Ripple and Stellar offer some of the best payment solutions based on blockchain technology, Stellar being developed by one of Ripple’s co-founders. Both projects have their own cryptocurrencies which are used to transfer funds.
During this period, the prices of the native XRP and XLM tokens fell by 57% and 73% respectively. Which of the two has more potential and represents a better investment in 2023?
Ripple vs. Stellar: Similarities and Differences
Ripple and Stellar were created as alternative money transfer solutions where transactions would be faster and with lower fees. To achieve this, the two blockchain networks use different approaches.
Ripple has its own technology called On Demand Liquidity (ODL). ODL helps customers transfer money internationally without the need for proper banking relationships and pre-funding overseas accounts. It uses XRP tokens as a vehicle for cross-border transactions and no middleman is required.
Stellar, on the other hand, uses the Stellar Consensus protocol, which solves the scalability and speed issues of cryptocurrencies like Bitcoin. It allows people to create digital representations of other currencies. The corresponding amount of money is converted into XLM and transferred to Stellar’s network. Stellar then searches for the best exchange rate and converts the money back into the desired fiat currency.
Stellar had a great year even as the price of XLM fell. The total number of accounts increased by 17% to 7.3 million, and the number of transactions processed reached 3.6 billion. The total number of payments processed has grown to over 345 million. Another milestone was the launch of Soroban, a new smart contract standard that allows developers to build decentralized applications. The company has set up a $100 million adoption fund.
XLM vs. XRP: predictions for 2023
XRP and XLM face many challenges in 2023. The most important event for Ripple will be the condemnation of the Securities and Exchange Commission (SEC) lawsuit currently underway in the United States. It is still too early to say whether Ripple will succeed in this case. However, I believe the SEC has a higher bar to prove that XRP is a security.
Therefore, I think XRP is a better buy than XLM in 2023 from a risk and reward perspective Stellar still faces significant challenges. For example, the trading volume with XLM is very low. This is one of the reasons why the coin disappeared from the Coinbase wallet. It’s also not yet clear whether Soroban will actually succeed. Additionally, Stellar faces a lot of competition in this regard as there are many other crypto projects that enable smart contracts.