There has been a lot of focus on both Stellar and Ripple over the past few days. Although both networks cannot be labeled as traditional cryptocurrency networks by any means, the technology is of great value to financial service providers. However, it is a bit unclear what the difference is between Stellar and Ripple are exactly. As it turns out, there are differences, but also a few similarities.
The Stellar project was originally created as a fork of the Ripple protocol back in 2014. It is only normal to learn there are some parts of the original Ripple code base that made their way to Stellar. However, no code was copied by any means, even though some functionalities are very similar. Both projects use a distributed ledger to track accounts and offer native asset and currency support.
Stellar uses a consensus mechanism known as Stellar Consensus Protocol. This particular feature is outlined in the project whitepaper, for those who want to know more technical aspects about the mechanism. This method allows for solving problems through reaching consensus among network nodes. The Stellar project also uses a strict API based on the External Data Representation Standard.
Furthermore, Stellar’s native currency is known as Lumens – which we discussed here – whereas Ripple uses XRP. Stellar is mainly designed to target individuals and focuses strongly on technology, rather than making a name for themselves among financial institutions. In this regard, they are the opposite of what Ripple tries to do.
Most people refer to Ripple as a centralized blockchain, although that is not an accurate assessment by any means. Ripple is a project designed to target financial institutions and provide a distributed ledger-based solution to facilitate cross-border payments. Additionally, the company is working together with regulators and central banks to make this project a reality.
Ripple was introduced several years ago, and the organized effort to engage with financial industry leaders has made them quite the prominent technology provider so far. Moreover, they use a different consensus mechanism compared to Stellar, which uses probabilistic voting, according to the whitepaper. This model is not that very different from Bitcoin, as it relies on majority validation.
It is also worth noting Ripple has a deflationary currency model. The number of XRP tokens in circulation will gradually decrease as it is used more often to facilitate cross-border currency transactions. Additionally, Ripple has formed several partnerships with banks and other financial institutions all over the world. Their technology is of great interest to these parties, that much is evident.
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