We have presented to communities interested in learning what xDai is all about, and where we are headed with public POSDAO. Below are the basics.
DeFi and Stablecoins are big trending topics in the blockchain industry today. New tools for trading, derivatives, lending and more are constantly being developed. Many of these are designed for stable value transfer. While this is happening on a large & institutional scale, small scale payment platforms have not kept up.
What we are talking about here is platforms for simple payments - like purchasing food from a food stand, sending a (digital) cash payment to a friend, or providing payment for services. The future of cryptocurrency for everyday people performing everyday tasks.
While big DeFi continues to grow, we need an infrastructure for simple payments. This is where the xDai Chain comes in.
We set out to build a reliable chain for stable payments, based on our past experience with Ethereum sidechains and interoperability bridges. The result is the xDai chain.
Infrastructure: A stable chain requires speed, user-friendly tools, and interoperability (the ability to connect between chains). xDai is an Ethereum based sidechain which features 5 second block times, tools developed for crypto-newbies, and a bridge that connects the chain to Ethereum, so that stable assets like Dai can be seamlessly transferred to xDai and back when needed.
Stable Payments: Fees should be stable, and simplified for users. On the xDai chain, transactions and fees are paid with xDai. In addition, the block creation process means fees can be kept extremely low (up to 500 tx for $.01 xDai).
Community Support: xDai has been supported by a dedicated group of well known organizations in the community.
The initial list of validators on the xDai chain includes POA Network, Giveth, Portis, MakerDAO, BurnerWallet, SyncNode, AnyBlock Analytics, Nevermind, Protofire, Gnosis and Galt Project. To date, these validators have subsidized their nodes in order to provide a stable chain for users.
In addition to the support from influential validators, companies like Splunk have supported the xDai chain by creating back-end data analysis tools and using xDai for their developer conferences. TheGraph, Terminal, Pocket Network, Tenderly, Chainbeat and more have all created compatible network tooling.
Support extends to the greater Ethereum Community. Many thought leaders and influential individuals in the space have also experienced the “magic” of xDai.
xDai has been used by 1000s of individuals at conferences, communities in Kenya, and as a payment chain for small gatherings across the globe. User-friendly tools like the Burner Wallet make this possible. We invite you to explore the use-cases section of our website to see how xDai adoption is real and growing every day.
xDai has been a success story so far. But to move forward, it is vital that we transition to a permissionless, decentralized consensus. With the transition to delegated Proof-of-Stake, xDai will become a truly decentralized platform for stable payments.
POSDAO is a delegated Proof-of-Stake algorithm implemented as a DAO (Decentralized Autonomous Organization). Validators provide STAKE in order to secure the network, and delegators may place STAKE on validators they believe will best serve the xDai chain consensus process.
POSDAO opens up the consensus process to the greater community. An easy-to-use interface allows anyone with STAKE to participate in consensus and earn incentives for their participation.
We have already rolled out phase 1 of POSDAO, where the current validators are placing STAKE and receiving rewards. Phase 2 is planned for a Q3 2020 release. This will allow public participants to become validator candidates, and allow public delegators to place stake on current validators.
A collection of smart contracts power the protocol, enabling staking, rewards, and validator management. When public staking begins, new validators will declare themselves as candidates by placing the minimum amount of STAKE required (20,000) into the protocol and preparing a node. Delegators will have the option to place additional STAKE on candidates in order to increase the size of their total STAKE amount (known as a pool). The minimum delegation amount is 1000 STAKE.
Each week, known as a staking epoch, a new group of Validators is selected to secure the protocol. Up to 19 validators can comprise a group. Selection to the group is based on the total amount of STAKE in a pool, as well as an on-chain generated random number (if there are more than 19 candidates).
Validators are responsible for sealing blocks, generating on-chain random numbers, and reporting on other network nodes. If they do not fulfill these duties, they are removed and banned for 90 days.
At the end of each staking epoch, rewards are distributed to participating validators and a new set of validators is selected for the next epoch.
While the amount of STAKE in a validator pool influences the chances of selection to a validator set, it does not influence the reward amount a validator receives for sealing blocks. Rewards are divided evenly among all validator pools in the set. However, within each pool, rewards are distributed based on the amount of STAKE contributed by delegators and the validator. Validators always receive at least 30% of the total pool reward, and may receive more if delegators have contributed less than 70% of the pool amount.
Protocol rewards come from multiple sources.
Transaction fees in xDai: Sent to validator that seals the block containing the transactions.
STAKE rewards from sealing blocks: STAKE placed in the protocol generates a 15% APR which is distributed to validator pools
Bridge Fees (STAKE & xDai): Fees assessed when Dai is bridged to xDai, and when xDai is bridged to Dai.
Chai interest (xDai): Dai placed in the protocol is locked as Chai, an interest bearing Dai derivative. Interest is distributed in xDai among validator pools.
To create xDai, the Dai stablecoin is bridged from the Ethereum Mainnet to the xDai chain. Dai is locked in a contract (and converted to Chai) and xDai is minted for use on the xDai chain. When bridging back, xDai is burned and Dai is unlocked.
STAKE is also bridged from the Ethereum mainnet to the xDai chain, and follows a similar process (locked, minted & burned) on a separate bridge. The bridge provides interoperability and promotes liquidity for STAKE, as it can be traded on the mainnet in DEXs and potentially used with other protocols. Although the initial use-case for STAKE will be to secure the xDai chain, its use may be extended to include multi-chain staking in the future.
That covers the very basics of where we are headed with POSDAO and the STAKE token. We are excited for public staking and believe that the decentralization it brings will help move xDai into the mainstream as a stable payments blockchain platform.