CEO ofCheesecake Labs, a software consultancy, design and engineering company that helps you build successful tech products.
Ethereum and Stellar are unique in the world of cryptocurrencies in that their value has less to do with their “coin” value and more to do with their feature sets. You can invest in them as a tradable asset, but that’s just the beginning of their capabilities and features.
Ethereum Is One Of The World’s Most Programmable Blockchains
You’ve probably heard that blockchain technology has a wide variety of uses. You don’t have to use blockchains to create and monitor digital currencies. You can use blockchains to keep track of medical information, store cloud data, secure the internet of things, track food, etc.
The problem with most cryptocurrencies is that the blockchain they’re built on can’t do any of this stuff. Bitcoin’s blockchain, for instance, is only suitable for trading bitcoin.
Ethereum solves this problem by being highly programmable. This means that you can trade Ethereum coins on the Ethereum blockchain or build your own apps and functionalities that run on this blockchain. It’s complex but very open-ended and fast, making it a powerful platform for launching blockchain applications.
Stellar Is A Cross-Border Payment System
Stellar, on the other hand, is entirely centered around trading any digital asset. What sets it apart from other cryptocurrencies is that Stellar’s coins (lumens) aren’t meant to hold value themselves. Instead, they’re just a medium of exchange.
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For example, let’s say your native currency is U.S. dollars, and you want to pay someone whose native currency is euros. Traditionally, this requires a wire transfer, which is slow and expensive. With Stellar, however, you can facilitate this transaction nearly instantly with little to no cost.
Stellar does this by taking your U.S. dollars, finding the best way to convert them to euros and delivering that money to your recipient. And Stellar does all this almost instantaneously.
This is pretty handy, to be sure, but it’s just the beginning of Stellar’s value. Stellar also allows anyone to program their own “token” of value. That means you can create a token representing any fiat currency, cryptocurrency, loyalty points, gift cards or even physical goods like apples or diamonds.
How Ethereum Uses Smart Contracts
Ethereum is programmable, allowing you to use its blockchain for more than just sending digital money back and forth. These programs (also known as apps) are known as smart contracts.
Smart contracts are just traditional contracts, except they’re not executed by a bank, notary or some other third party. Instead, they’re executed by code on the blockchain.
For instance, say John is selling a car to Jane. John and Jane agree that the car is worth 100 ether (Ethereum’s cryptocurrency). So they write a simple program (a smart contract) that says, “When Jane pays John 300 ether, transfer the car’s title from John to Jane.”
Because smart contracts are executed over the blockchain, there’s no need for a third party to oversee this transaction. The blockchain proves the transfer of ownership and currency, publicly and immutably.
This is a simple example that still focuses on monetary transactions. However, you can write a smart contract that updates a person’s medical information, verifies an IoT device, and just about anything else.
How Stellar’s Core Features Are Improving Its Performance
The downside of Ethereum’s smart contracts is that they can back up Ethereum’s network. All of these simple programs running in succession slows down the system and increases its cost. So simple transactions aren’t good candidates for Ethereum transactions anymore.
But this downside is Stellar’s strength. Since Stellar’s focus is facilitating financial transactions, it’s built around keeping transactions as low-cost and high-speed as possible.
Even as new features are added to Stellar, likeAutomated Market Maker, they’re programmed to be as lightweight and straightforward as possible. Users of Stellar can only create tokens and take advantage of all built-in features in the Stellar network — but you can’t create smart contracts.
Whenever some new computational ability is added to Stellar, it’s created and approved by a community and then implemented into Stellar on a fundamental level. So there’s less freedom than with Ethereum, but it’s far faster and trimmer as a result.
Ethereum Is One Of The Most Innovative Blockchain Technologies
By far, Ethereum’s biggest selling point is its innovation. Ethereum was built as a response to Bitcoin as a way of improving on the Bitcoin concept and taking it to the next level. Ethereum is also being expanded constantly, getting a second life in Ethereum 2.
Stellar Works As A Universal Exchange Medium
Conversely, Stellar’s strength comes from its focus. It isn’t bogged down by a complex network, updates that completely overhaul it or an overworked network. It’s a simple innovation built to be as light as possible, pushed forward by core features that don’t get in the way of its primary purpose — being a universal exchange medium.
Ethereum Is Challenging To Learn And Subject To Change
The biggest drawback of Ethereum is its complexity. It requires substantial experience with Ethereum to truly understand how it works and how you can use it, let alone start programming your own smart contracts. It’s also being updated constantly.
Stellar Is Less Flexible Than Ethereum
While simplicity is a plus, it can also be a drawback, making Stellar more limited. Ethereum can do everything Stellar can do and far more — it just can’t do it as quickly or inexpensively. Stellar, however, was specifically built to not be able to achieve everything that Ethereum can.
So, Which Blockchain Platform Should I Pick?
The first step before analyzing which blockchain you should leverage to boost your business is defining your business goals and the key use cases that would be valuable to users. With a clear (and the right) goal in mind, deciding the technology becomes the easy and fun part.
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As an expert in the field of blockchain technology and cryptocurrencies, I can provide comprehensive insights into the concepts discussed in the article. My background as the CEO of Cheesecake Labs, a software consultancy, design, and engineering company, reflects my hands-on experience in the tech industry. Let's delve into the key concepts mentioned in the article about Ethereum and Stellar.
Ethereum's Programmability: The article rightly emphasizes Ethereum's uniqueness in being one of the world's most programmable blockchains. Unlike Bitcoin, which primarily serves as a medium for trading bitcoin, Ethereum allows for the creation of decentralized applications (DApps) through smart contracts. Ethereum's blockchain is not confined to handling digital currencies; it is highly versatile, enabling the tracking of medical information, storing cloud data, securing the Internet of Things (IoT), and more. The programmability of Ethereum makes it a powerful platform for launching various blockchain applications, offering both coin value and functional capabilities.
Stellar as a Cross-Border Payment System: Stellar, on the other hand, stands out as a cross-border payment system with a primary focus on facilitating the trading of digital assets. The Lumens (XLM) in the Stellar network act as a bridge between different currencies, allowing for quick and cost-effective cross-border transactions. Stellar's key value proposition lies in its ability to convert one currency to another seamlessly, bypassing the traditional slow and expensive wire transfer process. Additionally, Stellar enables users to create their own tokens, representing various assets, further extending its utility beyond a simple payment system.
Ethereum's Smart Contracts: The article explains Ethereum's use of smart contracts, which are self-executing contracts with the terms directly written into code. These contracts automate processes without the need for intermediaries, such as banks or notaries. The example provided in the article involves a car sale where the smart contract automatically transfers ownership once the payment conditions are met. Ethereum's programmability allows for a wide range of applications beyond financial transactions, including updating medical records, verifying IoT devices, and more.
Stellar's Focus on Efficiency: While Ethereum's smart contracts can lead to network congestion and increased costs, Stellar excels in maintaining low-cost and high-speed transactions. Stellar's core features, including the Automated Market Maker, are designed to be lightweight and straightforward, focusing on facilitating financial transactions efficiently. Stellar's community-driven approach ensures that new features are implemented without compromising its speed and simplicity.
Comparative Strengths and Weaknesses: The article contrasts the strengths and weaknesses of Ethereum and Stellar. Ethereum's innovation and constant expansion, exemplified by Ethereum 2, position it as one of the most innovative blockchain technologies. However, its complexity and frequent updates can pose challenges for users. On the other hand, Stellar's simplicity and focus on being a universal exchange medium make it efficient but limit its capabilities compared to Ethereum.
Choosing the Right Blockchain: The conclusion suggests that the choice between Ethereum and Stellar depends on business goals and use cases. Ethereum's flexibility and extensive capabilities make it suitable for a wide range of applications, while Stellar's efficiency and simplicity make it ideal for specific use cases, particularly those related to cross-border payments and token creation.
In summary, understanding the distinct features and strengths of Ethereum and Stellar is crucial for businesses looking to leverage blockchain technology for their specific needs.
