What Is XDAI Bridge And How It Works?

What Is XDAI Bridge And How It Works?

Blockchain News
July 7, 2023 by Diana Ambolis
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Gnosis is a well-known name in the blockchain market, which first appeared in 2015 as a decentralised prediction market. At first, the team had planned to offer a separate blockchain platform. But the team saw that there was a need to build infrastructure tools that could help the Ethereum ecosystem utilities grow. The Gnosis DAO,
Cross Chain AI Hub ethereum Cross-Chain Bridge What Is XDAI Bridge And How It Works?

Gnosis is a well-known name in the blockchain market, which first appeared in 2015 as a decentralised prediction market. At first, the team had planned to offer a separate blockchain platform. But the team saw that there was a need to build infrastructure tools that could help the Ethereum ecosystem utilities grow. The Gnosis DAO, or Decentralized Autonomous Organization, can’t work without the xDAI Bridge. In fact, the Gnosis Chain was made by members of the GnosisDAO and XDAI bridge communities working together. It works as a sidechain or layer 2 solutions to help the Ethereum blockchain deal with scaling problems. The Gnosis Chain is an execution-layer EVM chain that uses xDAI stablecoin to make transactions and payment of fees possible.

What does the bridge have to do with the xDAI chain, which is now called Gnosis Chain? You can’t just buy xDAI like you can other stablecoins. So, a bridged version of the stablecoin is needed for Gnosis Chain to be able to handle transactions. In the next section, we’ll talk in-depth about xDAI Stablecoin Bridge and how it works.

How to Figure Out the Gnosis Chain

Gnosis Chain would be one of the first things beginners to xDAI Bridge would want to know about. It is the first blockchain where xDAI is the main currency used for all kinds of transactions. The Gnosis Chain is based on a model with two tokens: xDAI and STAKE. xDAI is a good choice for paying for transactions, while the STAKE token is an important part of making sure everyone agrees.

The STAKE token uses a consensus model called delegated Proof of Stake, or DPoS, and has been made to work on more than one chain. It can help people agree on transactions and give rewards for making blocks. On the other hand, as a derivative of DAI stablecoin, xDAI is tied to USD at a 1:1 ratio. DAI works on the Ethereum mainnet, and xDAI works on the Gnosis sidechain.

XDAI Bridge

If you want to know what xDAI Bridge is, you need to know what bridges do on the Gnosis Chain. For sending tokens and data, Gnosis uses its own bridges. For the bridges to work, they need a group of trusted bridge validators. Gnosis also has a plan for how implementing trustless bridges in a way that works well. The ecosystem of third-party bridges built on native bridges in Gnosis, which is growing all the time, also has important value benefits. Third-party bridges, for example, could help users get money faster and have better user experiences.

The architecture of the Gnosis Chain treats the native bridges, like Omnibridge and the one for converting xDAI, as first-class citizens. Native bridges, like the one used to make xDAI, give important value benefits when minting and burning native tokens used for gas fees. If you look at the conceptual architecture for Gnosis Bridges, you can get a better idea of what xDAI Bridge is like. There are three main kinds of bridges in Gnosis: native bridges, third-party bridges, and bridges that are specific to an application.

Native bridges have been built on the Gnosis Chain, as the name suggests. They help mint the canonical tokens that represent original assets, like the DAI stablecoin. The third-party bridges help users swap for canonical tokens made on the native bridges. Application-specific bridges are the custom bridges that some applications offer to keep their own canonical tokens on the Gnosis Chain.

Omnibridge and xDAI Bridge are the two native bridges on Gnosis Chain, and they each do different things. The latter is a useful ingredient for minting the native stablecoin by bridging DAI stablecoin from Ethereum. On the other hand, you can use the Arbitrary Message Bridge in the other native bridge to bridge both data and tokens.

What does xDAI Bridge mean?

The general idea of Gnosis Chain bridges can help you understand how xDAI bridging works. Most of the answers to “What is xDAI Bridge?” focus on the fact that it is a native DAI bridge between the Gnosis Chain and Ethereum. On top of that, you should know that the bridge is important for minting and burning xDAI, which is the Gnosis Chain’s native currency.

How xDAI Bridge Works

How xDAI works at its core, The Gnosis Chain Bridge clearly shows how it connects DAI to xDAI. How does it work? How does xDAI Bridge work? Can be answered by looking at the step-by-step process. Users must first create DAI tokens using the Maker protocol or buy them on an exchange. The user would put DAI in the xDAI Bridge, and the Gnosis Chain bridge contract would tell the block rewards contract about it. Then, in the next block, the consensus algorithm would mint xDAI on the user’s Gnosis address that matched.

Cross-chain bridge oracles play the role of trusted external validators for the bridge. xDAI bridging works by putting a certain amount of DAI stablecoins into the bridge using protocols like Compound and Aave. This makes the bridge earn money. As of right now, about 1 million DAI are locked up in reserves, while the rest is used to make yield. The income from the yield goes into the GnosisDAO treasury, which uses the money to keep Gnosis’s development going.

Also, read – Blockchain Bridges And Top 4 Ethereum Bridges

Bottom Line

The beginning of xDAI Bridge was mostly about the basics of Gnosis Chain bridges and what they do. You can see that the xDAI native bridge on Gnosis Chain is an important part of making the Gnosis ecosystem stronger. As the Gnosis Chain’s native currency, xDAI is a key part of how tokens work on the chain.

So, connecting DAI on Ethereum to xDAI on Gnosis could give people more ways to work together. On top of that, the native bridge on xDAI chain uses external validators to help make sure the data is correct. At the same time, you could also see how governance is a unique feature of the Gnosis Chain Bridge. Find out everything you can about Gnosis and its bridges right now.