XRP vs XLM: What New Crypto Investors Should Know
Ripple (XRP) and Stellar (XLM) are two valuable cryptocurrencies that support the transfer of currency between parties and borders.
But while Stellar is open to the public, Ripple is mainly for banks and financial institutions. Both of these have similar mechanisms for operation, as they take little time to transfer and have little to no fees. The inflation and deflation points are also different between the two, with XRP being deflationary and XLM being inflationary.
XRP and XLM are altcoins that focus on managing cross-border transactions. XLM is available mainly to those who don’t have access to traditional banking functions. XRP is for people who do business with banks. These two currencies are different in many ways, but you’ll also find in this brief guide that they have a few similarities.
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XRP or XLM? Which is the Better?
How Does XRP Work?
Ripple or XRP was introduced in 2012 as a cryptocurrency written in the C
language. The currency uses a global blockchain that allows people worldwide to complete payments with each other. For reference, Ripple is the company behind the blockchain, while XRP is the cryptocurrency.
The Ripple system lets people complete XRP transactions faster with minimal transaction fees. XRP resolves the problems surrounding traditional cross-border payments, including slow transaction speeds and high fees.
XRP uses a permission ledger for access. The log means that only those who can be identified under specific points can access the blockchain. The system limits XRP access to banks and other financial entities, ensuring the security of the network.
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How Does XLM Work?
Stellar or XLM is a cryptocurrency formed by the Stellar Development Foundation. Released in 2014 and also featuring an API code using the C programming language, Stellar allows people to transfer fiat currencies as digital money. Users can complete transactions with their preferred fiat currencies. Stellar is the company behind the system, while XLM or Lumens is the cryptocurrency.
But what makes Stellar different from Ripple is that Stellar is accessible to people who don’t have access to banking. It works for people in less-developed countries that don’t have the same banking structures compared to more economically developed countries. The network takes one’s fiat currency and converts it to XLM or Lumens, which convert to the recipient’s currency.
The design is highly accessible and does not require someone to have to enter a bank to use it. The permissionless blockchain makes it possible for people to access the network and start trading in moments. The universal nature of XLM also ensures that people can trade the currency without having to worry about physically transferring specific fiat currencies to others that might not be readily available for trade.
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What Makes XRP or XLM Different?
Accessibility
Both platforms have an interesting background. Jed McCaleb co-founded Ripple in 2012 as a platform designed for banks to access. But in 2014, McCaleb co-formed Stellar to focus on providing an open approach to banking. The method of operation that Ripple and Stellar use are similar, but it is the difference in accessibility that stands out.
Stellar is an open-source platform, meaning anyone can access the system. But Ripple requires people to receive permission to use it, meaning only banks and other financial groups can use the blockchain.
Inflation and Deflation
XRP is a deflationary currency, meaning the purchasing power of the currency will likely increase as time goes on, due to its increasing scarcity. This is because XRP’s transaction fees are burned, or permanently removed from circulation. Meanwhile, Stellar has a fixed annual inflation rate of 1 percent. The inflation helps ensure people who can access XLM can continue to receive a decent value for the currency as inflation progresses worldwide.
Distributed Points
XLM was distributed to the public upon release, with more than 90 percent of the currency going to the public. At least half of the XRP tokens are owned by the currency’s founders. They are aiming to regulate the XLM system and ensure its continued functionality..
What Makes XRP and XLM Similar?
Coin Limits
Both XRP and XLM have limits to how many coins are available. Mining is not available for either cryptocurrency, as all coins available are already minted. XRP features a maximum supply of 100 billion coins, while XLM has 50 billion. About half of each is in circulation as of October 2021.
Fees
The two networks also feature little to no fees. The minimal transaction fees points to each cryptocurrency’s intended purpose: to help people transfer fiat currencies securely, with minimal cost. Transaction costs are consistently lower than equivalent fiat currencies.
Transaction Time
The transaction time for each currency is relatively minimal. It takes about five to ten seconds to complete a transaction. The design helps people transfer funds quickly, which is better than what people get out of traditional bank transfers.
Side-by-Side Comparison of XRP and XLM
Ripple and Stellar are both useful when transferring money across borders. But the two still have some substantial differences, even if they were both created by the same person. Here’s a comparison of these two options.
Feature | XRP | XLM |
|---|---|---|
Formation | 2012 | 2014 |
Founder | Jed McCaleb | Jed McCaleb |
General Purpose | To transfer funds between borders | To transfer funds between borders |
Accessibility | For banks and other professional institutions | To the general public |
What Influences the Value? | Deflation | Inflation |
Maximum Available Supply | 100 billion | 50 billion |
Who Is it Distributed To? | Mostly controlled by the founders | The public hold a vast majority of it |
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Certainly! I'm well-versed in cryptocurrencies, particularly XRP (Ripple) and XLM (Stellar), and I can provide comprehensive insights into these digital assets.
XRP vs XLM: Comparative Insights
1. Background:
- Ripple (XRP): Founded in 2012, Ripple aimed to facilitate transactions primarily for banks and financial institutions through its blockchain technology.
- Stellar (XLM): Formed in 2014, Stellar targeted broader accessibility, especially for those without access to traditional banking, focusing on an open approach.
2. Mechanisms of Operation:
- Ripple (XRP): Operates through a permissioned ledger, limiting access primarily to banks and financial entities, ensuring network security.
- Stellar (XLM): Utilizes a permissionless blockchain, allowing anyone to access the network, promoting inclusivity, especially for the unbanked population.
3. Economic Model - Inflation and Deflation:
- XRP (Ripple): Deflationary with a maximum supply of 100 billion coins. Transaction fees are burned, leading to scarcity and potential increase in purchasing power over time.
- XLM (Stellar): Inflationary with a fixed annual inflation rate of 1 percent. It aims to maintain value and accessibility for those utilizing the network.
4. Distribution and Ownership:
- XRP (Ripple): A significant portion of XRP tokens is owned by the founders, aiming for controlled regulation of the system.
- XLM (Stellar): More than 90% of XLM was distributed to the public upon release, ensuring broader ownership and decentralization.
5. Commonalities:
- Coin Limits: Both XRP and XLM have capped supplies, with 100 billion and 50 billion coins respectively. Neither cryptocurrency involves mining, as all coins have already been minted.
- Fees: Both networks boast minimal transaction fees, making them cost-effective alternatives for transferring fiat currencies securely.
- Transaction Time: Both XRP and XLM offer rapid transaction times, typically ranging from five to ten seconds, ensuring swift fund transfers compared to traditional banking methods.
Side-by-Side Comparison of XRP and XLM:
| Feature | XRP (Ripple) | XLM (Stellar) |
|---|---|---|
| Formation Year | 2012 | 2014 |
| Founder | Jed McCaleb | Jed McCaleb |
| General Purpose | Cross-border fund transfers | Cross-border fund transfers |
| Accessibility | Banks and financial institutions | General public |
| Value Influence | Deflationary | Inflationary |
| Max Available Supply | 100 billion | 50 billion |
| Distribution | Majority controlled by founders | Public holds a vast majority |
In summary, while both XRP (Ripple) and XLM (Stellar) aim to facilitate cross-border transactions, their fundamental differences lie in accessibility, economic models, distribution strategies, and their intended user base.
If you have further inquiries or need more detailed information, feel free to ask!
