Smart-contracts discussion: Ethereum or Stellar? Part 2

In the previous article, I looked at the differences between Ethereum and Stellar in terms of purpose and goals. Today, I aim to look at both the Ethereum and Stellar protocols, in terms of security, scalability, decentralisation, privacy and confidentiality.

At the end, we’ll see when you should pick one or the other!

Dimensions

The five dimensions chosen are the most important and, usually, both small and big businesses look to improve at least one of the above five when they aim to implement a blockchain-related protocol.

For each dimension I’ve identified one characteristic as an example, in order to cross-check each protocol against each characteristic. By doing that, I can conclude at which dimension does each crypto excel and how can one leverage those qualities in the most efficient and effective way.

1. Security: in order to measure how secure a protocol is, there are important variables to consider. For this article’s purpose, the most important characteristic is, of course, immutability; this property represents the likelihood of a certain transaction being altered after being posted to the blockchain.
2. Scalability: represents the ability for a protocol to process as many transactions as possible, allowing for fast communication between nodes and users. The most important characteristic usually associated with scalability is the number of transactions per second, or TPS for short.
3. Decentralisation: simply dictates who owns the decision-making process in a certain network. For our discussion I chose to look into the number of nodes supporting a network, as the more nodes there are the higher the likelihood a certain network is more decentralised. Of course, nodes can always be owned by the same entity.
4. Privacy: represents the ability for users to hide the content of their transactions, such as amounts or recipients, making transactions untraceable
5. Confidentiality: is represented by users having anonymity when transacting.

Let’s now take a look at how each protocol scores against each metric:

Purpose

In order to conclude my analysis I need to explain why Ethereum and Stellar differ in such key characteristics like TPS or number of nodes, and why both are key to solve different sets of problems, for completely different users.

While Ethereum’s goal is to focus in security and decentralisation, Stellar’s goal is to focus in security and scalability. Because both protocols use a consensus algorithm based on a hashrate, it means immutability is considerable higher.

Protocols can be more or less secure depending on whether an agent with 51% hashrate, or tokens (in case of PoS), could control the network indefinitely. As it turns out, due to the ongoing cost of electricity, miners really can’t maintain control indefinitely.

So why would you chose to use Stellar, if it seems inferior to Ethereum?

The reason is simple: due to transaction costs and efficiency gains. A key characteristic of immutable and decentralised protocols is that there is little incentive to maintain its security unless there is a high premium (high transaction fee).

Because Stellar’s purpose is to allow business to create their own private blockchains, in order to interact privately with other corporations and government agencies, caring about how decentralised a protocol is makes little sense. This is, Stellar opted to give its customer scalability instead of decentralisation and anonymity, because corporations care about efficiency gains and not effectiveness gains.

Should you pick Ethereum or Stellar?

Depending on your final goal, I argue both are epic.

If you’re working with a corporate customer looking for efficiency gains, Stellar will most likely be the best choice; on the other hand, if you’re looking to promote decentralisation, immutability and permissionless within your Dapp, Ethereum should definitely be your first choice!

https://dev.coinrivet.com/different-types-of-cryptocurrency-and-how-to-use-them/