What is the difference between XLM and XRP Tokens?

 We can look at the recent foundations of Ripple and Stellar to see how the future of these two payment tokens with such a history will be entangled. 

Ripple vs Stellar

Cryptocurrency enthusiasts compare these two projects because they have a similar mission to prevent cross-border financial payments. One of the main differences between Stellar Lumens and Ripple is the type of users that each project focuses on. Stellar hopes to work with non-bank individuals worldwide, while Ripple focuses on establishing close partnerships with banks to help them transfer funds around the world.    

Another thing that unites these two projects is their founder Jed McCaleb. Ripple and XRP were co-founded by McCaleb and software developer Ryan Fugger. Their vision is to create an encrypted network independent of energy-intensive mining processes like Bitcoin. However, McCaleb and the rest of the Ripple team caused McCaleb to leave. In 2014, he co-founded Stellar with Joyce co-founder Kim McCaleb.    

Later, Ripple was attacked when the company asked Bitstamp to freeze McCaleb’s 96 million XRP exchange holdings. The crypto community viewed the move as centralized and preemptive censorship, just like the behaviour of the legacy financial system that cryptocurrency was supposed to replace. However, McCaleb’s XRP holdings are much more comprehensive than Bitstamp’s, and Ripple’s fears may have been justified by their former CTO’s constant dumping of hundreds of millions of XRP dollars. In 2021, the story between Ripple’s new management and McCaleb can now be considered old news as the company has more serious concerns.   

Ripple XRP in 2021

The SEC (American Securities and Exchange Commission) has filed a lawsuit against Ripple for selling what it classifies as unlisted securities for $ 1.3 billion. The complaint further alleges that both the former CEO and current Ripple, Christian Larsen and Brad Garlinghouse, used the raised capital to fund Ripple’s business and that the couple also “made unreported personal XRP sales totalling about $ 600 million.”   

The news prompted several large regulated exchanges like Coinbase to remove the XRP token from the listing, and the XRP price dropped to 0.18 cents. Ripple disputes that XRP is a currency, not a stock, and compares the ruling that XRP is a stock “similar to treating oil as a stock controlled by Exxon.” The company also claims that XRP was released to investors 8 years ago when the SEC did not set any guidelines or rules. Since the SEC initiated the case, Ripple won a discovery order that would force the SEC to hand over documentation explaining their reasoning that Bitcoin and Ethereum should not be considered securities.    

The price of XRP has since soared to 1.77 cents, and the currency has been relisted on the Phemex exchange, but this does not mean that the company has not been out of trouble.

 This may be the reason why Ripple recently entered into a deal with digital bank and payment company Novatti to enter the Southeast Asian remittance market, hoping to expand its horizons beyond North America. Also, in 2020, the XRP/Flare airdrop was held. DURING THIS PERIOD, the XRP code fork formed the Flare Network, a decentralized innovative contract platform designed to be faster and more significant than the Ethereum blockchain. Although Flare and its own Spark token are not listed on the XRP blockchain, it still opens XRP for a broader range of use cases. If the company passes legal proceedings, global remittances will still be an important use case for Ripple.    

In terms of international payments, traditional banks face high fees and long waiting times because payments are made between multiple parties, and Ripplenet can help reduce these fees and transaction time. Many well-known banks and institutions have established partnerships with Ripple at least on paper to use its RippleNet service to facilitate payments and transactions, which is the main reason why XRP has been such a popular cryptocurrency for many years. 

Stellar in 2021

The Stellar Foundation’s mandate has remained more or less unchanged since its inception in 2014: “to create equal access to the global financial system.” The benefits of Stellar for non-banks and sending money home without using expensive services such as Western Union also include the easy conversion of their assets into various national stablecoins through partnerships with such companies. 

Stellar has expanded slightly beyond payment solutions, hosting Dapps with alternative use cases such as the Keybase private messaging app and SatoshiPay, an online Dapp posting. SatoshiPay is particularly attractive as it allows users to consume content at a fraction of the cost of traditional paid media. It does this through micropayments using Stellar’s integrated decentralized exchange and the ability to send funds quickly and practically free of charge.

 The team celebrated over $ 1 million in content payouts last year. Stellar’s consumption of 55 billion tokens in 2019 made it economically more profitable, and the project’s token economy was further strengthened by the transition from an inflationary to a deflationary token.   

Stellar and Ripple have many questions about their long-term future. The big question about Ripple is that RippleNet may have many high-profile partners in the financial world, but will XRP do this? Ripple Labs has made every effort to maintain a distance from the XRP token, making XRP holders an asset with historically limited utility. The primary use case is obviously to fund Ripple’s daily operations.   

Ripple Labs accounts for about 55% of the total XRP supply, raising concerns about possible adverse price movements due to the enormous centralization of tokens. However, the Ripple team decided to postpone the release of this proposal for 55 months.    

Stellar performs better in this regard thanks to a more positive token economy, but Stellar cannot be said to be truly decentralized. In 2019, the Stellar network stalled for 67 minutes due to a failure to reach consensus caused by a massive outage of Stellar Development Fund nodes. In terms of blockchain architecture and Stellar project development, SDFs play too much of a role than blockchains, attracting more organic behaviour from developers like Ethereum and Polkadot.  

Since the 2019 power outage, the Stellar team has made a conscious effort to become more decentralized by launching more inspection nodes around the world, with the end result that no organization can shutdown nodes anymore. There are currently 50 validator nodes on the Stellar network, supported by 66 watcher nodes whose job is to monitor network activity even if they cannot vote. Despite its reputation for centralized design, XRP outperforms Stellar with 168 well-known validators here.    

Finally, as payment coins, XRP and XLM risk losing relevance if the vision of Bitcoin’s growth on the Lightning Network is realized. They are much faster than Bitcoin, but a critical use case will be eliminated if this advantage diminishes. And Stellar could expand to hosting a DApp, but a fully built and scalable Ethereum 2.0 will create even stricter competition for developers. However, both projects have strong online communities, most likely thanks to these dedicated HODLers living to see another day. 

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