What Is xDai On The Gnosis Chain?

Stablecoins are one of the most prominent trends in the crypto market. These coins are generally pegged to the fiat currency and maintain an equal ratio, which is 1:1. However, the existing problems of many stablecoins are the slow speed of the transactions and the high fees. Knowing these issues, many regular users are stepping away from these coins and looking for better options.

In this case, the Gnosis chain and its native coin xDai are stepping into the game. This stablecoin is different from other coins because it guarantees low fees, speedy transactions, and a high level of security.

In this article, we will touch on the Gnosis blockchain with its stable token xDai, while providing you with essential information about it, including its pros and cons. In addition, we explain to you where and how you can buy this token with ease. But let us start with the beginning and give you an xDai definition and extend your knowledge about the Gnosis blockchain (xDai chain earlier).

So, what is xDai?

As mentioned, xDai belongs to stablecoins. It is pegged to the US Dollar and is a derivative of the cryptocurrency DAI (will be explained later in the article), a stablecoin whose price is pegged to the US Dollar as well. The cost of performing a transaction with xDai is $0.000021 USD. Such a transaction takes up to five seconds. The stability of xDai allows for predetermined fees that are extremely low compared to many other blockchains. Nevertheless, it is worth answering one more question - what is xDai chain?

What is xDai chain?

The Gnosis chain (previously, it was called the xDai chain) was created as the world’s first stable dollar blockchain and went live in October 2018. It is designed for low-cost, anonymous, and speedy transactional payments with a fixed fee.

It has a dual-token model using a stablecoin called xDai for transactional payments and a second token called STAKE for consensus based on a new delegated Proof-of-Stake (PoS) consensus model called POSDAO, which is implemented by DAO, as you might have guessed.

What do you need to know about STAKE?

STAKE is a multi-chain token designed to protect the payment level. Stacking allows block producers (validators and delegates) to ensure transaction consensus and receive incentives for fair block production. STAKE is not required for everyday chain transactions or users. It is necessary only for consensus providers. STAKE is also an unstable token whose value is determined by the market.

Tokens are purchased on the main network and then transferred to the xDai sidechain through the DAI-xDai bridge for transaction tokens; OmniBridge transfers data between chains.

The xDai chain has three ways to get stacking fees. These ways include transaction fees paid to xDai, STAKE fees for checking blocks, and commissions. Previously, users could also earn interest in CHAI by blockchain DAI in a bridge.

Dual-token model

It is easy to understand the logic of this model - xDai for stable transactions, STAKE for protocol protection. The dual-token model was created to maintain xDai’s stable transaction capacity while supporting robust incentives for participants (validators and delegators).

xDai, a stable native coin, allows users to predict fees and conduct transactions where prices will not fluctuate by a large margin. This is ideal for everyday payments.

To create incentives for validators through token issuance, the xDai chain uses STAKE whose price is determined by the market. While this token is subject to volatility, it is not a transaction-based asset. Like other tokens, the price is determined by supply and demand in the Ethereum ecosystem.

But what is DAI?

After getting to know the xDai definition, it is the right time to learn more about DAI. Unlike most stablecoins, DAI is a decentralized and stable currency backed by Ethereum coins frozen in a smart contract.

The token can be used for settlement or funds transfer. The unused portion of the coins is burned. According to the developers, this leads to rate stabilization due to the continued balance of supply and demand.

How does xDai work?

xDai runs on the Ethereum sidechain (the Gnosis blockchain). ERC-20 standard DAI tokens become stablecoins in the xDai blockchain. They can be returned to the Ethereum blockchain at any time.

xDai uses the TokenBridge smart contract to create tokens. Such technology is called cross-chain bridging. The exchange of DAI to xDai goes like this:

  • The user sends a DAI to the TokenBridge smart contract address;
  • TokenBridge locks the DAI on the Ethereum blockchain and creates the same amount of xDai;
  • TokenBridge sends the xDai to the user’s Ethereum wallet.

Pros and cons of using xDai

Like every cryptocurrency, xDai has its strengths and weaknesses. But, let us consider the beneficial sides of the token first.

Advantages of xDai

  • Stable payment environment. You only need a single coin for transactions and gas fees. Stable payments for buyers and sellers.
  • Accurate cost planning. Projects can plan for operation costs. Similar to AWS and other pay-for-usage models.
  • Application expansion. Resource-intensive operations are optimized on xDai. DAO voting, NFT mining, smart contracts interaction.
  • Dev and project support. A rich ecosystem of tools and applications for both developers and users.
  • Green chain. Extremely small carbon footprint, smaller than ETH 2.0.

Disadvantages of xDai

  • The complex process of getting xDai. The complexity lies in additional efforts - because users should firstly buy DAI and convert this crypto into the xDai token.

Is xDai safe?

To answer this question properly, it is worth indicating that every blockchain, as well as any stablecoin, may include risks. However, the stablecoin xDai has proven its reliability in the market and among many users. The first hint that this token is safe lies in its belonging to the group of stablecoins. It is pegged to the US Dollar and maintains the ratio of 1:1.

Secondly, the stablecoin implements the stacking token STAKE, which is multi-chainable and is used by several validators to make sure the chain is safe.

And finally, the officials of xDai state that the Gnosis chain goes through regular examinations and inspections. It means that the chain owners want to make the chain and its token as secure as possible.

How can you use xDai?

As with every stablecoin, xDai can be used in different ways. For instance, you can easily send this coin from one wallet to another or receive this cryptocurrency in your wallet. What is more, you can store this token in your wallet without worries that its rate will go down, as it is a well-known practice with high-volatile coins, like Bitcoin (BTC), Litecoin, (LTC), etc.

Is it profitable to invest in xDai?

One of the essential ideas of the Gnosis chain and its native stablecoin xDai is to solve the problem of high transaction fees and slow transactions. While other stablecoins charge their users comparatively high fees, xDai makes it possible to save money on these fees. Thus, the answer is positive, and it is profitable to use xDai in this regard.

What is more, it is pegged to the US Dollar and is secured by DAI so that users should not have doubts and worries about the stability of its pegged rate.

How can you buy xDai?

Some time ago, it was complicated to purchase this token because you first needed to buy DAI for fiat money and, after that, convert the bought crypto into xDai. However, there is an easy way to buy xDai (even without the converting operation). On our website, you can make a purchase of xDai in the needed quantity so quickly. The purchasing process consists of three simple steps (users who already deal with us can purchase xDai even faster).

  • The first step - specify the details of your order. It means that you will be asked to indicate the amount of xDai you want to buy (it is also possible to enter the amount of money you are ready to put for this purchase), paste your crypto wallet (where the xDai coin come), and click on the “Buy XDAI Gnosis chain” button.
  • The second step - make a payment. You need to process a payment to buy xDai for fiat money, like EUR or USD. It can be done with the help of over 10 of the most popular payment methods, including Visa, Mastercard, Apple Pay, Google Pay, etc., and 27 popular fiat currencies.
  • The third step - get your KYC verification. This step is a mandatory measure for new users. As a licensed fintech company, we cannot skip this step because of the strict rules of the regulators. The great news is that the KYC verification procedure takes approximately 3 minutes. The only things you need to go through is to upload one of the proofs of your identity (it can be your actual ID card or driving license) and complete the liveness check (turn on your web camera and make a few turns of your head in front of it).

Buying xDai by the Genesis chain at Utorg is easy and without additional steps (to buy one token and then convert it to the needed one), and it takes several minutes of your time to reach your aim and get the xDai tokens.

Endnote

xDai is a young project. It is essentially an analog of the Lightning Network for Ethereum with a native stackable coin (xDai) and the ability to make money on stacking.

A proprietary blockchain allows xDai to conduct fast transactions with low fees. Users pay for transactions in xDai, not Ethereum.

Stablecoin solves the problems of collateral and commissions. Due to the link to DAI, xDai tokens cannot be issued without collateral. xDai operates on a separate blockchain: its transactions do not compete with Ethereum transactions and cost less.

FAQ

1. Is xDai a blockchain?

No, it is a stablecoin pegged to the US Dollar with a ratio one by one, which functions on the Gnosis blockchain (the xDai chain).  

2. Are xDai and DAI the same?

The only common thing that these cryptocurrencies have in common is the fact that they both belong to the same group of coins - stablecoins. But, xDai is a derivative of the cryptocurrency DAI. Thus, xDai and DAI are not the same.

3. Is xDai secure?

Absolutely! The stablecoin xDai is completely secured. It operates on Ethereum’s sidechain Gnosis, which is regularly audited by third-party security firms.

4. What is xDai on the Gnosis chain?

xDai is a stable payment blockchain designed for fast and low-cost transactions using a unique dual token model. xDai is a stable token used in transactions, payments, and collections, and STAKE is a management token used to support basic POSDAO (Proof-of-Stake) consensus.