What is xDAI?

DAI is an ERC20 token whose price follows that of the USD. This token "lives" on the decentralized blockchain called Ethereum, whose native currency is Ether (ETH).

DAI is an ERC20 token. Its price follows the value of  USD. This token "lives" on the decentralized blockchain called Ethereum, whose native currency is Ether (ETH).

Ethereum's security is based on a series of computers competing to validate the network's transactions to be part of the joint registry. 

The competition process to reach a consensus on which transactions are valid on Ethereum is the Proof of Work. The participating computers (validator nodes or miners) are rewarded for doing this work (in ETH), and the more use of the network, the more rewards they earn. Being a decentralized network, it is the network users who bear the costs each time a transaction is launched.

A few years ago, the R + D company POA created xDAI, a blockchain network very similar to Ethereum (the same addresses and smart contracts are used) but whose native currency, instead of being Ether, is the xDAI. This token always has the same value of DAI.

The consensus mechanism of xDAI is the Proof of Authority, which is less expensive for the validating nodes, with which the network commissions are very low in addition to being paid in xDAI (they are USD cents). As there is no bid to include transactions, confirmation times are shorter.

These advantages come at the cost of sacrificing degrees of decentralization. There are fewer nodes validating transactions, but their identity is legally known. Thus they are incentivized to be "legal".

To generate xDAI, a user has to send DAI to a particular smart contract deployed in Ethereum called TokenBridge, which will block DAIs in Ethereum and tell its counterpart in xDAI to create the same number of xDAI tokens and send them to the user's address, thus connecting the networks. The reverse mechanism is similar (from xDAI to DAI)."