Stellar Lumens (XLM) or XRP (Ripple) Fight for the Top of the Cross-Border Payments Food Chain
There are two large and recognized virtual currencies in the market that aim at improving cross-border payments for institutions and other companies. Stellar Lumens (XLM) and XRP have the potential to revolutionize the financial industry in many different ways.
The Stellar payment network indeed is a fork of the Ripple protocol. McCaleb, the founder of the Stellar network, is also the co-founder of Ripple’s protocol. Alongside the Stellar network, the Development Foundation was also launched to support the developments that take place on Stellar.
The main difference between these two networks is the fact that Stellar was created by a non-profit organization. As there are fewer costs to operate this Stellar network, the transaction fees are even lower. One of the main investors in the Stellar platform is the Internet-based payment processing service, Stripe.
The XLM cryptocurrency works in a similar way as XRP. This virtual currency allows users to send and receive payments independently from the bank account and fiat currency that the user has. This is also very positive because users do not have to pay high currency conversion fees.
That means that if a user living in the United Kingdom wants to send British pounds (GBP) to another account that only accepts US dollars, the sender will just pay a fee of 0.00001 XLM, which is just a fraction of a cent. At the time of writing, Stellar Lumens is the fourth largest virtual currency in the market and each XLM is being traded under $0.16, thus, fees are very low.
Ripple has also created a similar product to the one offered by Stellar. XRP transactions are also very cheap and users can transact XRP if they have more than 20 XRP in their wallets. The decision to place this threshold of 20 XRP is related to the necessity to avoid spam or malicious usage.
However, Ripple’s products do not necessarily use the XRP virtual currency. One of the most popular XRP products, xCurrent, is based on the Interledger Protocol (ILP) that allows parties to instantly process international payments. The Interledger Protocol has also been developed by Ripple Labs.
Ripple’s xCurrent works in a similar way to SWIFT, however, messages can be sent in a fast and easy way. The xRapid product developed by Ripple Labs does use the XRP virtual currency. It is possible to send payments using the xRapid service via XRP. According to the company, xRapid is able to reduce between 40% to 70% costs at the time of sending and receiving transactions. At the same time, XRP provides liquidity through XRP.
Ripple claims that it has already partnered with 150 different companies and institutions from all over the world. However, there are some critics that say that transactions using RippleNet are not transparent. RippleNet provides privacy features for clients that prefer to remain anonymous or hide the amounts transferred.
Although Stellar focuses on institutions and other financial companies, it also aims at connecting individuals that do not have access to banking services.
XRP is currently the second largest virtual currency in the market with $14.56 billion dollars’ market capitalization. Additionally, each XRP can be purchased for $0.36.
There are some legal disputes between both Stellar and Ripple Labs related to the funds that the companies held in specific accounts. One of the most important issues is related to funds that were stored in the digital asset exchange Bitstamp.