XLM vs XRP – decentralised vs centralised

XLM vs XRP – decentralised vs centralised

Blockchain Cryptocurrency Projects
March 4, 2018 by apurva sheel

If there has been one cryptocurrency that has been growing since its launch, its Stellar—trading as XLM. Since the beginning of December 2017, the coin has made major strides in landing on the 8th rank in the total market cap. The coin has shown excellent growth since its creation in 2014. But parallel to the success of XLM has been the growth of XRP. Though the founders of both the cryptocurrencies had worked together, and both the coins essentially work on the same rudiment protocol, it is important to understand each individually before making an investment decision.


What is Ripple?

Ripple was a back-end infrastructure, a global open-source exchange platform. But now, it is a cryptocurrency as well. The aim of the Ripple system is to free users from payment and financial networks such as credit cards, PayPal, banks etc. which charge a fee for currency exchange.

The Ripple cryptocurrency works with the aim of connecting banks all over the globe to enable hassle-free cross-border transactions and payment systems.

The XRP token

The XRP token can be understood as a digital coin with which banks and other financial organisations can instantly source liquidity. The token can be used by payment providers to improve the speed of payment settlement and curtail the cost of exchange.

How does Ripple work?

The aim of Ripple is to build a bridge between currencies and allow easy cross-border transactions among banks. The XRP then becomes a central currency which a bank can trade for its currency. Though it appears to add to the process of currency exchange, a ripple transaction can occur in 10 seconds with a fee amounting to less than 0.1% which, without any doubt, speeds up the cross-border trade.

The real-time problems that Ripple aims at solving, in addition, to slow settlement operations include curtailing high operational costs and payment failure which currently favours at 4%. The Ripple platform claims to keep a track of all payments made on a blockchain and therefore prevent any failures.

Ripple—Pros and Cons—Analysed

The market that exchange transactions bring is huge and a financial platform like ripple can for real transform the landscape of the banking market. The fact that Google Ventures and the Standard Chartered Bank both invested in Ripple speaks something about its reliability. The quick payment settlement feature is a plus and the currency can be converted into/from Bitcoin and other cryptocurrencies.

However, the whole platform is centralised and private and owns more than 65% of the coin which implies a risk of manipulated deflation and inflation. The individuals do not get complete access to the network which can create problems for the platform especially when it is surrounded by decentralised and transparent platforms. The platform is supported by banks and big businesses who are going to control the price which doesn’t really work in the favour of the users.

Stellar Lumes—XLM

What is Stellar?

The Stellar platform is an open-source digital platform employing decentralised currency and financial trading systems to bridge the gap between people, payment networks, and banks. The project was started by the Stellar Development Foundation with the aim of building an affordable fiscal system where individuals from varied income categories can enjoy access to a safe and affordable financial service.

Stellar operated on a non-profit infrastructure and its design focuses on supporting safe and error-free virtual transactions among different individuals and different currencies.

The XLM tokens

XLM is a digital currency that aids in the movement of cash around the globe in different currencies. Each transaction costs a fee of 0.00001 lumens and essentially the currency has been designed to operate as a security token to reduce spam attacks.

It requires for all accounts to maintain a minimum balance of 0.5 lumens thereby ensuring the authenticity of each account.

How does it work?

The Stellar platform is a network of decentralised servers which together power a shared ledger where all transactions occurring within the ecosystem are recorded. The ledger records the cash as credit that is issued by specific gateways. The credit is issued to your virtual account which here works as the digital wallet for the currency. The Stellar holders can send credit to other individuals on the network via multiple currencies and the network immediately exchanges value credits at the lowest possible rate.

The ledger is synchronised after every 3 to 5 seconds which takes care of the security dimension.

The real-world issues that Stellar hopes to tend to include micropayments as it decreases the cost of small transfers, sending money anywhere with a fee amounting to a fraction of a cent, and mobile money transfers.

Stellar—Pros and Cons—Analysed

Stellar is an open-source network and allows anyone to build low-cost financial products for the community. All the Lumen holders get to have a say in matters such as where the funds should come from and how much transaction fee should be charged. The platform gives its developers a tool that can unambiguously define the format of data records.

The partnerships for Stellar are still rolling in with IBM getting involved with the platform over the past few months. The platform might also develop its own Stack Exchange developed exclusively for Stellar.

The one thing that seems off about the XLM tokens right now is the ownership of almost 90% of the Lumens by its owners. Also, the huge size of the XLM parser may become a problem for some applications but these technical glitches can always be overcome.


Both XRP and XLM have been designed to make the international money transfer process easier for users. But the difference between the two—and this is crucial—is that while XRP focuses its attention on banks and similar large financial institution, XLM is geared towards smaller populations who have, in comparison to banks, lesser capital to transfer. Stellar is focusing on the extreme back-end transactions where common people and their everyday activities will be involved.

However, XLM is a non-profit which means their return on investment could be less. But this does not necessarily have to be a bad thing for them. Stellar is a far-sighted investment, and users especially the third world countries, may be required to develop radically to compete and modernize with others but getting in early will definitely prove beneficial.

The Stellar platform is for individuals to make cost-efficient money and currency transfers whereas Ripple are primarily for MNCs and banks. But the fact that Ripple is privately owned where Stellar is a non-profit organisation makes all the difference.

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