xDAI — The Stable Chain for Stablecoins
This article is brought to you by The Birb Nest trading community in collaboration with the YellowBlock blockchain educational hub.
Many supporters of blockchain technology envision a future in which all payment scenarios are made possible with the use of cryptocurrencies and defi applications. For now, there are a few obstacles to realizing that decentralized dream. Price volatility, unpredictable transaction fees, and slow transactions are just some of the detractors that make cryptocurrencies impractical for everyday use and blockchain difficult for application developers to integrate.
By creating a new stable EVM sidechain, or stablechain, with its own native stablecoin and POSDAO consensus model, the xDAI project aims to finally make it both practical and convenient to use cryptocurrencies and blockchain technology in the real world.
Features
Here are just some of the many benefits and features that xDAI has to offer.
Lightning Fast Transactions
With block times that average out at around 5 seconds, transactions on the xDAI chain are lightning fast. This makes it ideal for use in small everyday payments, where a wait time longer than a few seconds can be a large drag on commercial transaction flows.
It also results in more responsive dApps, as users no longer have to wait several minutes in between actions for the network to approve a transaction.
A Native Stablecoin
xDAI is also the name of the blockchain’s native stablecoin. xDAI can be exchanged at a 1:1 ratio with the decentralized, Ethereum-based stablecoin DAI. Since DAI is designed to maintain parity with the dollar, this gives xDAI a stable value of $1 per coin.
This native stablecoin, combined with the chain’s blazing fast transaction speed, turns xDAI into a blockchain-based payment network uniquely suited to facilitate smaller transactions.
While the project currently only has the DAI-based xDAI stablecoin, there is the potential in the future for many other stablecoins such as xUSDT or xUSDC to be created through the use of bridges.
Predictable, Affordable, and Convenient Fee System
xDAI chain transaction fees are not only extremely cheap at $0.01 per 500 transactions, but also predictable. Since these fees are charged in the xDAI stablecoin, there is no need for complicated price conversions or checking of exchange rates. $0.01 in fees would simply cost 0.01 xDAI.
Predictable transaction costs are also very important for developers, who can now reliably plan the maintenance and usage costs of their dApps.
For convenience, a single token is used for both transactions and fees. Unlike with Ethereum, users who receive tokens on xDAI do not have to acquire a different token before they can make a payment.
This combination of speed, predictability, and a simple fee system means spending xDAI is just as easy as making a regular digital fiat payment, making it much easier to onboard new users.
Ethereum Compatibility and Interoperability
xDAI is incredibly well-positioned to work with and enhance the countless Ethereum-based dApps currently being used and developed, giving it instant utility for a large number of blockchain developers.
Since it is actually an EVM sidechain, the xDAI chain is fully compatible with Ethereum and Ethereum-based projects. Developers of existing Ethereum dApps can move to xDAI with minimal additional effort.
In terms of interoperability, the TokenBridge and Arbitrary Message Bridge technologies allow for data to be passed between any two EVM-based chains. This enables operations such as the transfer of tokens from another chain onto the xDAI chain and back again, or the triggering of an event in one chain based on something happening on a different chain.
In short, developers of Ethereum-based dApps can easily move all or part of their project over to take advantage of the greater speed, lower fees, and predictable costs of the xDAI chain.
Scalable and Decentralized Consensus System
In order to become a faster and more efficiently scalable version of Ethereum, xDAI uses its own POSDAO consensus mechanism, which is a form of proof of stake that is designed to be more decentralized.
In this system, a separate token called STAKE is used to reward xDAI validators. Holders of STAKE tokens can either stake them to become a validator candidate or vote for one, and be rewarded for doing so. While xDAI currently uses a private version of POSDAO, staking will be open to the public in Q2-Q3 of 2020. In the future, STAKE can also be used as part of a reward mechanism for other POS-based chains.
While arguably not as secure or decentralized as proof of work, having delegated validators allows xDAI to easily scale up via an upgrade of validators’ equipment.
Scaling out is also possible through the use of parallel sidechains. If the main xDAI chain (xDAI1) becomes overly congested, a new sidechain (xDAI2) can be formed to offset the burden while still maintaining a connection through token bridges.
Anonymous Transactions
xDAI has also given grants to different applications and wallets that will research the use of zero knowledge proofs to allow anonymous xDAI transactions. This important development, targeted for completion in Q3 2020, will take xDAI even closer to becoming the best network for payments.
Real World Use Cases
xDAI’s network is not just a hopeful idea. It is a working technology that has been tried and tested in many real world applications.
At ETHDenver, the Burner Wallet running on the xDAI network was able to facilitate the quick and easy payment of a total of $38,432.56 DAI to 11 food trucks for only $0.20 in total transaction fees. By sacrificing some security for convenience, the Burner Wallet allowed attendees to easily load up BuffiDai (xDAI) tokens and use them to pay for food simply by pointing their phones at some QR codes.
Grassroots Economics is using xDAI to help create Community Inclusion Currencies (CICs). CICs are local currencies created and used by communities to facilitate the transfer of value and trade in places where there may not be enough money to go around. The xDAI network is not only fast enough to facilitate everyday transactions, but the transaction costs are also affordable and predictable enough that they can be easily subsidized.
Prediction market Helena chose to run their dApp on xDAI in order to avoid high gas fees. By keeping daily transactions on xDAI while regularly uploading important information to the Ethereum network, the project was able to combine the benefits of the predictable, low fees of xDAI with the security of Ethereum.
Video games with many microtransactions such as Galleass and DAOG are running on xDAI. xDAI’s affordable and fast transactions make these games cheaper and run smoother.
Conclusion
xDAI’s speed, predictable costs, cheap transaction fees, native stablecoin, and many other features make it an ideal choice for both everyday transactions and decentralized application development.
With xDAI, merchants can accept digital payments without worrying about price volatility or expensive transaction fees eating into profits. Customers can pay for products or services without having to keep a second currency in their wallets to pay for gas fees or enduring prolonged wait times for transaction confirmations. And developers can finally create dApps without ever having to worry about slow speeds or high transaction fees.
But xDAI is not just stopping there. There are many plans for continued development this year, including a transition to public staking for greater decentralization, the option for private transactions, the creation of fiat-based derivatives, a layer two scalability solution, and the creation of a new xDAI NG chain that will use a new HoneyBadger BFT consensus algorithm.
xDAI has already proven its value in the real world, and these many improvements will only help solidify its position as one of the top blockchain solutions for both payments and dApp development.
