1. Introduction

In recent years, the cryptocurrency market has experienced rapid growth, evolving from Bitcoin’s early dominance to the emergence of thousands of digital currencies, resulting in a continuously expanding market that has drawn global investors’ attention. Cryptocurrencies, with their decentralized nature, anonymity, and ease of transactions, show great potential in areas like cross-border payments and decentralized finance (DeFi), profoundly impacting the traditional financial system.

XLM (Stellar Lumens) and XRP (Ripple) are two prominent digital currencies in the cryptocurrency market, both playing significant roles in the cross-border payments space. XLM aims to build an open, decentralized financial ecosystem to allow anyone, anywhere in the world, to make financial transactions easily and at low cost, especially contributing to financial inclusion in developing countries. On the other hand, XRP, through its strong collaboration with financial institutions, has established an efficient cross-border payment network designed to address issues such as high transaction fees and long processing times typically seen in traditional cross-border payments.

2. Basic Understanding of XLM and XRP

2.1 XLM Introduction

2.1.1 Basic Concepts

XLM, also known as Stellar, is the native token of the Stellar blockchain platform. Stellar is an open-source distributed payment protocol designed to create an open, decentralized financial ecosystem, enabling anyone globally to easily and cost-effectively conduct financial transactions, especially in the field of cross-border remittances, where XLM has unique advantages.

The total supply of XLM is 100 billion, which was not generated through mining, but was all issued at the start of the project. This pre-issued model is different from cryptocurrencies like Bitcoin, which are generated through mining, aiming to avoid potential issues such as energy consumption and centralization of computing power during mining, and to focus more on achieving the goal of financial inclusion. In the Stellar network, XLM plays various important roles. It is not only a store of value, similar to the savings function of traditional currencies, but also serves as a medium of exchange within the network, used for paying various transaction fees, including cross-border remittance fees. In addition, XLM can also play a role in smart contracts and decentralized applications (DApps) as an incentive mechanism, encouraging developers to build innovative financial applications on the Stellar platform.

2.1.2 Development History

The journey of XLM began in 2014 when Jed McCaleb, the co-founder of Ripple, and Joyce Kim launched the Stellar project. They introduced XLM with the vision of breaking the barriers of traditional finance and achieving global financial interconnectivity. In the early stages of the project, the team focused on technology development, building the foundational architecture of the Stellar blockchain, and carefully designing the Stellar Consensus Protocol (SCP), a unique consensus mechanism. The creation of SCP was significant, as it ensured network security and decentralization while greatly increasing transaction processing speed and reducing energy consumption, laying a strong technical foundation for XLM’s growth.

Once the basic technology was in place, XLM began to expand its partnerships and seek breakthroughs in practical applications. In 2017, XLM reached a major milestone by partnering with IBM to advance cross-border payment solutions. This partnership proved essential, as IBM’s influence and technical strength helped bring XLM to the attention of more businesses and financial institutions, further expanding its use in cross-border payments. Over time, XLM deepened its cooperation with other companies, including strategic partnerships with global remittance providers like MoneyGram to pilot cross-border payment systems using Stellar’s network. Through these partnerships, XLM demonstrated its practical value, with its transaction speed and cost advantages clearly visible in real-world applications, attracting more users to adopt it for cross-border financial transactions.

With the development of the market and changing user demands, XLM has continually upgraded its technology and ecosystem. In 2020, the Stellar network underwent several major upgrades to improve performance and stability, further enhancing the user experience. XLM has also begun exploring DeFi applications, supporting the development and operation of more DeFi projects built on the Stellar network, offering users a broader range of financial services.

Between 2023 and 2024, XLM made new progress in expanding its ecosystem. For example, it reached a deep strategic partnership with Zebec, a Solana-based streaming payment protocol, incorporating Zebec’s payment systems and services into the XLM ecosystem. This partnership not only brought new use cases and user groups to XLM but also injected new vitality into its payment innovation.

2.2 XRP Introduction

2.2.1 Basic Concepts

XRP, also known as Ripple, is the native currency of the Ripple payment network. Ripple is an open-source distributed payment protocol designed to provide banks and financial institutions with an efficient, low-cost solution for cross-border transactions, aiming to address issues such as high fees, long transaction times, and complex processes in traditional cross-border payments.

The total supply of XRP is fixed at 100 billion, similar to XLM, it is also not generated through mining. In the Ripple network, XRP has a clear and important purpose. On the one hand, it is used as a bridge currency in cross-border payments. Due to the variety of legal tender currencies in different countries and regions, frequent exchange rate fluctuations, direct cross-border payments often face many difficulties and high costs. The emergence of XRP provides a new approach to solving this problem. When making cross-border payments, the payer can first exchange their national legal tender into XRP, then quickly transfer the XRP through the Ripple network to the recipient’s region, and the recipient can then exchange the XRP into the local legal tender, thereby achieving fast and low-cost cross-border fund transfers. On the other hand, XRP can also be used to pay for transaction fees on the Ripple network, ensuring the normal operation of the network and smooth processing of transactions.

2.2.2 Development History

In 2012, XRP’s precursor was introduced by the Silicon Valley startup Ripple Labs. Initially, it did not attract widespread attention as Bitcoin dominated the cryptocurrency market. However, XRP gradually gained recognition due to its unique cross-border payment solution and its strategic positioning with traditional financial institutions. In its early stages, Ripple Labs focused on optimizing XRP’s performance in cross-border payments, improving transaction speed and reducing fees.

In 2017, the cryptocurrency market experienced a bull market, and XRP saw significant growth. Its price soared from about $0.006 at the beginning of the year to approximately $3.84 by the end of the year, marking an increase of over 600 times. This price surge placed XRP among the top cryptocurrencies by market capitalization, making it a focal point in the market. Behind this price surge was XRP’s continuous progress in real-world applications. Ripple Labs worked actively to form partnerships with major financial institutions, including Standard Chartered and Santander Bank, among others, to integrate XRP for cross-border payments. These partnerships further validated XRP’s feasibility and advantages in cross-border payments, driving its adoption in the financial sector.

However, with the development of the cryptocurrency market, regulatory issues gradually emerged. In 2020, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs, accusing it of selling XRP as an unregistered security, violating securities laws. This lawsuit created significant uncertainty for XRP, and its price experienced substantial volatility. In the face of the lawsuit, Ripple Labs has vigorously defended itself, denying the accusations while continuing to innovate and expand its business. The company continues to optimize the Ripple payment network, enhance transaction speed and security, and actively explore new application scenarios, such as in DeFi and NFTs, to find new growth opportunities for XRP.

Between 2023 and 2024, XRP made some positive progress while dealing with the ongoing lawsuit. In July 2023, a court ruling determined that secondary sales of XRP do not constitute an investment contract and are therefore not unregistered securities, providing some support for XRP’s legal standing. In 2024, Ripple achieved further victories in its case with the SEC, with a judge reducing the fine from $2 billion to $150 million. This ruling boosted market confidence in XRP, leading to a price surge. Moreover, XRP also made breakthroughs in expanding its ecosystem by integrating with other blockchain networks, such as introducing an Ethereum Virtual Machine (EVM) sidechain for the XRP ledger, which rewards validators with XRP tokens, injecting new vitality into XRP’s application scenarios and ecosystem development.

3. Technical Comparison

3.1 Consensus Mechanism

3.1.1 The Stellar Consensus Protocol of XLM

XLM adopts the Stellar Consensus Protocol (SCP) as one of its technical core highlights. SCP is a consensus algorithm based on the Federated Byzantine Agreement (FBA), which builds a trust network to achieve consensus. Under the SCP mechanism, each node votes based on its own level of trust in other nodes to confirm the validity of transactions.

Specifically, each node has its own ‘Quorum slices’, which is a set of nodes that it recognizes as sufficiently trustworthy. As long as these nodes reach a consensus, the node will validate the transaction. This design gives the system a high degree of flexibility and resistance to attacks. Even if some nodes are attacked or fail, as long as the remaining nodes’ Quorum slices remain intact, the network can still operate normally. In addition, in the Stellar network, nodes are not entirely equal, but are assigned different weights based on their reputation, historical performance, and other factors. Nodes with higher weights have greater influence in the consensus process, and their voting results on transactions are more decisive, contributing to overall consensus efficiency and accuracy.

SCP has significant advantages. On the one hand, it is efficient and energy-saving, eliminating the need for extensive hash calculations like Bitcoin’s Proof of Work (PoW), greatly reducing energy consumption. On the other hand, transaction confirmation is extremely fast, usually completed in a few seconds, providing users with almost real-time trading experience, making XLM perform well in scenarios with high transaction speed requirements such as cross-border micropayments. However, SCP also has certain limitations. Due to its reliance on trust relationships between nodes, as the network scales, maintaining and managing trust relationships may become more difficult, potentially affecting the efficiency of consensus. In addition, although SCP claims to have decentralization characteristics, in practice, some supernodes may have a significant impact on the network, to some extent weakening the level of decentralization.

3.1.2 The Ripple Consensus Protocol of XRP

The Ripple Consensus Protocol (RPC) on which XRP relies is also unique. RPC is a distributed consensus algorithm based on trusted nodes, which achieves consensus through a network of validating nodes. In the Ripple network, there is a Unique Node List (UNL) consisting of nodes operated by Ripple company and other trusted institutions, responsible for validating and confirming transactions.

When a new transaction occurs, the transaction information is broadcast to various validating nodes in the network. These nodes will verify the transaction, check its legitimacy, such as whether the sender’s account balance is sufficient, and if the transaction signature is valid. Then, the validating nodes communicate with each other, exchanging their views on the transaction. When the majority of validating nodes (usually more than 80%) reach a consensus on the transaction, it is considered valid and added to the ledger. This consensus mechanism allows for extremely short transaction confirmation times for XRP, typically only 3-5 seconds, meeting the strict requirements of financial institutions for cross-border payment speed. Additionally, due to not requiring significant computational power for mining, transaction costs are also very low, with a fee of only 0.00001 XRP per transaction, which is almost negligible.

However, the Ripple Consensus Protocol also faces some doubts. It relies heavily on the validating nodes in the UNL, most of which are controlled by Ripple company and a few trusted institutions, leading to controversy over the decentralization of the Ripple network. Some community members criticize it for lacking the spirit of decentralization and not aligning with the core principles of blockchain. In the event of failure or attack on these key nodes, it could have a significant impact on the stability and security of the entire network. Furthermore, due to the relatively closed nature of the Ripple Consensus Protocol, it is difficult for new nodes to join the network, which to some extent limits the further development and growth of the network.

3.2 Transaction Speed and Cost

3.2.1 Performance of XLM

XLM performs well in terms of transaction speed and cost, possessing significant advantages. In terms of transaction speed, the Stellar network can achieve confirmation of transactions in seconds through the Stellar Consensus Protocol (SCP). According to official data and actual tests, the average transaction confirmation time of XLM is approximately 3 - 5 seconds, a speed that is leading among many cryptocurrencies, meeting users’ demands for instant transactions.

From the perspective of transaction costs, XLM has extremely low transaction fees, to the point where for some small transactions, the fees can be almost negligible. Typically, XLM transaction fees are only a fraction of a cent, making it uniquely advantageous in the field of cross-border small payments. Taking the example of cross-border remittances in a certain African country, local residents often need to remit money to overseas relatives. Traditional remittance methods such as bank telegraphic transfer or Western Union remittance have high fees and long processing times, usually taking 2-3 working days, with fees possibly as high as 5% - 10% of the remittance amount. Using XLM for cross-border remittances not only significantly reduces fees to only a fraction of those charged by traditional methods, but also allows funds to arrive within minutes, greatly improving remittance efficiency, reducing costs, and providing local residents with a more convenient and economical cross-border payment solution.

3.2.2 Performance of XRP

XRP also stands out in the cryptocurrency market with its excellent transaction speed and low transaction costs. The transaction confirmation time of XRP is extremely short, averaging only 3-5 seconds, which far exceeds traditional cross-border payment methods, and is even much faster than some mainstream cryptocurrencies such as Bitcoin, Ethereum, and others. The rapid transaction confirmation time enables XRP to achieve real-time funds arrival in cross-border payments, greatly improving transaction efficiency and meeting the strict requirements of financial institutions for the timeliness of cross-border payments.

In terms of transaction costs, XRP has a very low transaction fee of only 0.00001 XRP, which is approximately one-fifth of a cent at the current market price, almost negligible. This low transaction cost gives XRP a significant cost advantage in large cross-border transactions. For example, if a multinational corporation needs to remit 10 million US dollars to its overseas branches, using traditional bank remittance methods may incur transaction fees of tens of thousands of US dollars, as well as additional fees such as telegraph fees and transfer fees. However, using XRP for cross-border remittances, the transaction fee is only a few dollars, significantly reducing the cost. It is these advantages that have attracted the attention and application of many financial institutions. International banks such as Standard Chartered Bank and Santander Bank have adopted XRP for cross-border payment services, fully verifying the efficiency and practicality of XRP in the field of cross-border payments.

3.3 Smart Contract Functionality

3.3.1 XLM’s Soloban smart contract platform

The launch of the Soloban smart contract platform has endowed XLM with powerful smart contract capabilities, opening up a new journey in decentralized finance (DeFi) and other fields. Soloban is built on WebAssembly (Wasm), which enables it to be compatible with multiple programming languages. Developers can use familiar languages such as Rust, C++, etc. for smart contract development, greatly reducing the development threshold and attracting more developers to participate in the construction of the XLM ecosystem.

The Solovian smart contract platform brings rich application scenarios to XLM. In the field of DeFi, smart contracts based on Solovian can achieve decentralized lending, trading, liquidity mining, and other functions. For example, users can deposit their XLM or other assets into lending platforms through smart contracts to earn interest income; they can also trade XLM with other digital currencies on decentralized exchanges without relying on traditional centralized trading platforms, thus improving the security and transparency of transactions. In the field of supply chain finance, smart contracts can record the circulation information of goods, contract terms of both parties, etc., to achieve automated settlement and payment, reduce human intervention, and lower transaction risks. In addition, in the fields of identity verification, voting systems, etc., Solovian smart contracts can also play an important role, encrypting and verifying identity information through smart contracts, as well as ensuring fairness, justice, and transparency in the voting process.

The emergence of the Solana smart contract platform has had a profound impact on the development of the XLM ecosystem. It has attracted a large number of developers and projects to settle in, enriched the application ecosystem of XLM, and enhanced the market competitiveness of XLM. More and more users are beginning to pay attention to and use XLM, not only because of its advantages in cross-border payments, but also because of its potential in smart contract application scenarios. This helps drive the widespread use of XLM globally, further solidifying its position in the cryptocurrency market.

3.3.2 XRP smart contract situation

Compared to the active exploration and development of smart contracts by XLM, XRP has made relatively slow progress in this area, showing obvious shortcomings. Currently, XRP itself does not have a sophisticated smart contract functionality like Ethereum or XLM (leveraging the Stellar platform). Although Ripple has been actively exploring the application of smart contracts on the XRP network, substantial breakthroughs have not been achieved so far.

In the current cryptocurrency market, smart contracts have become an important indicator for measuring the development potential and application value of a blockchain project. Many projects have built a huge DeFi ecosystem with rich smart contract functions, attracting a large number of users and funds. The lag in smart contracts for XRP has placed certain limitations on its application scenarios. For example, in the DeFi field, due to the lack of smart contract support, XRP cannot realize complex financial operations such as decentralized lending and trading like other cryptocurrencies with smart contract functionality, which makes XRP’s market share relatively small in the DeFi market. In the field of NFT (non-fungible tokens), smart contracts are the basis for realizing functions such as NFT minting, trading, and ownership transfer. Due to the lack of smart contract functionality, XRP cannot effectively participate in the development of the NFT market, missing out on the opportunity in this emerging market.

However, Ripple also realizes the importance of smart contracts for the development of XRP and is actively investing in research and development, trying to make up for this shortcoming. The company is constantly exploring new solutions in technical research and development, collaborating with other blockchain projects, learning from advanced smart contract technology, in order to introduce powerful smart contract functionality to the XRP network, enhancing the application value and market competitiveness of XRP. The future development in the field of smart contracts is worth paying attention to.

4. Market Performance Comparison

4.1 Market Capitalization and Price Trends

4.1.1 XLM’s Market Capitalization and Price Changes

XLM’s market capitalization and price trends resemble a market saga full of ups and downs, reflecting the volatile nature of the cryptocurrency market. Since its inception, XLM’s market capitalization has experienced significant fluctuations. In the early stages, due to low market awareness, XLM’s market capitalization was relatively small, and it was on the fringes of the cryptocurrency market. However, with the continuous development of the Stellar network and the gradual expansion of its use cases, XLM’s market capitalization began to rise steadily. Especially after forming partnerships with major companies such as IBM, market confidence in XLM surged, and its market capitalization entered a rapid growth phase.

In terms of price, XLM has also experienced drastic fluctuations. Taking the cryptocurrency bull market of 2017-2018 as an example, the price of XLM quickly soared from a few cents to over $0.8 in early 2018, reaching a historical high. Behind this price surge are various factors at play. On one hand, the bullish sentiment in the entire cryptocurrency market led to increased investor enthusiasm and a large influx of funds, driving up the prices of many digital currencies including XLM. On the other hand, the Stellar network made continuous progress in the field of cross-border payments, establishing partnerships with numerous financial institutions and enterprises, significantly increasing market expectations for XLM demand, further driving up the price.

However, market changes are always full of uncertainties. As the cryptocurrency market entered a bear market in the second half of 2018, XLM’s price also suffered a substantial decline. By early 2019, the price had fallen to around $0.1, and its market value had also shrunk significantly. The main reason for this price drop was the overall downturn in the market, which led to a loss of investor confidence and a large-scale withdrawal of funds from the cryptocurrency market. At the same time, some investors had doubts about the future development of XLM, which further exacerbated the price decline.

Entering 2020-2021, the cryptocurrency market has once again seen a resurgence, and the price of XLM has rebounded accordingly. During this period, the rise of decentralized finance (DeFi) has brought new development opportunities for XLM. The Stellar network actively explores applications in the DeFi field, launching a series of DeFi projects based on XLM, attracting more users and funds, and driving the price up. In 2021, the price of XLM once again broke through $0.5, and its market value has returned to the forefront of the cryptocurrency market.

In recent years, the price trend of XLM is still influenced by a variety of factors. The overall market sentiment, changes in the macroeconomic environment, technical upgrades and partnership expansions of the Stellar network, all have a significant impact on the price of XLM. For example, in 2022, due to the instability of the global economic situation and the tightening regulation of the cryptocurrency market, the price of XLM experienced a certain degree of decline. However, in 2023-2024, with strategic partnerships between the Stellar network and Solana’s eco-flow payment protocol Zebec, as well as the gradual recovery of market confidence in the cryptocurrency market, the price of XLM began to show an upward trend.

4.1.2 Market Cap and Price Trend of XRP

The market value and price trend of XRP have been equally volatile, full of dramatic ups and downs, leaving a deep impression on the stage of the cryptocurrency market. From 2013 to 2017, XRP was in its early stages of development. Although Ripple had been actively promoting its cross-border payment solutions, the market’s awareness and acceptance of XRP were relatively limited, with a small market value and a price lingering at a low level for a long time, maintaining a level of just a few cents.

In 2017-2018, the cryptocurrency market ushered in a spectacular bull market, and XRP became a star currency. Its price started at less than 0.01 US dollars in early 2017, soaring all the way to an astonishing 3.84 US dollars in January 2018. Its market value also rapidly climbed, surpassing 140 billion US dollars at one point, ranking second in the global cryptocurrency market value, second only to Bitcoin. The significant price surge was partly due to the overall bull market frenzy in the cryptocurrency market, with investors’ unprecedented enthusiasm for digital currency leading to a large influx of funds and driving up the price of XRP. On the other hand, Ripple made significant breakthroughs in the field of cross-border payments, establishing cooperation with many internationally renowned financial institutions such as Standard Chartered Bank and Santander Bank. These cooperation cases showcased the huge potential of XRP in the field of cross-border payments, greatly boosting investors’ confidence in XRP and attracting more capital inflows, further driving up the price.

However, in the second half of 2018, the cryptocurrency market took a sharp downturn, entering a bear market, and the price of XRP also began to plummet. By the end of 2018, the price had fallen to around $0.25, and the market value had significantly shrunk. In addition to the overall market conditions, the lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple Labs became a key factor in the decline of XRP prices. In December 2020, the SEC accused Ripple Labs of raising over $1.3 billion through the issuance of XRP from 2013 to 2020 without registering with the SEC, and classified XRP as an unregistered security. This lawsuit brought significant uncertainty to the development of XRP, severely impacting market confidence in XRP. As a result, investors sold off XRP, leading to continued price declines.

During the period of 2019-2021, the price of XRP continued to fluctuate under the shadow of the SEC lawsuit, seeking development. Although the market is full of concerns about the future of XRP, Ripple has not stopped its pace of technological innovation and business expansion. The company continues to optimize the Ripple payment network, improve transaction speed and security, actively communicate with regulatory agencies, and work hard to resolve the litigation issues. In 2021, with the overall recovery of the cryptocurrency market, the price of XRP also experienced a certain degree of rebound, rising to $1.96 at one point.

2022-2024, XRP prices continue to fluctuate under the influence of the SEC lawsuit. In July 2023, the court ruled that the secondary sales of XRP were not investment contracts and therefore not unregistered securities, providing some support for the legitimacy of XRP, and the price rose accordingly. In 2024, Ripple further won the lawsuit against the SEC, and U.S. Judge Analisa Torres reduced the fine from $2 billion to $150 million, greatly boosting market confidence in XRP. The price rose again, briefly surpassing $2.80, reaching a six-year high. However, due to the high uncertainty of the cryptocurrency market and the complexity of the regulatory environment, XRP prices still face significant fluctuation risks.

5. Comparison of Application Scenarios

5.1 The application scenarios ofXLM

5.1.1 Cross-border Remittances and Financial Inclusion

XLM has extensive and in-depth applications in the field of cross-border remittances, especially in developing countries, where its advantages are fully demonstrated, becoming an important force driving financial inclusion. Taking the actual case of a certain country in Africa as an example, the country’s economy is relatively underdeveloped, with weak traditional financial infrastructure and low coverage of bank branches, making it difficult for many residents in remote areas to enjoy convenient financial services. In terms of cross-border remittances, traditional methods not only have high fees, often reaching 5% - 10% of the remittance amount, but also have long processing times, typically taking 2 - 3 working days. This is undoubtedly a heavy burden for families relying on remittances from overseas relatives to make a living.

The emergence of XLM has brought a turning point to this dilemma. Through a cross-border remittance platform based on XLM, local residents only need to download the corresponding wallet application on their mobile phones to easily complete cross-border remittance operations. The entire process incurs very low fees, only a fraction of the traditional methods, and in some small remittance scenarios, the fees are almost negligible. At the same time, the remittance arrival time is significantly shortened, usually completed in just a few minutes, greatly improving the efficiency of fund utilization. For example, a young person working in South Africa regularly remits money to his parents in his hometown every month. In the past, using traditional bank remittances not only incurred high fees but also required parents to wait for days to receive the money. Now, using XLM for remittance, parents can receive the funds within minutes, with significantly reduced fees, effectively increasing the family’s actual income.

In Southeast Asia, XLM also plays an important role. With the rapid development of the region’s economy, the scale of cross-border e-commerce and labor exports continues to expand, leading to an increasing demand for cross-border payments. However, traditional payment methods have many drawbacks and fail to meet market demands. XLM, with its fast and low-cost features, provides efficient payment solutions for local cross-border e-commerce companies and laborers. A cross-border e-commerce company in Vietnam, when trading with Chinese suppliers in the past, used bank wire transfers to pay for goods, which incurred high fees and long transaction periods, affecting the company’s capital turnover and business expansion. After adopting XLM for payments, transaction costs have significantly decreased, payment speed has greatly increased, the company’s capital turnover efficiency has been significantly improved, and the business scale has continued to expand.

The successful application of XLM in the field of cross-border remittances has effectively promoted financial inclusion. It breaks through the thresholds and restrictions set by traditional financial institutions, allowing vulnerable groups excluded by the traditional financial system, such as low-income populations in developing countries, residents in remote areas, to enjoy convenient and low-cost financial services. Through XLM, these groups can more easily receive overseas remittances, engage in cross-border shopping, etc., thus better participating in global economic activities, improving their own economic situation and living standards.

5.1.2 Charity and Micro-Payment Field

In the field of charitable donations, XLM is gradually emerging, demonstrating unique advantages. Traditional charitable donation models often have many pain points, such as complex donation processes, funds needing to go through multiple intermediaries before reaching the beneficiaries, which not only consumes time but also easily incurs high transaction fees and management costs. Moreover, the donation process lacks transparency, making it difficult for donors to track the specific flow and use of funds, affecting the public’s trust in charitable organizations.

The emergence of XLM provides solutions to these problems. Based on blockchain technology, XLM has the characteristics of decentralization, immutability, and transparency, making charity donations more efficient, transparent, and traceable. Donors can directly send donations to recipients through XLM wallets without going through cumbersome intermediate processes, greatly reducing donation time and lowering fees. At the same time, every donation transaction is recorded on the blockchain, allowing donors to track the flow and use of donations at any time, ensuring that the donations are truly used for charitable projects, and enhancing the credibility of charitable organizations. For example, in a charity event for the education of children in impoverished areas of Africa, donors can make donations through the XLM platform, and donation information and fund flow are instantly accessible. After the recipient children’s school receives the donations, every expenditure on purchasing teaching supplies is also recorded on the blockchain, allowing donors to clearly see how their donations help improve the learning conditions for the children, greatly enhancing the donors’ sense of participation and trust in the charity project.

In the micro-payment scenario, XLM also has broad application prospects. With the popularity of the Internet and mobile devices, the demand for micro-payments is increasing. Scenarios such as online content payment, in-game virtual item purchases, and small tips continue to emerge. However, traditional payment methods have many inconveniences when dealing with micro-payments, such as high fees and complicated payment processes, which restrict the development of micro-payments. XLM, with its extremely low transaction fees and fast transaction confirmation time, has become the ideal choice for micro-payments. Users can easily make small payments without worrying about high fees, meeting the needs of various micro-payment scenarios. For example, on some online content platforms, users can use XLM to give small tips to articles and videos they like, supporting creators. Although the tip amount is small, through XLM, payments can be completed quickly and at a low cost, providing creators with immediate economic feedback, motivating them to create more high-quality content.

Despite XLM’s clear advantages in the charity and micropayment fields, it also faces some challenges. In the charity sector, although XLM has improved the transparency and efficiency of donations, some charitable organizations have a low acceptance of blockchain technology, lack relevant technical talents and equipment, and find it difficult to quickly adapt to new donation models. At the same time, due to the high volatility of the cryptocurrency market, the value of XLM will also fluctuate, which may affect the decision-making of donors and the funding planning of charitable projects. In the micropayment field, the popularity of XLM is not high enough, and many merchants and platforms have not yet supported XLM payment, which may restrict users when using XLM for micropayments. In addition, the uncertainty of regulatory policies also brings certain risks to the development of XLM in the micropayment field. Different countries and regions have different attitudes and policies towards the regulation of cryptocurrency micropayments, which may cause XLM to be unable to operate normally in certain areas.

5.2 The application scenarios of XRP

5.2.1 Cross-Border Payments of Financial Institutions

XRP has achieved remarkable results in the field of cross-border payments in financial institutions, establishing close cooperation with many well-known financial institutions, bringing revolutionary changes to cross-border payments. Taking the example of Standard Chartered Bank’s cooperation with XRP, as a large financial institution with extensive international business, Standard Chartered Bank faces many challenges in cross-border payments. Traditional cross-border payment methods have high fees and long transaction times, severely affecting customer experience and business efficiency.

After using XRP for cross-border payments, Standard Chartered Bank’s cross-border payment business has undergone significant changes. When customers make cross-border remittances through Standard Chartered Bank, the bank first exchanges the customer’s local legal currency into XRP, and then uses the Ripple payment network to quickly transfer XRP to the cooperating bank in the recipient’s area. In this process, XRP serves as a bridge currency, enabling fast exchange and transfer between different legal currencies. After receiving XRP, the cooperating bank then converts it into the local legal currency and pays it to the recipient. The entire process usually takes only 3-5 seconds to complete the transaction confirmation, which is a significant improvement in efficiency compared to traditional cross-border payment methods that often take 2-3 working days. Additionally, due to the extremely low transaction fee of XRP, which is only 0.00001 XRP per transaction, almost negligible at the current market price, this greatly reduces the cost of cross-border payments.

Santander Bank is also an important partner of XRP in the field of cross-border payments for financial institutions. Through cooperation with Ripple, Santander Bank uses XRP to carry out cross-border payment business, providing its global customers with more convenient and efficient cross-border payment services. In practical operation, Santander Bank’s customers can easily initiate cross-border payment requests through the bank’s online platform or mobile app. The bank converts the customer’s payment information into XRP transactions in the background and transfers them quickly through the Ripple network. For example, a Santander Bank customer in Spain needs to remit money to relatives in the United States. In the past, using traditional bank remittance methods not only incurred high fees but also took several days to arrive. Now, through XRP cross-border payments, remittances can reach the accounts of American relatives in just a few minutes, with significantly reduced fees, bringing real convenience to customers.

These partnership cases fully demonstrate the advantages of XRP in cross-border payments for financial institutions. Compared with traditional cross-border payment methods, XRP has significant advantages such as fast transaction speed, low fees, and high settlement efficiency. The quick transaction confirmation time can meet the strict requirements of financial institutions for the timeliness of cross-border payments, enabling funds to be credited in real time and improving the efficiency of fund utilization. The low fees reduce the transaction costs for financial institutions and customers, enhancing the competitiveness of financial institutions in the cross-border payment market. The efficient settlement efficiency reduces intermediate links and human intervention, reduces transaction risks, and improves the accuracy and reliability of transactions.

5.2.2 Stablecoins and Financial Ecosystem Expansion

In June 2024, Ripple launched a stablecoin pegged to the US dollar at a 1:1 ratio (RLUSD), which has attracted widespread attention in the financial ecosystem and has had a profound impact on the expansion of the XRP ecosystem. The issuance of RLUSD is aimed at directly competing with Circle’s stablecoin USDC. Its value is pegged to the US dollar, short-term US Treasury bonds, and cash equivalents at a 1:1 ratio. Ripple company promises that users can exchange it for US dollars at any time.

From an operational perspective, RLUSD follows a verified stablecoin support structure pattern, ensuring its stability through USD deposits, short-term US Treasury bonds, and other cash equivalents. This composition differs from some algorithmic stablecoins, such as Terra UST that collapsed in May 2022, which uses algorithmic mechanisms based on burning and minting its sister token LUNA to maintain its dollar peg. When massive sell-offs break the stability mechanism, the system collapses, leading to a market value evaporation of over $40 billion. RLUSD effectively avoids similar risks through asset backing, conveying stability and reliability to the market.

(The launch of RLUSD has significantly expanded the XRP ecosystem. On the one hand, RLUSD, as an ERC-20 token issued on the XRP Ledger and the Ethereum blockchain, enhances its compatibility with various wallets, decentralized finance (DeFi) applications, and cryptocurrency exchanges. This enables RLUSD to circulate and be used in a wider blockchain ecosystem, attracting more users and funds to the XRP ecosystem. For example, in some DeFi applications, users can use RLUSD for lending, trading, and other operations, enriching the variety of assets and trading pairs in DeFi applications, and improving user experience. On the other hand, the emergence of RLUSD provides a more stable value medium for XRP in cross-border payments and financial transactions. In cross-border payment scenarios, RLUSD can serve as an intermediary currency, further simplifying cross-border payment processes and increasing liquidity. Due to its stable value, it reduces the risks associated with exchange rate fluctuations, making cross-border payments more convenient and secure.

Looking ahead, with the continuous development of the cryptocurrency market and the gradual clarification of the regulatory environment, RLUSD is expected to occupy an important position in the financial ecosystem. Ripple has an established position in institutional payment services, and through RLUSD, the company is committed to acting as a key intermediary for the tokenization of real-world assets (RWA), placing traditional financial instruments on the blockchain track to achieve more efficient transactions. If RLUSD can gain more recognition and adoption from financial institutions and market participants, it will further promote the development of the XRP ecosystem and enhance XRP’s influence in the global financial market. However, the development of RLUSD also faces some challenges, and regulatory uncertainty remains a significant factor. Different countries and regions have different attitudes and policies towards stablecoins. RLUSD needs to seek development under the premise of compliance to avoid potential legal risks. Market competition is also fierce. In addition to competing with stablecoins such as USDC, it also needs to address the challenges of other emerging stablecoins. How to stand out in the competition is the issue that $RLUSD needs to address in its future development.

6. Facing Challenges and Risks

6.1 XLM facing challenges

6.1.1 Competitive Pressure

XLM faces fierce competition in the cryptocurrency market, especially from competitors like XRP. Technically, XRP’s Ripple Consensus Protocol (RCP) performs similarly to XLM’s Stellar Consensus Protocol (SCP) in terms of transaction speed and confirmation time, both achieving near-instant transaction confirmation. This makes it difficult for XLM to establish a clear advantage in transaction speed, a key technical indicator. In terms of market share, XRP holds a significant portion in the cross-border payment field, thanks to its deep collaborations with numerous financial institutions. International financial institutions like Standard Chartered Bank and Santander Bank have already adopted XRP for cross-border payment services, establishing its high visibility and recognition in the market. In contrast, although XLM is actively expanding its collaborations with financial institutions, its depth and breadth of partnerships still lag behind XRP, leading to a relatively smaller market share.

To cope with these competitive pressures, XLM has adopted a series of proactive strategies. In terms of technological innovation, XLM continues to invest in research and development resources to continuously optimize the Stellar Consensus Protocol (SCP) to further improve transaction speed and security, and reduce transaction costs. By improving the consensus algorithm, reducing communication latency between nodes, and increasing the efficiency of consensus, the overall network performance is enhanced. XLM actively explores new application scenarios to expand its market space. In addition to the traditional field of cross-border remittances, XLM is also laying out in areas such as charitable donations, micropayments, and decentralized finance (DeFi). In the field of charitable donations, XLM utilizes the immutability and transparency of blockchain to realize the full traceability of the donation process, enhancing the credibility of charitable organizations. In the field of micropayments, XLM provides an ideal solution for micro-payment scenarios such as paying for online content and purchasing in-game virtual items with its extremely low transaction fees and fast transaction confirmation time. Through these efforts, XLM seeks to find differentiated competitive advantages in the fiercely competitive cryptocurrency market and enhance its market competitiveness.

6.1.2 Technical Upgrade and Expansion Challenges

With the rapid development of the cryptocurrency market and the continuous changes in user demand, XLM faces many challenges in technical upgrades and expanding application scenarios. In terms of technical upgrades, although XLM’s Stellar Consensus Protocol (SCP) has certain advantages in transaction speed and energy consumption, with the continuous expansion of the network scale and the increasing number of transactions, SCP also faces some challenges. The increase in the number of network nodes may lead to increased difficulty in achieving consensus, and the transaction confirmation time may be prolonged, which will affect the user’s trading experience. SCP also needs to be continuously strengthened in dealing with network attacks and malicious nodes to ensure the security and stability of the network. To address these issues, XLM’s development team needs to invest a large amount of R&D resources to continuously optimize and improve SCP. Researching new consensus algorithm improvement solutions, improving communication efficiency between nodes, enhancing the network’s resistance to attacks, and adapting to the constantly changing market demands.

When expanding its application scenarios, XLM also faces technical challenges. In the decentralized finance (DeFi) field, although XLM has launched the Sologenic smart contract platform, providing a foundation for the development of DeFi applications, compared with mature DeFi platforms such as Ethereum, the ecosystem development of the Sologenic smart contract platform is relatively weak, lacking rich DeFi applications and developer community support. This has somewhat limited the development of XLM in the DeFi field. To overcome this dilemma, XLM actively attracts developers to participate in ecosystem development, provides rich development tools and documentation, lowers the development threshold, organizes developer competitions and other activities, and encourages developers to develop innovative DeFi applications based on the Sologenic platform. XLM has also strengthened cooperation with other blockchain projects, achieving interoperability with other blockchains through cross-chain technology, expanding the application scenarios and user base of XLM. By collaborating with mainstream blockchains such as Ethereum, interoperability between XLM and other digital currencies is achieved, providing users with more convenient financial services.

6.2 XRP risks

6.2.1 Regulatory Uncertainty

The SEC lawsuit has had a profound impact on XRP, bringing significant uncertainty to its development. In 2020, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs, accusing it of selling XRP as unregistered securities, violating securities laws. This lawsuit has raised questions about the legitimacy of XRP, severely undermining market confidence in XRP. During the lawsuit, many cryptocurrency exchanges suspended XRP trading, leading to a significant decrease in XRP trading volume and causing drastic price fluctuations. This not only affects the interests of XRP investors but also hinders the normal circulation and application of XRP in the market.

The future direction of regulatory policies poses potential significant risks to the XRP market. If the SEC ultimately determines XRP to be a security, it will be subject to more stringent securities regulations. This may lead to trading restrictions or even bans on XRP in many countries and regions. Some countries and regions have set high thresholds for trading securities-based cryptocurrencies, requiring investors to have professional financial knowledge and high risk tolerance, making it difficult for ordinary investors to participate in XRP trading and significantly reducing XRP’s market liquidity. Stringent regulatory policies may also restrict Ripple’s business development, affecting its collaboration with financial institutions and further weakening XRP’s competitiveness in areas such as cross-border payments. Conversely, if regulatory policies adopt a more open and inclusive attitude towards XRP, clarifying its legal status, XRP will usher in new development opportunities, market confidence will be restored, prices are expected to rise, and trading volume will increase, creating favorable conditions for widespread application of XRP in the financial sector.

6.2.2 Centralization Concerns

The market has been questioning the centralized control of XRP token supply by Ripple, which has had a significant impact on the development of XRP. The total supply of XRP is 100 billion, with the majority of tokens held by Ripple. This highly centralized token supply model has raised concerns in the market about its level of decentralization, criticized by some community members for lacking the spirit of decentralization and not aligning with the core principles of blockchain. In the ideal model of blockchain, the issuance and management of tokens should be decentralized, involving many nodes to ensure fairness and security of the network. This centralized supply model of XRP may give Ripple significant influence over the price and circulation of XRP in the market. If Ripple makes mistakes or engages in improper behavior, it could have a serious impact on the price and market stability of XRP.

This kind of doubt has posed various obstacles to the development of XRP. In terms of marketing, due to concerns about centralization, some potential users and investors are cautious about XRP and are unwilling to participate in XRP transactions and applications, which limits the further expansion of XRP’s user base and market share. In cooperation with financial institutions, centralization concerns may also become obstacles to cooperation. Some financial institutions have high requirements for the decentralization and compliance of partners, and the centralization issues of XRP may cause these financial institutions to take a wait-and-see attitude towards cooperation with Ripple, affecting the expansion of XRP in the field of cross-border payments for financial institutions. To address this issue, Ripple has taken a series of measures, gradually releasing XRP tokens, reducing centralized control over token supply, and increasing market liquidity and transparency. Strengthen communication and interaction with the community, address community concerns, and enhance the community’s trust in XRP.

Conclusion

Given the overall high risk of the cryptocurrency market, both XLM and XRP carry certain risks. However, if investors remain optimistic about the prospects of the cross-border payment sector, they may consider including both in their investment portfolios, but the investment proportion should not be too high. The relatively low market value of XLM implies that its potential for growth may be significant, and it has some potential in terms of technological innovation and ecosystem expansion, making it a complementary part of the investment portfolio. Despite facing regulatory uncertainty, if Ripple’s lawsuit with the SEC ultimately yields a favorable outcome, its application in financial institutions is expected to further expand, potentially positively impacting its price. Investors should closely monitor the progress of the lawsuit and allocate their investments appropriately under the premise of manageable risks.