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Ripple vs Stellar: Which Crypto Should You Buy in 2021

Ripple and Stellar are among the most popular cryptocurrencies. But is XLM a better investment?

20 Min Read
Last Updated April 1st 2021

The cryptocurrency market surged to record highs throughout the opening months of 2021, as the trading prices of top coins like Bitcoin, Ethereum and Binance Coin doubled - or even tripled -  in price in just a few weeks.

Whilst this is great news for the market, many forward-thinking investors are expecting things to slow down for the top five coins and are instead starting to look at smaller altcoins that still have plenty of room to grow - coins like Ripple’s XRP and Stellar’s XLM.

Anyone with experience of the industry will already be aware that it’s common practice for analysts and commentators to pit one token against another as a means of choosing the most worthwhile investment. Ordinarily, there is plenty of diversity within the crypto space to enable the various blockchains to operate alongside each other. However, Ripple and Stellar, to some extent at least, are competing for the same client base - namely banks and financial institutions. 

So how do we compare Ripple vs Stellar? And, more importantly, how do we choose the better investment? In the following article, we’ll review each token’s technical particulars, take a look back over their recent price movement, find out what experts have to say and, finally, consider predictions from some of the top market analysts. 

Ripple vs Stellar: A Comparison Between XRP and XLM

It’s fair to say that both Ripple and Stellar present a riskier investment than the comparatively stable coins, like Bitcoin or Binance Coin. However, in volatility lies opportunity and both XRP and XLM have plenty of potential to further establish themselves not only on the crypto scene but in the wider financial world.  

Whether you invest in Ripple or buy Stellar in 2021, both are tipped to grow in the coming months and both are likely to remain in the top popular cryptocurrencies for the foreseeable future. But to take an objective view of Stellar vs Ripple, we first need to look at each coin’s development. 

Ripple Vs Stellar: What Are The Key Differences Between Them

Here are the most important ways the two assets differ:

Background

Set up in 2014  to provide an open-source platform to facilitate international payments, Stellar undoubtedly shares many attributes with its predecessor, Ripple. In fact, Stellar was actually founded by Jed McCaleb, who was also one of the original co-founders of Ripple. 

The network was built by the Stellar Development Foundation. The nonprofit organization attracted a lot of attention early on and received significant funding from payments startup Stripe, along with donations from Google, FastForward and BlackRock.

Just like Ripple, Stellar's intended objective was to provide a faster, cheaper way for banks and financial institutions to transfer currencies across borders. It does this using its native cryptocurrency token, Lumen (XLM), as a medium for exchange.

However, there are significant differences between Ripple and Stellar. Most notably, Stellar is targeted at developing markets and can facilitate money remittances and bank loan distribution to the unbanked, whereas Ripple is squarely aimed at the mainstream banks serving the world’s major economies. 

Naturally, many of those who choose to invest in Stellar look upon it as a long term investment. Its focus on remittances and bank loans to those who are outside of the reach of the banking services makes it a very interesting investment as developing economies are exactly that: developing. As such, Stellar uptake could grow significantly as the years go by. It also means that Stellar doesn’t necessarily have to compete with Ripple to gain ground. 

Ripple was also set up to facilitate cross border transfers using its own native cryptocurrency, XRP. The Ripple network itself is owned and operated by Ripple Lab - something which has often caused controversy as many crypto advocates believe the corporate structure means Ripple is not truly decentralised. 

Much like Stellar, Ripple’s fast processing speed and low transaction fees make it suitable for financial institutions which normally rely on the more costly SWIFT payment protocol. However, Ripple is often dubbed the banker’s cryptocurrency, as it is squarely aimed at mainstream financial giants, rather than emerging economies, as is the case with Stellar. 

If you’re considering investing in Ripple, you may already be aware that the company is currently entangled in a legal battle with the US Securities and Exchange Commission. In December 2020, the regulator ruled that XRP is a security, rather than a currency, and must be traded as such. Naturally, this hit the price of XRP and has caused a degree of ongoing uncertainty amongst investors. A further ruling on the case is due in August 2021. 


Transactions and Speed

Transaction speeds and costs are always a key factor in determining a cryptocurrencies viability, but for the likes of Stellar and Ripple - both of which being intended to offer banks a cheaper alternative to SWIFT - it is arguably the most important feature and one that could well determine which of the coins comes out on top. 

Stellar, as it exists today, is a result of a hard fork that occurred in 2014. It was then that the Stellar Consensus Protocol (SCP) came into operation. The protocol uses the Federated Byzantine Agreement (FBA) algorithm, which enables faster processing of transactions by using a selection of trusted nodes to validate transactions, rather than the entire network.

Ripple also uses a similar consensus mechanism, although they differ in how they operate. One notable variation is the way in which the Stellar network appoints trusted nodes - effectively this process is done via a peer-to-peer mechanism, meaning it is completely decentralised. Whilst many Ripple advocates would say the same for the Ripple network, ultimately Ripple Labs own most of the trusted nodes, meaning there is a de facto authority controlling the process. 

Ripple processes transactions in a similar way to the Stellar network, using a consensus ledger and series of approved network servers to validate transactions. XRP is known for its speed - processing approximately 1,500 transactions per second. The consensus mechanism also keeps Ripple’s transaction costs much lower than with those of, say, Bitcoin, which relies on the proof-of-work mechanism. 

Ripple’s consensus mechanism differs from Stellar’s in how it operates. Aside from the finer technical details, a key difference is that Ripple Labs actually owns many of the trusted nodes - those which approve the transactions and thus constitute the consensus approach - which effectively means the company itself plays a major role in authorising transactions. 

This may have little to no effect on XRP’s potential as an investment, but it has drawn criticism from the wider cryptocurrency community as being out of alignment with a key tenet of the widely acknowledged blockchain ethos - its decentralised nature. 

Supply and Demand

Investment is all about supply and demand and if you are planning to buy in Stellar or Ripple in the near future, then it’s important to be aware that the coins differ significantly in this regard.

Stellar is an inflationary cryptocurrency. This means that it has an in-built inflation mechanism as part of its protocol. Put simply, the mechanism involves fees on the Stellar network being recycled back into circulation, which inflates the number of XLM by 1% annually. This differs from many of the top cryptocurrencies, including Ripple, which operate deflationary mechanisms.

So does this make Stellar’s Lumen less valuable? Not necessarily. The inflation on the Stellar protocol is redistributed to users. Plus, Stellar’s ethos is that the inflation mechanism will ensure coins are spent rather than held - thus allowing the network to better achieve its intended function. 

As noted above, Ripple differs from Stellar in that it is deflationary crypto. A Ripple account requires a reserve fee - which means a minimal holding of XRP that stays in the account. Accounts cannot be closed, so effectively these reserve fees are taken out of circulation every time a new account is set up. A small amount of XRP is also burned with each transaction, meaning that, in theory, scarcity of XRP should increase as time goes on. 

XRP is also supplied to the network directly by Ripple Labs. The firm holds a huge amount of XRP in escrow and releases up to 1 billion tokens each month to facilitate business transactions, with any unused XRP being placed back into escrow. Once again, this is very different from how the majority of cryptocurrencies operate and again has led to accusations that Ripple’s XRP is not a truly decentralised cryptocurrency. 

XRP vs BTC: Which Is The Better Investment?

Having looked at the fundamentals of Ripple and Stellar, it should be obvious that both tokens have a huge amount of potential. However, anyone familiar with the cryptocurrency market will probably know that the most technically advanced coin does not necessarily equate to the best investment opportunity. 

If you are planning to invest in Stellar or Ripple in future, one of the best ways to gauge each coin's potential is by taking a look back at previous price movement. This information can then be used to inform future predictions. Of course, we can also look at the forecasts from leading analysts to get an idea of market sentiment for both tokens. 

Stellar Vs Ripple: Price History

Looking at the price history of a cryptocurrency can give an idea of how certain market forces will affect prices and reveal any price barriers associated with a particular token. 

XLM

The first few years of Stellar’s existence repeat a familiar story. XLM traded at a fraction of a cent for the first two years or so, with no significant price movement until 2017. After a short bull run in the summer of that year, the price of XLM suddenly skyrocketed in November/December, reaching an all-time high of $0.93 by January 2018.

The record price wasn’t to hold long. XLM experienced a significant downturn throughout 2018, with prices tanking by around 90%. By February of 2019, the token was trading at just $0.06. There was little improvement that year either, with XLM barely scraping a high of just $0.16, having dropped as low as $0.03.

Stellar looked to benefit from the wider crypto market bull at the end of 2020, but the SEC ruling against Ripple caused a huge amount of collateral damage, as investors predicted that a similar decision could be coming Stellar’s way. Having crept up to $0.19, the price of XLM had dropped back to $0.13 by January 2021.

XLM has since recovered well. The second upturn to hit the crypto market saw prices surge across the board - and Stellar was no exception. Prices reached a high of $0.54 in February, before going into decline. At the time of writing, XLM was trading at around $0.40.

XRP

Ripple’s initial price trajectory looks much the same as that of XLM. Prices remained subdued until 2017, when XRP reached parity with the US dollar, following a spate of adoption by several financial institutions. Prices then surged at the end of the year, finally reaching an all-time-high of $3.08 by January 2018.

Ripple was unable to hold its value for long though, and prices dropped steeply in the opening quarter of 2018. By August, prices had dropped as low as $0.27. Things picked up again in 2019, with XRP reaching a high of $0.46 by the summer, but once again the good fortune wasn’t to last and prices declined steeply for the remainder of the year.

Things were looking up for XRP going into 2020, but any price growth was stifled, first by the COVID pandemic then later the SEC ruling. However, XRP seems to have recovered well from what was a very chaotic year. Having traded as low as $0.21 in January 2021, Ripple experienced a major upturn and prices soared to $0.62 in February. Ripple has so far held on to this growth, trading at $0.56 as of March 2021. 

Read More: Is XRP a Good Buy in 2021?

Stellar Vs Ripple: Future Predictions

Previous price movement is one of the key metrics in putting together a realistic price prediction. But we can also look at what several reputable analysts are forecasting over the coming months. Future predictions are where the competition of Ripple vs Stellar really heats up. 

XLM

There is a fair amount of optimism regarding Stellar’s price potential. TradingBeasts has issued a  conservative forecast, predicting steady growth for Stellar across 2021 and into 2022. According to its technical analysis, TradingBeasts has XLM reaching an average price of $0.53 by December and continuing to grow month-by-month across 2022, hitting highs of up to $0.75.

The TradingBeasts forecast is somewhat echoed by DigitalCoinPrice, which has XLM climbing steadily in the coming months. However, DCP sees Stellar reaching $0.60 before the end of 2021. Looking ahead to 2020, the platform sees XLM trading at $0.70-plus, growing by some 20% throughout the year. 

Prime XTB has the most optimistic forecast, having predicted that XLM could finally reach parity with the dollar in 2021. The platform is also overwhelmingly bullish for Stellar in 2022, forecasting Stellar to reach highs of up to $4 by the end of the year. 

Image: Prime XTB

The forecasts for XLM are undoubtedly positive and are highly believable. Naturally, anyone looking to invest in Stellar should align their expectations with the more conservative XLM predictions, but adding the token to your portfolio could well prove a smart decision. 

XRP

Ripple’s ongoing legal battle with the SEC has led to many leading analysts having to revisit their XRP predictions. However, a degree of optimism seems to have returned with regards to Ripple’s future as an investment opportunity. 

DigitalCoinPrice is just one platform predicting growth for XRP in the coming months. The platform’s technical analysis has XRP hitting a high of $0.87 before the year is out - representing growth of around 52%. 

Image: DigitalCoinPrice

Wallet Investor also sees XRP reaching $0.84 by December 2021. However, not before a downturn over the summer, which the platform believes will see the price of Ripple dipping to $0.52.

Finally, the Economy Forecast Agency has a very different Stellar price prediction. The platform has XRP holding its price well throughout 2021, finishing the year at around $0.78. However, from there, the EFA believes XRP will go into steady decline, dropping to $0.40 in 2022 and continuing to slide well into 2023.

Naturally, anyone looking to invest in Ripple will need to keep a close eye on developments in the SEC case. However, it seems that most platforms are predicting growth for 2021. Whether XRP is a good long-term investment remains to be seen, but it certainly could offer returns as part of a short-term strategy. 

Check Out: Ripple Price Prediction for 2025 and 2030

Stellar Vs Ripple: What the Experts Say

As part of our comparison of Stellar vs Ripple, it’s worth noting the opinions of some key industry figures and analysts, as this is often a great way to gauge wider sentiment towards each token. 

Writing for Nasdaq.com, financial analyst Chris Macdonald is optimistic about XLM’s potential, saying that “Stellar Lumens is an interesting option for crypto investors seeking a viable reason to own a particular cryptocurrency today.” Interestingly, he also picks Ripple as his other “top pick” in the crypto space. However, he does warn that the SEC case could still impact both coins heavily and advises caution when adding either to your investment portfolio. 

Ripple, of course, has plenty of supporters due to its affiliation with banking giants such as Santander. Noted crypto trader Kaleo believes Ripple is about to surge and potentially approach its previous all-time high of $3.84.“The possibility of a breakout leading to a return back to the old ATH is too tempting not to punt a long on,” he told Daily Hodl

Elsewhere, Vorto Trading has made the case for technologies like Stellar and Ripple eventually replacing SWIFT as the medium for international money transfers, stating that “blockchain has the potential to offer a bright future for cross-border payments and banks may start to prioritise blockchain strategies in the next few years.” 

Naturally, this would be a huge boost for either token - and Vorto notes that Stellar and Ripple have the potential to corner different markets within the same sector. As such, either token could be a worthy addition to your investment portfolio. 

Ripple Vs Stellar: Conclusion

Both Stellar and Ripple have a huge amount of potential. Whereas many top cryptocurrencies purport to being retail peer-to-peer payment systems, these two digital currencies are looking at an altogether different market and, as such, would complement the likes of Ethereum and Bitcoin as part of a diversified cryptocurrency investment strategy. 

However, pitting them against each other could be a fool's errand. Whilst they both have similar functions and objectives, Stellar is aimed at developing countries and those without traditional banking services, whereas Ripple looks to work with leading financial institutions. 

If you plan on investing in cryptocurrency in 2021, then you are probably aware that the market is highly volatile. This is especially true of both Ripple and Stellar - particularly with the ongoing SEC saga. As such, investing in either token carries a high degree of risk. Whether you invest in Stellar or Ripple - or both - you will need to monitor the legal proceedings carefully and adjust your investment strategy accordingly. 

Read Also: Ripple vs Bitcoin

Where to Invest in Cryptocurrency

Whether you choose to invest in Ripple or Stellar, you’ll need to find a reputable broker or exchange to facilitate any transactions. We usually recommend eToro, as it offers trading in all the top cryptocurrencies via a powerful but easy-to-use trading platform. 

Opening an account is simple and, assuming you are able to provide all the relevant details, you can be up-and-running in minutes. The great thing about eToro is that the website also has plenty of educational material, so even those new to the crypto markets can quickly get to grips with the fundamentals of trading digital currency. 

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FAQ

Is it a good idea to invest in Stellar?

Stellar may not have the notoriety of Bitcoin or Ethereum, but it certainly has a lot of potential. Whether or not it proves to be a good investment will largely depend on how widely adopted it is, but it’s worth noting that many leading crypto analysts are predicting growth for XLM throughout 2021.

Is it safe to invest in Ripple in 2021?

If you have been looking into Ripple as an investment opportunity, then you’ll probably be aware of its ongoing case with the SEC. Naturally, this could have a significant impact on the price of XRP. However, whatever the outcome, there may still be opportunity.

If Ripple’s price drops, then there is always the chance it will rebound in future - as it seems to have done after the initial 2020 ruling. Alternatively, a positive outcome could see XRP reach record prices by the end of 2021. 

Will Ripple replace SWIFT?

It has been argued that cryptocurrencies like Ripple and Lumen offer a much cheaper and more efficient means of making cross-border transfers than the existing industry standard, SWIFT. Ultimately, time will tell whether banks adopt blockchain technologies for such transactions, but it’s worth noting that, at the time of writing, even those financial institutions which have adopted Ripple in some form or another still rely on SWIFT as their primary means of international transfer. 

Which crypto should I buy in 2021?

If you are looking to invest in cryptocurrency in 2021, then you have plenty of options, with many of the top coins tipped for major growth in the coming months. However, as with any investment strategy, it’s important to diversity.

As such, it’s worth looking at the top cryptocurrencies like Bitcoin and Ethereum, along with lesser-known coins, such as Tron or Stellar. There is of course more risk in investing in the smaller altcoins, but they also have huge potential for growth. 

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