Why Jed McCaleb Left Ripple and Built Stellar: XRP, XLM and the Split That Shaped Crypto

Founders often agree on the problem before they agree on the company. Early Ripple and Stellar both emerged from dissatisfaction with the limits of existing payment systems and Bitcoin's energy-intensive proof-of-work model. The split came later — in people, governance and eventually technology.

Jed McCaleb sits at the centre of both histories.

McCaleb before Ripple

McCaleb had already created the Mt. Gox exchange before selling it years ahead of its catastrophic collapse under later ownership. In 2011 he worked with David Schwartz and Arthur Britto on a new distributed ledger that could reach agreement without mining. That project became the XRP Ledger.

Chris Larsen joined the group in 2012, and a company was created to commercialise the technology. Through name changes from NewCoin to OpenCoin and later Ripple Labs/Ripple, the business increasingly focused on financial institutions and cross-border payments.

Why did McCaleb leave?

The public record supports the basic fact that McCaleb departed after disagreements over the venture's direction, but the story has often been retold as a simple personal feud. That is too neat.

Startups argue about control, hiring, commercial strategy, governance and how much a decentralised network should depend on a venture-funded company. McCaleb left the Ripple company in 2013. In 2014 he launched the nonprofit Stellar Development Foundation with Joyce Kim, and Stellar described its technology as resuming development of open-source ideas McCaleb had worked on at Ripple.

The philosophical difference became clearer over time. Ripple built an enterprise business selling infrastructure to banks, payment providers and other institutions. Stellar framed itself more explicitly around an open financial network and financial inclusion, with a nonprofit foundation at the centre of ecosystem development.

That distinction is real, but neither network can be reduced to a slogan. Ripple contributes heavily to an open-source ledger; Stellar also works with regulated financial businesses.

Stellar's early technical connection — and later break

Early Stellar software inherited significant technical ancestry from Ripple. That did not last unchanged.

After concerns about consensus behaviour in the early network, Stellar moved to a new model designed by Stanford professor David Mazières: the Stellar Consensus Protocol (SCP), based on federated Byzantine agreement. Stellar's own technical history discusses the limitations it saw in the earlier Ripple/Stellar consensus model and the reasons for choosing a new approach.

Modern XRPL and Stellar therefore share family history, not identical consensus engines.

XRP and XLM: similar jobs, different networks

Both XRP and XLM can be used as native assets for fees and value transfer on their respective ledgers. Both networks support asset issuance and exchange-like functions. Both aim to move value more efficiently than traditional correspondent banking in certain use cases.

But XRP is native to XRPL; XLM, or lumens, is native to Stellar. Holding one gives no ownership or claim over the other network. Ripple the company is not the issuer of XLM, and the Stellar Development Foundation is not the operator of XRPL.

Their ecosystems, governance mechanisms, developer tooling and commercial relationships have also diverged substantially over more than a decade.

The nine-billion-XRP problem

The split became economically sensitive because McCaleb had received a very large amount of XRP from the original allocation. Public filings summarising the later settlement say his original holdings were about nine billion XRP.

When McCaleb announced plans in 2014 to sell his XRP, the market worried that a founder could dump a huge inventory. Ripple and McCaleb entered agreements that restricted the pace of sales. A 2016 settlement tied permitted selling to a percentage of daily XRP trading volume and placed arrangements around XRP held for McCaleb and his family, as well as charitable holdings.

The permitted percentages increased over time — from fractions of one percent toward higher limits — specifically to reduce the risk of uncontrolled market impact.

Why the XRP community watched “tacostand”

A well-known wallet associated with McCaleb became a daily obsession for parts of the XRP community. Analysts tracked transfers and tried to estimate when the remaining balance would reach zero.

Ripple reported in its Q2 2022 XRP Markets Report that the final XRP connected with the arrangement had been sold in July 2022. That ended a market overhang that had lasted years.

It is tempting to treat those sales as proof that McCaleb was “against XRP”. That is more psychology than analysis. He had moved on to build a competing network and had a legal framework governing an enormous personal asset position. Selling under that agreement was economically rational whether or not he held positive feelings toward the old project.

Was Stellar created to compete with Ripple?

Inevitably, yes in some markets — but not only for that reason. Both networks address payments and asset transfer, so overlap is unavoidable. Yet Stellar's nonprofit structure and focus on open financial access created a different institutional path, while Ripple pursued a venture-backed enterprise model.

The split is better understood as an early crypto fork in *strategy* that later became a deeper technical divergence.

Related reading: Arthur Britto and the early XRP Ledger; How Bitcoin and XRPL differ.

XRP for Newbies

Jed McCaleb helped create the XRP Ledger, then left the company that became Ripple. He later created Stellar, a different network whose native asset is XLM. Stellar originally shared some technical ancestry with Ripple/XRPL but later adopted a different consensus system. McCaleb also owned billions of XRP; agreements limited how quickly he could sell it, and the final sales were completed in 2022.

The Bottom Line

Stellar was born from the same early search for faster, more efficient digital payments as XRPL, but it became its own network with its own consensus design and organisational model. Personal disagreements were part of the history, yet reducing the split to drama misses the bigger story: two projects with a common technical ancestor chose different ways to build trust, governance and adoption.