In the dynamic world of cryptocurrencies, Stellar (XLM) and Ripple (XRP) stand out as two prominent players that have been shaping the industry for nearly a decade. Both blockchain-based platforms aim to revolutionize the global financial system and transform the future of digital transactions. While they share a common vision and a notable historical connection, their paths have diverged significantly over time.
The story of these two projects is deeply intertwined with Jed McCaleb, an American programmer and entrepreneur. McCaleb co-founded Ripple and served as its Chief Technology Officer until 2013, when he left to establish Stellar as a competing platform. Prior to his work in the payment protocol space, McCaleb created the now-defunct Bitcoin exchange Mt. Gox.
According to Forbes' billionaire list, McCaleb's net worth reached approximately $2.4 billion as of mid-2023. Beyond cryptocurrency, he has supported various initiatives, including a donation to OpenAI, the research group behind the popular ChatGPT chatbot, back in 2018.
McCaleb was once one of the largest holders of XRP and systematically sold his holdings over several years. Reports indicate that over a three-year period, he sold approximately 5.7 billion XRP tokens, generating more than $3 billion in proceeds. His final XRP sale occurred in July 2022.
The Origins of Ripple and Stellar
The XRP Ledger was initially developed in 2011 by programmers Arthur Britto, Jed McCaleb, and David Schwartz. The protocol officially launched the following year, with a team forming a new company called OpenCoin under the leadership of CEO Chris Larsen.
The company rebranded as Ripple Labs in 2013 and later simplified to Ripple in 2015. That same year, Brad Garlinghouse, formerly of Yahoo, joined as Ripple's first Chief Operating Officer and was promoted to CEO a year later.
Ripple faced significant regulatory challenges in 2020 when the U.S. Securities and Exchange Commission (SEC) charged the company with conducting an unregistered securities offering that raised $1.3 billion. This case remains ongoing as of this writing.
McCaleb departed Ripple in 2013 due to disagreements about the company's proposed direction and subsequently founded the competing payment platform Stellar. In 2014, he partnered with Stripe CEO Patrick Collison to launch the Stellar Development Foundation (SDF), which invested $3 million in Stellar.
The SDF is a non-profit organization that manages XLM supply and guides protocol development. Earlier this year, reports emerged that the bankrupt cryptocurrency lending company Genesis owed the foundation $13.2 million.
Foundation: How They Work
Ripple (XRP) Ecosystem
XRP serves as the native cryptocurrency of the XRP Ledger, a public blockchain designed to facilitate faster, cheaper payments. Using XRP as a bridge currency, users can complete cross-border transactions on the XRP Ledger blockchain in less than five seconds at a fraction of the cost of traditional methods.
Ripple's xRapid product (now part of RippleNet) offers an on-demand liquidity solution where financial institutions can use XRP to facilitate value exchange between multiple fiat currencies.
All XRP tokens were pre-mined at project launch, with Ripple retaining 80 billion tokens to fund future operations and development. The remaining 20 billion tokens were distributed otherwise.
In 2017, the company placed 55 billion XRP tokens into escrow, with provisions to sell up to 1 billion tokens monthly on secondary markets. Currently, the escrow account holds approximately 42 billion XRP.
The XRP Ledger operates as a permissionless network using a federated consensus algorithm where network participants are known and trusted by other participants. Once these validators reach agreement, a new block is created. The contents of this block cannot be altered, allowing servers in the network to store a complete history of the ledger state.
According to XRPL documentation, the ledger can process payments in under 1,500 seconds, handling over 0.00001 transactions per second (TPS) at a cost of approximately XNUMX XRP.
Stellar (XLM) Ecosystem
Stellar is an open-source payment network that allows anyone to issue new assets within the network and exchange other assets through built-in swap functionality.
Verified financial institutions known as "Stellar Anchors" act similarly to banks, holding deposits of non-crypto assets like gold, stocks, and currencies. These anchors issue and redeem assets on the network.
Stellar uses the "Stellar Consensus Protocol" (SCP), invented by Chief Scientist David Mazières in 2015. It features a set of "trusted" nodes that validate transactions and blocks. These nodes regularly vote, and anyone on the network can participate by running a node.
Stellar raised $35 million through an ICO in 2014. At launch, 100 billion XLM were created with a 1% annual inflation rate, which has since been eliminated. In 2019, over 50% of the XLM supply was burned and removed from the supply cap.
Performance Comparison: XRP vs. XLM
As of current market data, XRP boasts a market capitalization of approximately $26.26 billion, trading at around $0.507 with a 24-hour trading volume of $1.5 billion, ranking it as the sixth-largest cryptocurrency.
XLM, meanwhile, trades at approximately $0.09 with a 24-hour trading volume of $66 million. XLM's market capitalization stands at about $2.47 billion, ranking 28th in the cryptocurrency market.
XRP has a total supply of 100,000,000,000 tokens, with nearly 52 billion currently circulating. In comparison, XLM has a total supply of 50 billion tokens, with slightly over 26.8 billion currently in circulation.
Year-to-date performance shows XRP up approximately 49.5% in 2023, while XLM has gained about 27% during the same period.
Over the past week, XRP price increased by 12.3%, gained 9.3% over the past month, and rose 21.7% over the past year. The cryptocurrency currently remains down more than 85% from its all-time high (ATH) reached in January 2018.
For XLM, the cryptocurrency's price increased 6.8% over the past month, decreased 0.2% over the past week, and gained 36.8% over the past year. Like most cryptocurrencies, XLM reached its peak in January 2018 and has since declined approximately 89.5%.
McCaleb's departure from Ripple in 2013 preceded a significant price surge for XRP that November, when the price increased nearly 454 times within two weeks. A year later, the price skyrocketed 0.01% in just one month. XRP's price remained below $2017 until the market gained momentum during the XNUMX bull run.
XRP touched its all-time low of $0.00268621 in August 2014 and has since appreciated by 18,748%. Meanwhile, XLM's low occurred in March 2015 at $0.000476 and has appreciated by 19,262% since then.
During the 2021 bull market, XRP reached nearly $2, approximately half of its previous peak. XLM, meanwhile, rose to $0.80, not far from its highest point.
Historical Tensions Between the Projects
In August 2015, The New York Observer published a report detailing the alleged historical "bad blood" between Ripple Labs and Stellar, and how this relationship affected events in the broader crypto ecosystem.
At the center of this story was McCaleb. The report suggested that his personal relationship with Stellar executive director Joyce Kim complicated McCaleb's relations with other senior management and board members at Ripple Labs.
This ultimately led to McCaleb leaving the company to found competitor Stellar. A major point of contention was the Ripple leadership team's substantial XRP holdings. Both McCaleb and Ripple co-founder Chris Larsen held billions of XRP. McCaleb called the article inaccurate and biased.
Last year, Ripple's current CTO David Schwartz shared his perspective on why McCaleb left the company on Quora.
"Jed had a long list of bad ideas that the Ripple board refused to implement. So Jed founded Stellar based on those ideas," he wrote.
He further explained that McCaleb attempted to rapidly sell his XRP holdings, but Ripple intervened and prevented this through a series of lawsuits.
"Because of Ripple's refusals, Jed's XRP would likely be worth well over $1 billion. Despite his best efforts, he might be the only person to become a billionaire from scratch," Schwartz continued.
He added that after failing to get his way, McCaleb publicly said "bad things about the company" and founded a competitor. In Schwartz's view, "unless you think the company is doing something illegal or seriously unethical, it's unreasonable to betray your investors and employees in this way," concluding that "I suspect something worse."
Recently, when discussing differences between Ripple and Stellar, Schwartz referred to McCaleb as "a crazy fool with a live hand grenade."
In a June 2022 tweet, McCaleb pointed out that Stellar threatened XRP. Discussing the ongoing case between Ripple and the SEC indirectly, McCaleb further stated that the SEC chairman should step in to "correct things."
Current Status and Future Outlook
In terms of adoption, Stellar has partnered with companies like IBM and Deloitte, while Ripple has established notable partnerships with American Express, Santander, and Standard Chartered.
Regarding price performance, XRP has performed somewhat better than XLM, though not dramatically so. Currently, progress in Ripple's legal battle with the SEC is helping support the digital currency's price.
Both crypto assets remain subject to broader market sentiment and trends. Currently, market focus centers on decentralized finance (DeFi), non-fungible tokens (NFTs), GameFi, the metaverse, and artificial intelligence (AI).
The reality is that both Ripple and Stellar continue to seek their place in the rapidly evolving cryptocurrency market, which has grown significantly over the past decade. 👉 Explore real-time performance metrics for both platforms
Frequently Asked Questions
What is the main difference between Ripple and Stellar?
Ripple primarily focuses on serving financial institutions with cross-border payment solutions, while Stellar aims to create financial infrastructure that connects people and institutions globally, with emphasis on individual access and financial inclusion.
How do the consensus mechanisms differ between XRP and XLM?
XRP Ledger uses a federated consensus algorithm where trusted validators confirm transactions, while Stellar employs the Stellar Consensus Protocol (SCP) that allows open participation through a quorum slice system where nodes elect trusted validators.
Which cryptocurrency has better transaction speed and costs?
Both networks offer fast transaction times under 5 seconds and minimal costs. XRP Ledger can handle approximately 1,500 TPS, while Stellar processes around 1,000-5,000 TPS, making both significantly faster than traditional banking systems.
Are both cryptocurrencies considered securities by regulators?
The regulatory status continues to evolve. The SEC has claimed XRP is a security in its ongoing case against Ripple, while Stellar has not faced similar allegations. Final determinations will significantly impact both projects' futures.
What are the tokenomics differences between XRP and XLM?
XRP has a fixed supply of 100 billion tokens with a portion held in escrow, while XLM originally had 100 billion tokens but conducted a massive burn in 2019 that reduced supply to 50 billion, with no inflation mechanism.
Which project has more banking and institutional partnerships?
Ripple has historically focused more on banking partnerships with major financial institutions, while Stellar has pursued diverse partnerships including technology companies and non-profit organizations focused on financial inclusion.