XRP vs Stellar (XLM): Which is Better for Cross-Border Payments?
December 3, 2018 By Danielys Bluetower
Here are excerpts from two current articles on the website elevenews.com that helped greatly to explain the relationship between several cryptocurrencies being developed for digital currency transactions.
The on-going discussion is about which one will be the best to use for cross-border payment solutions.
Both XRP and Stellar Lumens (XLM) are distributed ledger technology (DLT)-based platforms that aim to provide cross-border payments solutions between large banks and financial firms. However, Stellar’s products have also been developed for the individual consumer.
Notably, the Stellar payment network is a fork of the Ripple protocol and was founded by Jed McCaleb in 2014. McCaleb is also the co-founder of the Ripple protocol. When the Stellar project was proposed, a non-profit Development Foundation was launched as well – in order to support the ongoing development of the Stellar platform.
Stellar Backed By Stripe
One key difference between XRP and Stellar is that the latter was created by a non-profit organization. Due partly to the lower overhead costs of operating as a non-profit entity, the transaction fees on Stellar’s network are quite low. Early stage investors in the Stellar project include San Francisco-based Stripe, an internet-based payment processing service.
Similar to how the XRP cryptocurrency (developed by Ripple Labs) is used to facilitate transfers between two parties who may use different fiat currencies, the Stellar network also allows users to send and receive payments to/from bank accounts that support different currencies – without having to pay high currency conversion fees.
Transactions Only Cost Fractions Of A Cent
For example, the Stellar network can be used to send a payment in British pounds (GBP) to an account that accepts USD. The sender of the payment on the platform only has to pay a 0.00001 XLM network usage fee – which is only a fraction of a cent.
San Francisco-based Ripple Labs has also developed products which are quite similar to those offered by Stellar. XRP is a cryptocurrency that was developed by Ripple Labs and its transactions are conducted on the XRP ledger, at incredibly small costs. In order to transact on the XRP ledger, however, an address must hold at least 20 XRP.
As explained on Ripple’s official website, users must hold a minimum of 20 XRP so that “the shared [XRP] global ledger [does not] grow excessively large as [a] result of spam or malicious usage.”
As most XRP community members would know, not all of Ripple’s products use XRP as the base currency. xCurrent, which does not use the token, is an enterprise-level software product that utilizes the Interledger Protocol (ILP) to “instantly” process international payments – as it allows for “inter-operability” between virtual and fiat currencies.
The Interledger Protocol was created by Ripple Labs, but its ongoing management and development is now handled by the World Wide Web Consortium (W3C) group. The W3C is an international body that creates open standards to support further growth of the internet.
MoneyGram Tests xRapid, xCurrent Supports Real-Time Messaging
Notably, xCurrent supports real-time messaging between banks (similar to SWIFT) – which is useful because static messages may have typos or might not include important information. This often leads to transactions being delayed.
Another popular product developed by Ripple Labs, xRapid, was also launched recently. If XRP is used to send payments using xCurrent, then Ripple refers to these types of transactions as xRapid. Prior to going live (production), xRapid was tested by leading money transfer services such as Western Union and MoneyGram.
One of the main benefits of using xRapid, according to Ripple, is that it provides liquidity through XRP – which allows money to be transferred cheaply and quickly.
Public Vs Private DLT Networks
Although Ripple, the company, claims to have partnered with around 150 different financial institutions who are either currently testing its products or are even using them in a production environment, the American fintech’s critics say that transactions on RippleNet are not transparent. That’s because it’s a private DLT-based payment network.
However, digital currency transactions on the Stellar network can be verified and seen by anyone – which is something that generally holds true for most public blockchains. Another thing which Stellar’s community focuses more on, compared to Ripple, is serving the underbanked – meaning helping to provide financial services to people who do not have access to modern banking services.