providing payment services to banks and other financial institutions, Stellar being a decentralized network focuses more on individuals and small businesses. 

XLM also isn’t focused on profit but instead on banking the unbanked, especially in developing countries, unlike Ripple.

Another key difference is that although both XRP and XLM’s total supply are pre-mined, all of XRP was released at once, but XLM tokens are released gradually through an ICO, airdrops, and other means. 

Finally, Ripple uses the Ripple Protocol Consensus Algorithm (RPCA) to verify and add transactions to the blockchain, while Stellar uses the Stellar Consensus Protocol (SCP). Both consensus algorithms are used to verify transactions but use different approaches. 

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