Here’s Why Stellar (XLM) Could Soon Catch Up To Ripple (XRP)

Stellar (XLM) is up close to 40% over the last twenty-four hours against its USD counterpart and is up close to 900% since the start of December. This is a coin that is picking up a huge amount of speculative attention right now, even against a backdrop of weakness in some of the more established cryptocurrency markets, and the extra attention is translating to some pretty substantial volume spikes. In the last twenty-four hours alone, more than $670 million dollars’ worth of XLM changed hands.

What’s driving this action and where do things go next?

Before answering, it’s worth delving into the history of this one a little bit.

Most reading will likely be familiar with Ripple (XRP). For those that aren’t (and for those that are, but aren’t familiar with its history), it was initially conceived by a guy called Ryan Fugger who, after a couple of years of working on the project, handed it over to Chris Larsen and Jed McCaleb.

XLM Daily Chart

In 2014, McCaleb left Ripple to form Stellar. It was initially set up based on the Ripple protocol but subsequent to a fork in the Stellar network, has since been based on what’s now called the Stellar Consensus Protocol (SCP).

So what’s the difference between Ripple and Stellar?

Well, both are designed as systems through which two or more parties can conduct cross-border payments, quickly and cheaply. Both employ a native cryptocurrency (for Ripple, it’s XRP and for Stellar, it’s XLM) and these coins are used for a variety of things – transaction fees, DDOS protection, etc.

Where they differ, however, is in their respective intended use cases.

Ripple is going after the big banks. The company wants its platform to form the base of cross-border exchange between one financial institution and another, replacing the current systems (primarily SWIFT) and, in doing so, removing the inefficiencies associated with these existing processes. And as major news outlets are reporting in the press subsequent to XRP’s huge run over the last few week, Ripple is being somewhat successful in its efforts.

While Ripple is going after financial institutions, however, Stellar is going after a much more individual use case. It’s still based on a cross-border exchange type platform and it’s still designed to facilitate quick and easy exchange and transfer but, in Stellar’s case, the parties on either side of the transaction aren’t global financial institutions.

Instead, they are individuals from developing countries that want to send money back to their families. They are small businesses in struggling economies that want to transact on a global scale but that can’t gain access to bank accounts of traditional exchange mechanisms. In line with this vision, Stellar is also set up as a non-profit entity.

Is the non-profit element a red flag?

No. If you were asked to buy shares in a non-profit company, you’d turn that down (if you are looking to make a return, that is). When you buy XLP, however, you’re banking on the success of the platform in terms of adoption, not how much money the company behind it makes.

So what’s driving the action now?

Well, people are looking at what Ripple has achieved and are assuming that Stellar can do the same. The technology is, after all, similar, and Ripple is proving that it can work on a global scale. If Stellar can follow in Ripple’s footsteps and start to prove the market for this sort of platform in an alternative use case, there’s no reason XLM can’t catch up to XRP during 2018.

Of course, XRP has some hurdles to clear before it does this but, given what both companies have achieved to date, it’s far from an unreasonable suggestion.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Image courtesy of Stellar.