In 2008, a paper was released by an unknown writer, who went by the fake identity, Satoshi Nakamoto. Later, in 2009, a software called Bitcoin was released to the world. It is the first cryptocurrency in history to revolutionize the way our financial system works.
It operates with no central authority or banks, nobody owns or controls Bitcoin. Managing transactions and the issuing of bitcoins is carried out collectively by the network.
When Bitcoin launched, it began a rippling effect for the creation of other cryptocurrencies (called altcoins). At the core, a lot of altcoins pull from the roots of Bitcoin, which is why if you have the time, it’s also recommended to read Bitcoin’s White Paper.
When Jed McCaleb left Ripple Labs to create Stellar Development Foundation, it created a feud between the two organizations in the press.
So what’s the difference between the two? To put it simply, Ripple is more top-down (working with large banks), and Stellar is more bottom up (focusing on impoverished areas and micro-financial institutions).
Aside from talking about Ripple, you may be wondering how Stellar compares to the hundreds of other cryptocurrencies out there. The best way to do that is to understand the types of cryptocurrencies.
Serve as a medium of exchange for goods and services, or for storing value like gold or silver. Some are deflationary, some inflationary. The biggest one is Bitcoin.
Platform coins can power decentralized applications, run smart contracts and power everything from identities to storage to voting. The biggest one is Ethereum.
Provide a service and/or the ability to create tokens on top of an existing Blockchain. For example, a lot of cryptocurrencies are actually built on top of the Ethereum Blockchain. These tokens represent some type of asset or utility.
Which category does Stellar fall into? All of above.
- Lumens serve as a currency, that can be exchanged for goods and services.
- Applications can be built on top of Stellar, such as ColorGlyph, making it a platform coin.
- Lastly, you can actually create your own tokens on top of the Stellar network. For example, Mobius. Additionally, you can use tokens as an intermediate currency when exchanging two currencies such as USD and EUR.
