First of all, in this context, it is important to define cryptocurrency as a medium of exchange and not a speculative asset.
I have looked into four cryptos that embody this based on their value propositions as payments although Algorand and Stellar can also be used as a platform like Ethereum.
The Metrics
To check which one is the best for payment, it is important to determine transaction fee, transaction speed, and scalability.
- Transaction fee: Is it affordable?
- Transaction speed: Is it fast?
- Scalability: Can it scale?
Other important metrics are adoption rates of their respective platforms, usage, tech and on/off ramp services.
Breaking it down
Figure 1: Transaction Speed
Figure 2: Transaction Fees
Figure 1 and Figure 2 shows that when it comes to fast and fee-less transactions, Nano wins (if we do not consider current state of the network).
However, the differences between fees are definitely so minuscule especially if you compare Nano to XLM. I do not think paying nothing and a fraction of a cent really matters.
Transactions Per Second
Figure 3: Transactions per second handled by each network on March 24, 2021
When it comes to daily transactions, XLM leads the chart.
Take note that these were the transactions processed last March 24, 2021. Nano having the lowest transactions were also exacerbated by the spam attack to its network.
*In ideal situation:
\These transactions per second are based on finalized transactions.*
Now here is an interesting part. If you compare Stellar to top 14 marketcap blockchains, it has the highest daily transactions. Comparing it to all time charts, Stellar is on the 3rd spot. Take note some factors like Bitcoin being around since 2009 and Ethereum DeFi explosion.
Figure 4: Top Blockchains With Highest Numbers of Processed Transactions
But why is TPS important? Because it shows you how scalable it is and can be.
Scalability
Mainstream adoption means greater network usage, thus it is salient that a blockchain can scale to meet the demand.
Stellar can scale just by upgrading your hardware requirements or adding Layer 2 Payment Solutions.
In an interview with the blockchain-focused podcast Epicenter, Stellar founder Jed McCaleb suggested ~4000 t/s at the 37:18 mark.
It really depends on the hardware you are running Stellar Core on, so it is hard to give solid numbers. We've gotten it up to 4000 transactions per second, and that wasn't on that crazy of hardware. It was basically a machine with a SSD drive. You can take it much further on big hardware. We also haven't put in a ton of effort into optimizing too much. The network is still very small, so it seems silly to get it too much faster than it can do right now. We are pretty confident there are a lot of areas you can optimize still.
Whereas in a test conducted by Barclays of Africa with Deloitte, Stellar could process up to ~10,000 TPS.
On the other hand, Algorand is planning to roll out this year an ambitious upgrade where its block can contain up to 25,000 transactions which will enable its network to handle 46k TPS.
Meanwile, Nano just like Stellar can scale with upgrading hardware requirements or its protocol by implementing shard nodes:
"Shard node" by definition is a node which is vouched for by "Master node". It is allowed to vote on transactions instead of master node. If multiple shard nodes (or shard nodes and master node) vote on the same transaction, only one of the votes are considered (it is a byzantine behavior, similar to node voting twice). Master node can revoke shard node permissions at any time.
What about Ripple? Ripple tackles scaling through Payment Channel which is a concept similar to BTC Lightning Network. Sending payments are sent asynchronously into small increments and settled later.
Adoption Rates
With this metric, Nano is losing. Algorand, Stellar, and Ripple are backed by well-known institutions. It could be because Nano Foundation doesn't have as much funds as the three platforms.
The metric for adoption rates do not represent using the native coins like Algo or XLm, but the adoption of their platforms .
Usage
How do we determine usage?
Figure 5: Daily Transactions as of March 24, 2021
If we look at usage of each platform based on daily total transactions, here is the data captured last 24th of March 2021.
- XLM - 2, 730, 542
- XRP - 970, 132
- Algo - 803, 414
- Nano - 360, 225
At the present, Stellar processes the highest transactions daily. There are a lot of factors that contribute to this such as using XLM as the bridge currency for moving crypto holdings from one exchange to another. The SDEX also facilitates a lot of operations such as issuing assets, payments and trades. Bots fighting for arbitrage opportunities also adds to the over-all transactions.
Now, if we look at the usage strictly for payments only or moving funds around, it is hard to get an accurate data for Algorand meanwhile Nano transactions are mainly for send-receive transactions, then the transactions on Nano are strictly payments. Meanwhile, Ripple and Stellar have metrics to track payment operations.
As of April 02, 2021:
- Nano's total payment transactions are 110,061
- Stellar has 98, 667 total payment transactions
- Ripple has 114, 283 total payment transactions
The Tech Behind
Stellar, Ripple, and Algorand are based on Byzantine Agreement with different ways of arriving at consensus while Nano uses DAG and a block-lattice structure where each account owns their own chain.
Diving deeper, Stellar was the first platform to successfully implement a safe and secure Federated Byzantine Agreement even though Ripple pioneered Federated Byzantine Agreement.
But how do they arrive at consensus?
To keep it short:
- Ripple relies on Proof of Correctness where each participant server sends the available set of transactions to UNL(Unique Node List) aka transaction validators to vote at least 80% for the transactions to go through
- Stellar achieves consensus when Quorom Slices (network of nodes/participants) intersect or overlap.
- Algorand achieves consensus through Verifiable Random Functions that allows users to privately check whether they are selected to participate in the Byzantine Agreement to agree on the next set of transactions.
- Nano uses Open Representative Voting (ORV) where every account can freely choose a Representative at any time to vote on their behalf and when a node sees a block gets enough votes to reach a quorum, transactions are confirmed.
On/off Ramps
On ramp in cryptocurrency is having an easy access to buy crypto, whereas off-ramp is exchanging your crypto for fiat.
Source: Coin Market Cap Top Spot Exchanges
To compare which among the four have the most available on/off ramp exchanges, I used Coin Market Cap ranking of Top Exchanges based on liquidity, traffic, trading volumes, and confidence in the legitimacy of trading volumes reported.
The winners in this criteria are XRP and XLM (explaining why XLM is the currency people use for moving funds) while Nano is not available in five of these top 10 crypto exchanges.
Threats and Over-all Comparison
Network outage, sybil attack, double-spend attack, forking, and spam attacks are some of the examples that can threaten the network.
Nano is fast and fee-less, but at the same time it looks its best features are its downsides too. The spam attack that has been going on has slowed down Nano transactions and the developers have been hard at work at setting up an anti-spam attack upgrade.
If you look at the current state, Nano is only processing 4 transactions per second.
Another threat to crypto being used as a mainstream currency are stablecoins and CBDCs. They don't fluctuate as much as cryptos making them the best medium of exchange.
Furthermore, Nano doesn't have the capabilities to issue these currencies compared to Stellar, Algorand, and Ripple.
Some people also say that Algorand is better than Stellar or Ripple. The truth is it isn't. Most of what Algorand can do can be done on Stellar. Stellar has also been around since 2014 whereas Algorand was established in 2017.
Algorand is like Stellar (not a fork or no shared code) but in terms of the protocol design: Algorand will not fork, has transaction finality, sending with a memo, and runs on Byzantine Agreement. It can also issue stablecoins, CBDCs and NFTs.
Of course there are big differences too such as Algorand provides staking whereas there is no staking on Stellar; the way consensus is achieved; the way assets are issued; and smart contracts designs.
Stellar has a "clawback" feature whereas Algorand has "a right to be forgotten" where erasable and non-erasable parts are stored separately (the hash of any data is never erased) hence modifying the traditional structure of the blocks and transactions.
What about clawback? It is interesting how clawback works on Stellar that makes it appealing to financial institutions and regulators:
- Recover assets that have been fraudulently obtained.
- Respond to regulatory actions, if required.
- Enable identity proofed persons to recover an enabled asset in the event of loss of key custody or theft.
On the other hand, Ripple is facing lawsuits that has quite tainted the image of XRP, yet Ripple are in bed with numerous of banks and fintech services using their Ripplenet payment service although it does not require XRP to function. That said, Ripple claims that RippleNet’s On-Demand Liquidity service that uses XRP is available in Australia, the Euro Zone, the United States, Mexico and the Philippines.
The Winner
Is there really a winner? When all of these cryptos are volatile? And can Nano become the true global currency it aims to be or can Stellar, Ripple, and Algorand be chosen (not necessarily their native assets) because they work with regulators instead of replacing them?
I'll leave it to you to decide.
