DeFi applications need scalability in terms of transactions. So we have xDAI, Ethereum's less decentralized little sister. And xDAI does a good job picking up where Ethereum left off. Anything on Ethereum can be ported to xDAI, so financial apps, DAOs, and non-fungible tokens - anything that needs less security - fits perfectly. xDAI admires and depends on Eth a lot, but feels that Eth can be a little tight at times. Despite their superficial differences, they have the same long-term vision and the same destination, that of a decentralized blockchain future.
How are xDai and Ethereum similar?
Remember that without Ethereum, there is no xDai and the latter is an EVM sidechain. It operates independently of Ether but relies on it for the creation of its native token, the XDAI, as well as its multi-use governance token, the STAKE. The network follows the same protocol updates, block size limits, and EVM settings as Ethereum's mainnet.
BENEFIT: This compatibility allows developers, projects and users to easily switch between channels.
How are xDai and Eth different?
xDai also uses a different consensus mechanism than Ethereum, called POSDAO, and uses a proof-of-stake incentive model to achieve 5-second blocks with low transaction costs. Validators are rewarded with STAKE rather than the native XDAI token.
BENEFIT: It decouples the incentive model from the transaction currency, so that transactions can be processed with minimal costs.
The future of xDai and Ethereum
Eth 2.0 is full of promise, and xDai is excited to contribute to the expansion of Ethereum during this several-month transition period. xDai will continue to support projects and applications that require low-cost, predictable transactions for users or have contracts that must process many transactions in a short period of time. xDai is also actively working to improve network and bridge security and to increase the decentralization of the protocols.
Once the Eth 2.0 blockchain is operational, xDai will be well positioned to join it, either as a shard or a rollup. At this stage, security guarantees will be ensured by Ethereum's global architecture, making xDai more decentralized and secure.