Stellar vs. Ethereum: Which of the two is better?

With smart contracts unleashing new opportunities for developers, coins that belong to new-generation blockchains are becoming increasingly popular. Among all such networks, Ethereum and Stellar are the most commonly used ones. However, their smart contracts and technical capabilities are not equal. How do these coins differ? This article provides an in-depth comparison of Stellar vs. Ethereum.

What is Ethereum?

Ethereum is an innovative blockchain with Ethereum (Ether or ETH) native cryptocurrency. Ethereum was the first network to introduce decentralized applications (dApps). Another innovation of this platform is smart contracts, which have changed the perception of blockchain possibilities, unlocking the full potential of the technology.

How did Ethereum appear on the horizon?

Back in 2013, Canadian programmer and Bitcoin Magazine co-founder Vitalik Buterin collaborated with Dr. Gavin Wood (who created the sensational Polkadot project later on) to elaborate the concept of the Ethereum blockchain platform. It was one of the first blockchain networks where cryptocurrency was not only a means of payment, but also empowered the exchange of resources by many independent web services operating in the same peer-to-peer network.

In summer 2015, the Ethereum network was launched in test mode, and 9 months later the Homestead protocol was published for the network to start working in full-fledged mode. Right from the start, the crypto community has acknowledged the opportunities provided by the EVM (Ethereum Virtual Machine).

Today, the Ethereum blockchain mostly serves as a platform for developing decentralized applications without the need to create and maintain your own blockchain.

Ethereum’s features

When it comes to the Ethereum token, it also has a few peculiarities:

• ERC-20 (Ethereum’s technological standard) is a security standard that guarantees the stability of the Ethereum network. It is widely used as a standard for other projects and blockchains.
• ETH tokens have an infinite supply. Coins are added to the network when a new block is generated. A new block with recorded transactions is added approximately every 15 seconds, and the miners who processed this block receive a reward of 3 ETH. In addition to this, miners are rewarded from transaction fees on the network.

Initially, the Ethereum blockchain operated with the Proof of Work (PoW) consensus, where miners perform calculations, add new blocks to the network, and get rewarded with coins and transaction fees. In 2022, the network finished transitioning to Ethereum 2.0, a new network that operates on the Proof of Stake (PoS) algorithm.

In the case of PoS, token holders or “nominators” choose a “node” (special server) that is controlled by a “validator” and stake their tokens. The validator (the node owner), receives a reward, part of which he keeps for himself, and the other part is divided between the nominators (owners of tokens) in proportion to the staked number of tokens.

Where can I buy Ethereum?

Fundamentally, the methods of buying Ether do not differ from buying other cryptocurrencies:

• Centralized crypto exchanges.
• DeFi sites (you can exchange another cryptocurrency for ETH).
• Through wallet extensions like Metamask.
• Through an online wallet (MyEtherWallet).
• Using the Ledger live app from the Ledger cold wallet.

The easiest and safest way to buy ETH is OWNR wallet. All you need to do is download the app on your device (desktop or mobile), register an account and choose a suitable payment method. OWNR app guarantees bulletproof safety of your funds and supports hundreds of ERC-20 tokens: aside from storing your Ether securely, you can exchange it for other coins in a few clicks.

What is Stellar (XLM)?

The Stellar project was launched as a clone of Ripple in 2014 by the developers who left the main team. Later, they switched to a separate open-source protocol with the same name. The decision to share the XPR source code was made by the Ripple developers in 2014 in response to demand from the cryptocurrency community. A year later, Stellar was moved to Jed McCaleb's own blockchain by the hard fork's developer, the former CTO of Ripple. Hence, Stellar was intended to be Ripple's competitor, because people were continuously criticizing XRP for being too centralized.

The goal of the Stellar project is to unite global banking systems within a single platform. In 2018, Stellar became the second most popular ICO platform, second only to Ethereum in terms of the number of projects. Today, Stellar is a decentralized network that is open to the public and supports a number of different assets. Additionally, the network has its own cryptocurrency, the open-source Stellar Lumens (XLM).

The currency is built on the Stellar Consensus Protocol (SCP), which, while conceptually similar to Ripple’s BFT protocol, differs significantly. There are no central control nodes in the network and all validators are equal.

Stellar’s features

Here are the major characteristics of the Stellar blockchain and Stellar Lumens cryptocurrency:

• Stellar supports transfers of both digital and fiat currencies.
• Stellar Lumens tokens help improve safety. The network requires a minimum number of tokens to be stored in an account to keep it active – only 1 XLM.
• The transaction fee in the Stellar network is 0.00001 XLM, which is a tiny fraction of a dollar.
• Unlike in Bitcoin, tokens are not mined in the Stellar network because it uses the Stellar Consensus Protocol instead of PoW.

In 2015, when Stellar first introduced the XLM token, 100 billion XLM was allocated to the network. A 1% annual inflation rate lasted until 2019, when the community voted for decreasing the number of XLM. Today, the Stellar issuance is 50 billion XLM. The Stellar team has stated that it does not plan to issue any additional tokens, but some of the currently saved tokens will be released to the open market in the future.

There are currently about 20 billion XLM available in open circulation. Users can purchase these tokens on cryptocurrency exchanges. The rest of the Lumens are currently owned by the Stellar Development Foundation. The main purpose of the remaining Lumens is to fuel promotion and development of the Stellar platform.

Circulating Stellar Lumens can be bought on exchanges and online wallets, as well as via the OWNR wallet. Aside from Ethereum and ERC-20 tokens, it supports many other cryptocurrencies, including XLM – click here to buy it.

How do Stellar and Ethereum differ?

Now that we have described both cryptocurrencies and their underlying blockchains, let’s compare them side by side.

• Creation. The concept of a decentralized virtual machine was invented by Vitalik Buterin in 2013, and the Ethereum network was launched in 2015 after a testing period. The Stellar network was created in 2014 as a more convenient and cheaper alternative to the Ripple blockchain.
• Consensus. Ethereum used to run on the Proof of Work (PoW) mechanism like Bitcoin, but transitioned to Proof of Stake (PoS) in 2022. The Stellar network is powered by its own algorithm – the Stellar Consensus Protocol (SCP), which does not rely on a closed system to accurately record financial transactions.
• Value. At the moment of writing this guide, the price of ETH is $1,211, while XLM costs $0.09. With Ethereum’s all-time high of $4,891, its ROI exceeds 42,694%, while Stellar has reached the $0.93 threshold and generated an ROI of 2,923%.
• Purpose. Ethereum is mostly used as a blockchain for building decentralized applications (dApps) and similar projects that enable transferring and exchanging ERC-20 compliant tokens. A Stellar smart contract serves for cross-border payments and flawless cryptocurrency exchange.
• Mining. In Ethereum, mining was powered by the PoW algorithm, but now it has staking instead of mining because of its switch to the PoS algorithm. The Stellar network does not support mining.
• Transaction speed. With Ethereum’s blockchain being able to process only 10-15 transactions per second, its fastest transaction speed is 3 minutes. The Stellar network processes transactions within 5 seconds.
• Transaction fees. The Stellar network is a more democratic solution for minor payments because its transaction fees are very low. Ethereum transaction fees depend on the network congestion and can exceed $100 at peak times.
• Block time. The block time in Ethereum is 10-20 minutes, while in Stellar, new blocks are generated at a fixed time interval of 5 seconds.
• Supply. The Ether supply is unlimited: so far, it has reached 122 mln ETH. Stellar’s total supply is 50 bln coins (25 bln XLM is in circulation).

Stellar vs. Ethereum: A Side-By-Side Comparison

Let’s compare the two coins side by side:

	Ethereum	Stellar
Consensus	Proof of Stake	The Stellar Consensus Protocol
Mining	Was provided before 2022, now replaced by staking	Not available
Major purpose	Creation of decentralized applications and other platforms on the basis of smart contracts and the EVM	Cheap and fast transactions (both local and cross-border) and cryptocurrency exchange
Transaction fees	About 0.0015 ETH ($1.84)	0.00001 XLM
Total supply	Infinite	50 bln XLM

Use Cases

Ethereum

Initially being driven by the Ethereum blockchain, dApps (crypto lending platforms, farming and other similar projects) have gained immense traction since 2020. Thousands of applications created in different programming languages can now run and interact with each other on the same platform, which has significantly increased the applicability of the blockchain technology itself.

The functionality of the Ethereum network allows you to:

• manage logistics by launching Ethereum smart contracts of increased complexity;
• create applications with a variety of functions;
• digitize any assets (create tokens equivalent to gold, currency, etc.);
• create unique non-fungible tokens (NFTs);
• maintain document management services;
• digitize and store data to identify users;
• create decentralized DeFi exchange platforms;
• organize electronic voting.

Stellar

Stellar is also an open-source network and a decentralized blockchain system designed to help people make domestic or cross-border transfers. In the Stellar network, all transactions are carried out quickly and simply.

Today, the Stellar network can be used for three main purposes:

• It is a safe and simple solution for money transfers. These can be local transactions (for example, when paying for goods or services), or international ones.
• The Stellar network allows storing funds securely.
• Stellar was also created as a basis for payment solutions. A number of tools help developers integrate network and payment functionality into their software products.

Ethereum (ETH): Pros and Cons

Advantages of Ethereum

• The versatility of the platform makes it a sought-after basis for many projects, providing high liquidity (already higher than BTC) and a certain fundamental value (the project cannot completely collapse).
• When the scalability problem gets solved, Ether will become one of the most convenient methods of making crypto transactions.
• Due to its complex background, the technological potential of the coin is higher than that of any other altcoin.
• The Ethereum blockchain occupies a significant share of the dApp market, due to which it has a high capitalization. It is extremely difficult for other projects to compete with Ethereum.

Disadvantages of Ethereum

• At times of high network congestion, transaction speeds decrease and fees become too high. As a result, many users are looking for alternative networks to make standard transactions.
• The price of Ether fluctuates a lot due to large trading volumes.
• The network is being developed too slowly, and many advanced blockchains like Stellar, Polygon, and Binance Smart Chain are becoming serious competitors.
• After the final transition to PoS, participation in the generation of new blocks will not be available to ordinary users due to a high entry price (more than $32,000 at the moment of writing this post). Besides that, the coin will lose its original democracy.

Stellar (XLM): Pros and Cons

Advantages of Stellar

• The Stellar system supports multi-currency transactions thanks to its proprietary anchor system. For example, you can send Monero, and the recipient receives Bitcoin or any other currency they need. The system independently selects a profitable exchange rate.
• The system is controlled by the independent Stellar Development Foundation: no banks or governmentts interfere in the process of its development.
• Stellar has an open-source code, so anyone can take part in upgrading the platform.

Disadvantages of Stellar

• If a hacker attack is suspected, the system may stop working. Fortunately, this happens quite rarely: the latest downtime happened in May 2019.
• Stellar's annual inflation rate is 1%.
• Stellar developers are mostly focused on the coin’s practical value rather than price growth. Hence, it is much cheaper than Ethereum and cannot be the major constituent of your portfolio if you hope to make large crypto profits.

Is Ethereum similar to Stellar?

The main similarity of Ethereum and Stellar is the usage of smart contracts. Stellar allows anyone to create their own "token" of value: you can construct a token that represents any fiat money, cryptocurrency, points from loyalty programs, gift cards, and so on. Ethereum is rather used for more complex solutions, such as decentralized applications, NFT and crypto projects.

Can Stellar beat Ethereum?

Not in terms of the price. Since Stellar’s Lumens aren't intended to have intrinsic worth, they merely serve as a means of exchange. If you intend to make profit, Ethereum will be a better solution.

Whatever coin you choose to put into your portfolio, you can buy both Stellar and Ethereum via the OWNR wallet in a few clicks.

How do you choose between cryptocurrencies? Stellar vs. Ethereum

Everything depends on the purpose of use. If you need cryptocurrency for quick transactions and exchange, Stellar is a cheaper and faster alternative. If you are looking for a coin to add to your portfolio, Ethereum is a more promising option.

FAQ

Why are Stellar Smart Contracts considered limited?

Stellar, unlike Ethereum, is only capable of running a minimal set of operators in various situations and does not have a full Turing-complete language for writing smart contracts. A Stellar smart contract (SSC) is a collection of related transactions that are carried out under a variety of constraints.

Does Stellar run on Ethereum?

No, Stellar smart contracts are executed on a separate proprietary blockchain.

Are Stellar Lumens worth buying?

This cryptocurrency is particularly valuable as a means of storage and cross-border payments. If you are searching for profit generation options, consider another altcoin, because Stellars’ ROI is relatively low.

Is Stellar becoming a competitor to Ethereum?

Ethereum has many competitors among blockchains that deploy smart contracts, and Stellar is one of them. However, Stellar smart contracts are used for slightly different purposes, so they are not direct competitors.

Is Ethereum faster than Stellar?

The average Stellar transaction processing time is five seconds, compared to more than three minutes on Ethereum.

Where can I buy Ethereum and Stellar?

Via crypto exchanges, DeFi apps, and online wallets. One of the simplest and safest solutions is OWNR wallet. It allows you to buy Ethereum and Stellar with fiat – all you need to do is download the app and sign up.

DISCLAIMER: None of the authors, contributors, administrators, or editors connected to OWNR Wallet encourage readers to invest in Ethereum or Stellar without proper research. This article is purely for educational purposes only.