Ripple vs Stellar [Ultimate Comparison Guide]

Updated on: April 24th, 2020
This content has been Fact-Checked.
Ripple vs Stellar

Ripple VS Stellar both want to disrupt the global financial payment systems even though they are using two completely different approaches. Ripple is working closely with banks and financial institutions, while Stellar is working at a more grassroots level. In this guide, we are going to be taking a closer look at how Ripple and Stellar work.

Ripple vs Stellar: A Brief History

On the surface, Ripple and Stellar are both pretty similar projects as they both want to disrupt cross-border payments. However, it is when you take a more in-depth look into the projects, do you see the differences. The history of these two projects is pretty intertwined as well. In Ripple vs Stellar we explore both of these interesting projects! 

Jed McCaleb is one of the most well-known figures in cryptocurrency because he was the founder (or a co-founder) of 3 pretty famous (or infamous if you will) projects. Back in 2006, he founded the exchange Mt. Gox because, in his own words, he wanted a way to get more Bitcoins. He eventually sold it to Mark Karpeles, whose mismanagement brought about one of the biggest crisis in crypto history.

In May 2011 McCaleb founded Ripple, a cross-border payment system which enabled a decentralized cross-border system without depending on mining. However, things quickly turned sour between McCaleb and Ripple. He realized that there was some fundamental misunderstanding between the two parties, which was past redemption. In 2014, along with Joyce Kim, they forked off from the Ripple protocol and founded The Stellar Development Foundation. Ever since then, Stellar has grown from strength to strength.

Ripple vs Stellar at a Glance


Ripple vs Stellar

Key Highlights

  • May 2011: Jed McCaleb and Chris Larsen find the company behind Ripple protocol, OpenCoin.
  • 2012:  Ripple gets released.
  • 2014: Jed McCaleb forks away from Ripple to form Stellar Protocol.
  • April 2015: Brad Garlinghouse joins Ripple as CEO.
  • April 2015: Ripple offices open in Sydney.
  • March 2016: Offices open up in London.
  • May 2016: Santander becomes the first U.K. bank to use Ripple for cross-border payments.


Ripple vs Stellar

  • 2014: Jed McCaleb launches the Stellar network.
  • August 2014: Mercado Bitcoin, the first Brazilian bitcoin exchange, announced it would be using the Stellar network.
  • January 2015, Stellar had approximately 3 million registered user accounts on its platform and its market cap was almost $15 million.
  • April 2015: The Stellar Development Foundation released an upgraded protocol with a new consensus algorithm called Stellar Consensus Protocol (SCP).
  • November 2015: Stellar with the new algorithm goes live.
  • May 2017:, a for-profit entity of Stellar aka Stellar’s commercial arm, gets launched.
  • September 2017: Stellar announces a benefits program, part of its Stellar Partnership Grant Program, which would award partners up to $2 million worth of Lumens for project development.
  • In October 2017, Stellar partnered with IBM and KlickEx to facilitate cross-border transactions in the South Pacific region. The cross-border payment system developed by IBM includes partnerships with banks in the area.
  • September 2018, Lightyear Corporation acquired Chain, Inc and the combined company was named Interstellar.

Ripple vs Stellar: The Differences

The differences between Ripple and Stellar will be among the following categories:

#1 Ripple vs Stellar: Purpose

Firstly, let’s look into the reasons behind the creation of Ripple and Stellar.

Ripple Purpose

First thing you must understand is that Ripple and XRP and two completely different entities. Ripple aka Ripple Labs is a privately-held enterprise company with its own executive team which aims to create and enable a global network of financial institutions and banks.

XRP is a digital currency, also known as Ripple, which is used to power the XRP ledger. The ledger is an open-source product created by Ripple, which aims to connect banks in a network to enable fast and efficient international payments with minimal extra costs.

So, why was Ripple needed in the first place? The short answer, international payments as we know it is broken.

The Problem with International Payments

With the world becoming increasingly connected and with constant innovations in communications and transportations, many companies have expanded into foreign markets. However, they are still hampered by the fact that they can’t indulge in basic and efficient cross-border payments. Here are some of the most common issues with international payments:

  • Bloated Transaction Fees: International payment systems like SWIFT tends to have multiple banks acting as bridges between the origin bank and the destination bank. These banks charge you some commission fees for passage. The fees tend to add up and get extremely bloated towards the end.
  • Exchange Rates: Importers and exporters are both affected by exchange rates. Banks charge a premium on foreign exchange, which is often a significant margin above the mid-market exchange rate.
    Tracking of Payments: It is impossible to track the payments between the different parties.
    Time: The entire process takes a long amount of time.

$155 trillion moves across borders every year. Financial institutions make a whole lot of money from these transactions. Keep in mind that even if banks collect just 2% of the transactions fees, that’s a whopping $3.1 trillion. Nearly all the cryptocurrencies have been created to raze the corrupt banking system to the ground, except Ripple. Ripple’s approach is to work closely with the banks and help them create change from within.

RippleNet is a network of institutional payment-providers (banks, MSBs, etc.) that use solutions developed by Ripple. Ripple has three main products:

  • xRapid: It is a commercial product that will allow banks to use the XRP token to transfer money globally. This will help banks take full advantage of its low transaction fees and scalability.
  • xCurrent: Connects banks to transfer money globally while being able to track how and where it moves. xCurrent doesn’t use XRP tokens.
  • xVia: A payment interface designed to make the user experience of xCurrent and xRapid more intuitive and introduces more abstraction. xVia doesn’t use XRP tokens

Ripple has already made some intriguing POCs. Case in point, ATB Financial, the largest Alberta-based financial institution, has collaborated with SAP SE, financial technology start-up Ripple Labs Inc. and ReiseBank AG in Germany to send the first real international blockchain payment from Canada to Germany. They were able to send 1000 CAD, which would have usually taken 2-5 working days, within 20 seconds! To make matters even more staggering, they improved their POC and cut the transaction time even further to 10 seconds.

Stellar Purpose

While Ripple wants to disrupt cross-border payments by working closely with banks and institutions, Stellar’s approach is to focus on the unbanked masses of the world.

Check out the following graph:

Ripple vs Stellar

Turns out that a staggering 2 billion people around the world don’t even have a bank account. Of these, 438 million people are unbanked in SE Asia alone, that’s 73% of the entire population living in the region alone.

In fact, a study done by McKinsey shows that reaching the unbanked population in ASEAN could increase the economic contribution of the region from $17 billion to $52 billion by 2030.

Stellar aims to reach out to all these people and give them the means to have control over their money. Let’s do a brief overview of how this system will work.

Suppose, Alice wants to send money to Bob. Alice lives in the United States and Bob lives in Nigeria. She wants to send $100 to Bob which will be converted to Nigerian Naira. How will it work?

Alice belongs to Bank A based in the US and Bob belongs to Bank B based in Nigeria. Both these banks are connected to the Stellar network and are “Anchors” (more on this later). Ok, so now let’s see what happens.

  • Alice sends Bob $100 and the transaction intent is sent to Bank B within seconds to see if Bob is compliant or not.
  • The moment Bank A gets the green signal from Bank B, they deduct the funds from Alice’s personal account.
  • The USD is then moved to Bank A’s pool account and then moved into the Stellar network in the form of credits aka Lumens, the native Stellar tokens.
  • Once inside, the network looks for the best exchange rate to use to convert the Lumens into Naira.
  • The money then moves to Bank B’s base account which then gets credited to Bob’s account.

#2 Ripple vs Stellar: Consensus Algorithm

Ripple Consensus Algorithm (RPCA)

Before we understand how Ripple Consensus Algorithm (RPCA) works, there are some terms that you should familiarize yourself with:

  • Server: Any entity that runs the Ripple Server software and participates in its consensus process is called a server.
  • Unique Node List (UNL): UNL is a set of other servers that is maintained by each server. The members of a server’s UNL are responsible for voting and determining consensus.

So, let’s look at how RPCA works. The RPCA occurs in rounds.

  • Each server takes all the transactions available at the beginning of the consensus process. These transactions could either be new, leftovers from the previous round, or they didn’t get the required number of confirmations previously.
  • The server then sends this transaction set to all the servers in its UNL. The UNL members then vote on the validity of each transaction.
  • When at least 80% of the members of a UNL agree on the validity of a transaction, the transaction gets added to the ledger.

The RPCA is extremely fast as it achieves 1,500 transactions per second.

Professor David Mazières from Stanford and co-founder of Stellar Development Foundation suggested that there are some flaws in the RPCA.

Firstly, he claims that the Fischer Lynch Paterson (FLP) impossibility result stated that any deterministic asynchronous consensus system can only have two of the following three properties:

  • Safety.
  • Guaranteed termination or liveness.
  • Fault Tolerance.

According to him, the Ripple Consensus Algorithm was sacrificing Safety over the other two. He concludes,

“This means it prioritizes ledger closes and availability over everyone actually agreeing on what the ledger is—thus opening up several potential risk scenarios.”

Secondly, the issue of “Provable Correctness.” He researched the entire system and found out that the algorithm fails to be safe under all circumstances.

Note: Ripple has responded to Professor Mazières’ research which you can read over here.

Stellar Consensus Protocol

Stellar earlier used to implement Ripple’s consensus algorithm but have since started using their consensus protocol called Stellar Consensus Protocol or SCP.

SCP is an FBA (Federated Byzantine Agreement) protocol which guarantees that its well-behaved nodes can sustain the network despite the presence of malicious nodes. This means that it is Byzantine Fault Tolerant.

The way the SCP achieves this and the core idea behind it is Federated voting.

Federated Voting

Each node v in the ecosystem can vote for a statement “a” provided “a” is consistent with the past statements that have been agreed upon beforehand.

Now suppose we have a quorum U which includes node v, then we have the following two conditions of ratification:

  • U ratifies a if and only if every member of U ratifies a.
  • Node v ratifies a if and only if the quorum U ratifies a.

The theory behinds this is very straightforward. If we indeed have a Byzantine fault tolerant system, then despite having malicious nodes, the statement “a” can still be ratified.

However, even then we have two scenarios of failure:

  • Node v may not actually vote for a.
  • Some nodes that have voted for a may stop working.

So, what should the outcome of Federated voting look like? It is the same as the outcome for any simple daily voting should look like which is like this:

Ripple vs Stellar

What is happening here?

  • In the beginning, we have a mixed set of people. They either vote for “a” or “ā.” This mixed state which can vote for either of the two states is called a “bivalent” state.
  • Now we have three scenarios. Either majority of the nodes vote for “a.”
  • Or, the majority of the nodes vote for “ā.”
  • Or, there is no clear majority and the entire system is stuck.

This is how it works in a centralized voting system and this is how the Federated voting outcome should look like.

However, we once again have two points of failures:

  • The whole voting premise works on the supposition that the system can’t fail. However, that doesn’t make it Byzantine Fault tolerant.
  • A node v in a quorum Q cannot just assume that the other quorums will be correct.

So, how do we know that a decentralized system in SCP is indeed going to vote for a statement “a” and make it a-valent? For that to happen, every node needs to have the first-hand ratification.

To achieve that, we must answer the following two questions:

  • How can a node v come to a consensus about the statement “a” even after voting against it?
  • How do you know that the entire system has come to a consensus on “a?”

So let’s tackle these questions.

Answering Question 1

Firstly, let’s answer the first question: How can a node v come to a consensus about the statement “a” even after voting against it?

For the statement “a” to be accepted by node “v,” it must fulfill two conditions:

  • The quorum that “v” belongs to must have voted for or accepted “a.”
  • Each member of the v-blocking set i.e. the nodes making a quorum slice with “v” must accept “a.”

The latter point makes sure that node “v” accepts the statement “a” even after voting against it.

However, we still don’t have a clear consensus. We are still facing two more issues:

  • We don’t know if all the intact nodes will accept the statement “a” yet.
  • We cannot guarantee the sub-optimal safety of the non-intact nodes enjoying quorum intersection.

Answering Question 2

To address both these issues, we have to answer the second question: How do you know that the entire system has come to a consensus on “a?”

The solution for that is another vote. It is a vote to confirm the fact that the first vote succeeded.

How does this confirmation work?

  • The quorum U confirms a statement a, by ratifying that “we voted for a.”
  • The node v confirms “a” if and only if it belongs to the quorum “a.”

Now, how will this second vote solve both the problems outlined before?

Problem: We don’t know if all the intact nodes will accept the statement “a” yet.

Solution: The intact nodes may vote against the statement “a” but won’t vote against the fact that their quorum voted for the statement “a.”

Problem: We cannot guarantee the sub-optimal safety of the non-intact nodes enjoying quorum intersection.

Solution: The non-intact nodes are no longer suffering because of malicious v-blocking nodes since the ratification in this stage is first-hand and doesn’t depend on the decision of its quorum.

The underlying theory of confirmation goes like this: if one intact node confirms a statement, then all the other intact nodes will follow suit.

Bringing it All Together

Finally, let’s bring everything together and see what the final overview of the Federated Voting process looks like.

Ripple vs Stellar

Pictured above, the two layers of voting in the federated voting system. So, how does SCP measure up to other well-known consensus mechanisms?

Ripple vs Stellar

Image Credit: SCP white paper

#3 Ripple vs Stellar: Token Distribution

XRP distribution

The XRP token is primarily used as a utility token within the ecosystem. Of course, there has been a lot of controversies floating around recently about whether the XRP token is a security or not. A formal decision still needs to be taken, however, all signs point to the contrary. A security token represents the fact that you own a certain part of the company that issues it. However, XRP and the XRP blockchain can theoretically still run if the Ripple company shuts down.

Before we go any further, there are certain things that you need to know about XRP.

  • Ripple has already been completely pre-mined. Ripple has no miners or stakers in its ecosystem.
  • 20 billion XRP tokens have been withheld by the creators.
  • The remaining 80% were handed to Ripple Labs to increase the liquidity available and strengthen the overall market.
  • To regulate the supply of the tokens within the ecosystem, 55 billion XRP are locked up in a rolling 5-year escrow that releases 1 billion XRP per month and returns the unused/unsold portion to escrow, adding an additional month at the end of the established five years.

XLM distribution

100 billion XLM has already been pre-mined. The Stellar Development Foundation (SDF) is supposed to oversee the distribution of the 95 billion lumens (95%). The distribution will happen like this:

  • 50% to be given in small increments to as many people as possible over 10 years. Wider the distribution, more decentralized the system.
  • 25% to be given to other businesses and non-profits to reach people that Stellar wouldn’t otherwise be able to reach through the Direct Signup program.
  • 20% will go to bitcoin and ripple holders
  • 5% will be retained by Stellar for future development and other operating costs.

Stellar has a built-in fixed inflation system. Every year the total lumens count increases by 1%.

Stellar also has another exciting feature ingrained in it called “Spam Fees.”Spamming a network with transactions to slow down the system can be very problematic. To stop this attack, Stellar does two things.

  • Firstly, Stellar charges a small fee per transaction. This will stop spammers from doing multiple transactions since it won’t be economically viable.  These spam fees are added to the inflation pool. Anyone who holds lumens can vote on where the funds in the pool will go. Every week, the lumen is distributed to any account which gets more than .05% of the votes from the accounts.
  • Secondly, every account in the Stellar network most hold a minimum of 20 XLM. This helps ensure the authenticity of the account.

Ripple vs Stellar: Conclusion

Before we conclude, let’s do a quick overview of the differences between these two projects:

Ripple vs Stellar

Fans of both Ripple and Stellar tend to bicker against each other a lot. However, while their functionality may be pretty similar, their core philosophies are completely different and they are both fixing problems that need to be fixed. Ripple is fixing cross-border payments for institutions while Stellar is doing the same at an individual level. All things considered, they are both important projects who are bringing in important utility into the crypto ecosystem.

Rajarshi Mitra
Rajarshi started writing in the blockchain space after listening to Andreas Antonopoulos’ podcast with Joe Rogan. A content generating machine, Rajarshi has been consistently producing high-quality guides and articles for us since late 2016. His articles have been shared extensively in social media and several start-ups have used his guide as learning material for their staff. He is continuously invited all over his country to give talks in various crypto seminars and conferences. He has gained a solid reputation as a speaker/educator on top of being one of the most promising writers in the crypto space. When he is not busy nerding out over the latest in the blockchain/crypto space, he is usually busy watching re-runs of top gear and MMA.

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Use the path of least resistance for all Blockchains by default at all

Justin Holbein

Good guide – thank you for posting this!

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