LIVE NOW

First ever blockchain with USD-pegged native stablecoin revealed

Posted: 19 October 2018 3:47 pm News

What do you get when you cross POA Network with Maker DAO?

POA Network and Maker DAO have partnered to create xDai – the world's first blockchain to use a USD pegged coin as its native token.

More specifically, it's a POA sidechain which now lets users import Dai to a more scalable and utilitarian ERC20 environment.

So, what does that mean?



What it means

POA Network

POA Network is a proof of authority variation of Ethereum.

  • Proof of work (PoW) blockchains like bitcoin secure the network by requiring nodes (miners) to show their work. That work takes the form of equations solved by mining machines.
  • Proof of stake (PoS) blockchains secure the network by requiring nodes to show their stake. This stake takes the form of certain cryptocurrency holdings.
  • Proof of authority (PoA) blockchains secure the network by requiring nodes to show their authority. In the case of POA Network, this authority takes the form of being a US public notary, whose identity is made publicly available.

By doing away with the need to show work or demonstrate a stake, instead replacing it with a system of (presumably) trusted validators, POA Network can handle transactions much more speedily than Ethereum, which is currently still PoW.

At the same time, POA Network is essentially a variation of Ethereum, providing a lot of familiarity and transferrability for dapp developers who might want to test or move into a more scalable environment.

Maker DAO

Maker DAO is a paired stablecoin system consisting of the MKR token and the USD-pegged Dai stablecoin. It runs on the Ethereum blockchain.

The MKR token might fluctuate, but the Dai token remains stable as smart contracts automatically liquidate or buy Ethereum reserves to ensure full backing for the Dai token.

xDai

The two projects met in the middle on a separate blockchain of their own, called xDai Chain. While POA Network is a modified variation of Ethereum, xDai Chain is a modified variation of POA Network.

juicy crypto words

It retains features like the nippy five second block time and similar, but significantly allows for the use of Maker's Dai on this second blockchain, rather than just the volatile native POA token. Now Dai can be transferred across from the Ethereum blockchain to the xDai blockchain, while retaining its backing on the Ethereum blockchain, and therefore its value.

Basically, you now have a reliable US dollar-pegged stablecoin on a much speedier Ethereum-like platform. Functionally this means gas fees can be denominated in USD (technically they're denominated in xDai, but you get the idea), developers can more easily see how much their contracts will actually cost and dapps can be created that make use of a USD-pegged coin.

"{xDai Chain provides an exciting and new platform for the community and DApp developers," says Igor Barinov, tech lead of POA Network. "The premise of a stable coin based blockchain opens up endless possibilities for developers and applications. Using the different tools POA Network has created, users can bridge their Dai to the new xDai Chain and start using a single token for their transactions while making use of the benefits of a PoA based sidechain."

"With xDai Chain, POA created a full tool kit for DApp developers looking to improve the end user experience by allowing people to transact with high scalability and pay gas fees in a single token," said Rune Christensen, CEO and co founder of MakerDAO. "xDai Chain creates an awesome opportunity for developers to launch DApps with Dai as the medium of exchange."


Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Crypto explained


Latest cryptocurrency news

Picture: Shutterstock

Latest crypto guides

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site