Stellar (XLM) could compete with Ripple
Ripple, ripple, ripple. This cryptocurrency is on everyone’s lips these days. After all, Ripple has soared more than 1,100% in the last month and more than 43,000% in just one year!
It’s not too far-fetched to say that fortunes were made overnight with this cryptocurrency. Countless young investors have turned their modest investments into gigantic jackpots in no time.
Someone in my extended friends just turned an early investment of $ 15,000 into more than $ 140,000. There are countless other examples like this one that are flooding Ripple’s subreddit these days. So it’s obvious that Ripple is blinking dollar signs in all eyes.
Just yesterday I received a call from a distant relative who asked me if this was a good time to invest in Ripple. However, my answer may not please readers blinded by Ripple’s blinking dollars.
I asked him to look at Stellar Lumens (XLM) instead. It is another digital currency that poses as a “ripple killer”. This digital currency is up more than 700% in the last month and still trades for less than a dollar a piece.
Chart courtesy of TradingView.com
So let’s start by answering the first question that may just have crossed your mind.
What is Stellar Lumen (XLM)?
Stellar is quite simply a blockchain-based network and “Lumen” are its digital currency – its cryptocoins – just like “Bitcoins” for the Bitcoin network or “Ether” for Ethereum.
Stellar is a platform for users to move money cheaply across borders. Stellar enables an easy, fast and secure way to conduct transactions (make or receive payments) in any currency in the world.
Since the transactions take place across borders, you can imagine that there can be any number of currencies involved. To avoid converting one currency into another and incurring high fees in the process, users can simply buy Lumen and do business with it. In short, Stellar makes international transactions both cheap and fast.
Wait, isn’t Ripple doing that? You might want to argue here that Stellar is nothing more than a cheap clone of Ripple.
But the two are not exactly alike.
Ripple vs. Stellar
Stellar is more like Ripple’s dizygotic twin. It was split hard by Ripple in 2014. There is a common brain that developed these two technologies. Jed McCaleb – the famous personality of the crypto world who founded the infamous cryptocurrency exchange, Mount Gox– is both co-founder of Ripple and creator of Stellar.
Obviously, the two initially had similarities – but that only lasted until summer 2015. In addition, Stellar did not share the same code as Ripple or its ideology.
The main difference between Ripple and Stellar is their target market. Ripple is marketed to banks. Stellar is aimed at the average layperson – you and me.
It’s true that Ripple does exactly the same thing as Stellar – enabling cheap and fast cross-border money transfers. But Ripple wants to be the middleman between banks and people. On the contrary, Stellar wants to take banks out of the equation and be the middleman between humans and humans. Additionally, in terms of transaction fees, Stellar is reportedly cheaper than Ripple.
Now you might be wondering why Stellar isn’t as popular as Ripple. I can give you an answer to that in one word.
Ripple receives a lot more media coverage than Stellar, which has made it a full-fledged crypto brand. Ripple had a first mover advantage in the industry. It came three years earlier than Stellar, so it obviously had a head start.
In addition, strong PR within Silicon Valley and Wall Street has helped forge significant partnerships in the corporate and financial worlds. Ripple’s technology is already being tested by a number of international banking giants, which is why the average Joe is so excited about this idea.
Although Stellar may have been late for the party, Ripple is now following closely behind.
Why Stellar could see exponential growth
Just like Ripple, Stellar rubs shoulder to shoulder with the Bigwigs. At the top of the list is Big Blue.
Just recently, Stellar is partnered with. received International Business Machines Corp. (NYSE: IBM) to create a solution for cross-border payments with Lumen.
IBM will use Stellar’s blockchain technology to build an international network that will connect people and banks in a number of countries, large and small, and allow them to conduct foreign exchange trades using only Stellar lumens. (Source: “IBM and Stellar start blockchain banking in several countries”, Fortune, October 16, 2017.)
Think of it this way: a buyer based in Afghanistan may be able to send a secure payment to a seller in a small town in Somalia. The transaction would be carried out in lumens and would not take days or high transaction fees. It sounds like a pipe dream, only that it gets a lot closer to reality than you think.
Some famous banks are also interested in Stellar. To name a few, global banks like Spain’s Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA), Japan Mizuho Financial Group Inc. (NYSE: MFG), Australia National Australia Bank Ltd. (ASX: NAB) and Canada Toronto-Dominion Bank (NYSE: TD) are committed to Stellar.
Ripple’s digging might actually turn out to be an Achilles heel. Remember that Ripple’s blockchain technology is open source and the primary target market is the banking sharks.
The same banks that are shaking hands with Ripple could actually stab him in the back should they find an opportunity. There’s no reason for them not to replicate Ripple and bypass using its service entirely.
You may now be wondering why other banks would ever want to use their competitor’s platform. The answer is simple. They will take advantage of any service that will save them money. And economic theory suggests that competition must produce many of these cheap services.
Forget about banks. Any large company could do a Ripple clone. Think Visa Inc (NYSE: V), Mastercard Inc (NYSE: MA) or even Paypal Holdings Inc (NASDAQ: PYPL).
My point is that the ultimate success of a platform doesn’t depend on who is using it, but on how many are using it. Obviously there are more people in the world than banks and, mind you, Stellar is aimed at people.
You should now find it easy to add two and two together. I look at the bigger picture, which is not a bunch of greedy companies, but humanity as a whole. I think “long term”. It is precisely for this reason that I introduced Stellar to my relative and would do the same to you. Only time will tell if I’m ultimately right or wrong.
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