ICO’s are quickly becoming a significant alternative to IPO’s, and they are attracting a lot of interest.
In fact, in 2017, startups raised a massive $5.6 billion from ICO’s. With so much money being raised through ICO’s, more and more companies are turning to them to get funding. Obtaining funding through ICO’s is also attractive because ICO’s do not have anywhere near as many regulatory hoops to jump through, compared to IPO’s.
There were 435 successful ICO’s in 2017, and there could be even more in 2018. However, with so many companies launching ICO’s, there is a real question of which platform is the best for launching an ICO. Two blockchains that have emerged as being ideal for ICO’s are Stellar Lumens (XLM) and Ethereum (ETH).
The Stellar vs. Ethereum Debate
Right now, Ethereum is the second largest cryptocurrency in the world by overall market cap. This is largely because Ethereum has built a name for itself as being excellent for launching ICO’s. Ethereum’s smart contract capabilities are very appealing to many companies launching ICO’s. However, despite the fact that Ethereum has become well-known for ICO’s, Stellar is steadily becoming known as an excellent alternative to Ethereum.
Stellar Lumens is currently priced at about 27 cents. There are several key reasons why Stellar is gaining ground on Ethereum in terms of being a go-to platform for ICO launches. The first is speed. Stellar is much, much faster than Ethereum. Given the fact that cryptocurrency prices are very volatile, being able to make transactions quickly is crucial for traders of cryptocurrencies. The average settlement time for Stellar transactions is five seconds. For Ethereum, it is 3.5 minutes. This gives Stellar a tremendous advantage over Ethereum.
Stellar is also cheaper. In fact, to make 100,000 transactions with Stellar, it only costs one cent. This is largely because Stellar as a built-in exchange, and therefore no fees are required to be paid to third party exchanges for transactions. Ethereum transactions are significantly more expensive.
The fact that Stellar has its own built-in exchange which is extremely fast and incredibly cheap means that ICO companies can start having their coins exchanged on day – 1, as soon as they launch.
Does Ethereum have any advantages?
Yes, Ethereum does have several key advantages over Stellar. One of the primary advantages of Ethereum over Stellar for ICO’s is that Ethereum is already well-established as the go-to platform for ICO’s and has been successfully launching ICO’s for a good amount of time now. Ethereum is also the second largest cryptocurrency by overall market cap, which gives it distinct clout and a higher level of brand awareness than Stellar.
Stellar only broke into the top ten cryptocurrencies by market cap in January 2018. So, Ethereum is way ahead in terms of consumer awareness and popularity. Also, Ethereum offers the so-called “Turing-complete smart contracts.” These contracts allow businesses to set up a wide variety of smart contracts which can be very complicated.
However, despite the fact that Ethereum allows for Turing complete smart contracts, most ICO’s do not require Turing complete smart contracts, and thus can be run on the Stellar network. Also, there are some security risks associated with Turing complete smart contracts which simply do not apply to contracts which are not Turing complete. So, the argument can be made that ICO’s on the Stellar network are less vulnerable to security breaches as well.
Essentially, Ethereum is better for ICO’s that require complicated smart contracts which are Turing complete. However, for ICO’s that do not require these types of contracts, Stellar could be a much better option. Stellar is not only faster and cheaper, but it is not reliant on third party exchanges. This is because it has its own built-in exchange which is extremely effective and efficient.
Stellar may currently lack the brand recognition of Ethereum, but if it continues to rack up ICO’s, as it has been doing recently, then this could soon change. Ethereum could soon start to face real competition from Stellar. If Ethereum is going to continue to stay way out ahead of Stellar for ICO’s, then lower transaction fees and faster settlement times may be required. These are two of the key advantages that Stellar has over it at the moment.