While Ethereum has been the preferred platform for token issuances for a long time, more and more issuers are now opting for Stellar. Both platforms have their strengths and weaknesses.
Ethereum has been one of the blockchain industry’s frontrunners for a long time. The name is synonymous with platform development, token customization and the launch of numerous ICOs.
However, for some time now, there has been a new kid on the block: Stellar. Germany’s first STO, Bitbond, is using Stellar. VMC, which has just launched an STO in the Netherlands, is also using Stellar.
That raises the question: Will Stellar become the go-to blockchain for security tokens? To answer this question, we need to take a more detailed look at the different features both platforms offer.
Ethereum offers greater flexibility
Ethereum is the world’s first blockchain development platform and many big names in the industry have built on it. Ethereum smart contracts are Turing complete, meaning anybody can develop complex applications on Ethereum without limitations.
On the contrary, Stellar’s smart contracts provide only simple functionalities for basic applications. But they are also faster and easier to use.
Thus, in terms of token issuances, it depends on the requirements of the token. A company that aims at launching security tokens that require complex smart contracts should better run with Ethereum. If the goal is to launch a simple token, Stellar might already offer more than enough functionalities.
Stellar comes with enhanced security features
Ethereum is by far the most widely used blockchain for developing smart contracts. The resulting network congestion, combined with the flexibility Ethereum offers, has created room for hacker attacks.
Thus, being less flexible, Stellar offers higher security. On top of that, Stellar includes more security features such as multi-signature, batching/atomicy, and businesses can choose which nodes can validate their transactions. These increased security features are especially crucial for STOs, as the tokens represent real-world assets.
Stellar has built-in compliance functionalities
On the contrary to unregulated ICOs, compliance is a major concern for regulated STOs. Security token issuers will have to comply with strict KYC and AML rules.
Stellar allows users to enable trading between KYC/AML approved addresses only. It also has a provision where certain accounts can be frozen. Ethereum does not allow for these functionalities.
Transaction speed and cost: Stellar is the clear winner
The average transaction processing time on Stellar is five seconds, compared to more than three minutes on Ethereum. Also, transaction costs on Stellar are just a fraction of the fees on Ethereum. One reason for that is Stellar’s built-in decentralized exchange. Users don’t need to pay any fees to third-party exchanges to conduct transactions.
Stellar is the clear winner in this category.
Conclusion: It depends…
So, which platform is superior for STOs? Well, it depends…
Stellar is primarily a payment solution platform that also doubles up as an unsophisticated development solution. Some STOs will require simplicity, low transaction costs, speed, and increased security; those will go for Stellar.
Ethereum is a complex development solution that offers maximum flexibility. STOs that require a high degree of customization and tokens that need fully scriptable smart contracts will use Ethereum.
Thus, Ethereum and Stellar both remain as exemplary solutions in their respective segments. Both blockchains are differentiated enough to co-exist and attract different types of token issuers.