David vs. Goliath: ETH and XLM go head on

Published by Madhuri Walia on

Ethereum vs Stellar
Ethereum vs Stellar

It all started in 2008 with a paper that was released by an unknown writer, under the assumed identity of one Satoshi Nakamoto. A year later, a software called the Bitcoin was open to the world. It’s one of the first cryptocurrencies that revolutionized the way financial transactions worked.

So far, money was the only means of trade. But the thing about a financial infrastructure like money is it’s a mess of closed systems, with innumerable gaps. Gaps imply loopholes that can be taken advantage of, the result of which is increase in transactional costs. The second, and far more devastating outcome is how slowly money moves across geographical and political boundaries.

Historically, the good samaritans of the business world have safeguarded financial integrity by imposing high barriers to entry, and have such planted financial institutions to bring about regulation- a concept that inherently deceives the organic idea of the Bitcoin.

Over the years, trends have proved Bitcoin’s many proponents wrong- that it will less likely be a universal communal ledger. Although the transactions over Bitcoin have consistently risen over the years, it is not the most ideal platform for small payments, and despite the presence of transaction accelerators, miners simply don’t prefer small payments yet.

But can the ultimate demise of cryptocurrency be avoided?

Ethereum: The people’s choice

From a comparative standpoint, if Bitcoin is decentralizing currency, Ethereum is decentralizing the internet. Ethereum is a blockchain development platform and is a more powerful idea than the Bitcoin.

Bitcoin, or the technology behind it called the blockchain, is simply more than just being a ‘peer-to-peer transfer of money system.’ The central idea of the Ethereum is to create an alternative protocol for building decentralized applications where factors like development time and security are crucial.

Ethereum is a programmable blockchain. It’s not a fork of Bitcoin. The platform is fueled by the currency called ‘Ether’ (ETH), which is what is used to pay miners for verifying transactions on it.

Although sometimes Ethereum is criticized for scalability limitations, it is the best tool for building real world applications, which could not be proven by counterparts like EOS or Tron. Here’s a partial documentation of what it has done:

  1. DeFi: Decentralized Finance applications is the biggest use case of Ethereum. This includes smart contract powered loans and decentralized exchanges.
  2. Digital Identity: Ethereum enables the verification of data in an open and transparent way. The is great because until date, the only reason why documents like passports hadn’t been digitized is because it’s hard to authenticate a digital document.
  3. Health applications: Storing public health records is vital for developing vaccines and other medications in case of viral outbreaks or to study patterns of illness. Ethereum will enable your personal health information to be shared across with every hospital in the world, securely and safely. So, any doctor you visit across the world will know your medical history, without you having to explain it.

Stellar: A strong contender

Stellar is a payment transfer protocol which executes cross-border payments by the usage of multiple cryptocurrencies, including its own, Lumens (XLM). Apart from this, Stellar also works a development solution for simple applications through smart contracts.

In perspective with Turning complete based Ethereum and NEO, Stellar brought about a paradigm shift with it’s Stellar Consensus Protocol (SCP), that eradicated the use of any mining operations for the verification of a transaction.   

This means just one thing- basic applications created much faster. Stellar is not completely dependent on the blockchain technology and bases its operations on blockchain- based Distributed Ledger Technology (DLT).

What makes Stellar a strong contender is that like Ethereum, it focuses on providing real world scalable solutions. It’s main aim is to provide payment solutions across the world.

  1. It provides an option for executing transactions through payment facilitators called ‘Anchors’, giving users the luxury of not being experts on DLT.
  1. As smart contracts here are non-Turing complete, it is ideal for developers and organizations who want to build products at low cost and higher speeds. This also implies much lower transactional fees.
  1. Projects can also use Stellar to run token sales, and list their tokens on Stellar Decentralized Exchange. Basically, people can create, issue and list the tokens in no time- bestowing the power of liquidity in the process.

The final verdict

First things first, Ethereum is a development platform with the addition of running a fully functional cryptocurrency, while Stellar acts as a platform for development to facilitate cross border payments.

Ethereum was specifically designed for creating smart contracts, but off lately Stellar has proven to be better at this. A team of researchers found that Ethereum was more vulnerable to attacks and their smart contracts were easy to manipulate- its own flexibility acting like a double-edged sword.

While it is evident that Stellar cannot provide the mobility and scalability that Ethereum does, it is still a great alternative to develop viable solutions and issue tokens and carry out ICOs because it gives you only the features you want. Stellar immensely focuses on micro-payments and is pocket friendly.

For people looking to develop complex applications with high computation capabilities, then the Turing complete smart contract based Ethereum is the way to go. But seeing the broader canvas, both Ethereum and Stellar are winners in their own segments. While Ethereum has proved its mettle in development and to an extent scalability, Stellar has done so for peer-to-peer cross border payments, but not without some notable shortcomings.

One being its major marketing and PR issue. Due to this, Stellar has not achieved the market penetration it deserves and thus its potential to become a true end-to-end platform is often unseen.

So on the one hand, we have Ethereum’s scalability issues and on the other, we have Stellar’s penetration. If these issues are holistically solved, then there is no argument that they will most likely become monopolies in their own respective markets, providing unbeatable value for their users.

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