N.B: In the spirit of full transparency, the following Coin Report on xDai is a Sponsored Post.
Welcome to the 54th Coin Report. In today’s report, I will be assessing the fundamental and technical strengths and weaknesses of xDai. This will be comprised of an analysis of a number of significant metrics, an evaluation of the project’s community and development and an overview of its price-history. The report will conclude with a grading out of 10. I hope you enjoy the read!
This is undoubtedly the first report that I will have published on a dual-token model, such as that of xDai. Though I will be discussing both components of the project throughout this report, the Metric Analysis section will naturally be focused on STAKE, which is the non-pegged Proof-of-Stake consensus token, as opposed to xDai, which is the USD-pegged stablecoin. xDai is both the term used for the actual blockchain and the stablecoin.
In truth, though I had heard of the project before conducting my research, I knew very little about it beyond the fact that it focused on stablecoin utility. I had no idea about the dual-token model, nor anything about its developmental progress, so all of the research here is entirely fresh.
I hope this report will prove objective where it must be and fair on more subjective matters. For those who’d like to learn a little more about xDai prior to reading this report, here are some primary links:
Ticker: xDai (stablecoin) and STAKE (Proof-of-Stake consensus token)
Algorithm: ERC-677 (POSDAO consensus)
Exchanges: BitMax, Uniswap, Hoo.com, Bilaxy and FatBTC
xDai was conceptualised in September 2018 by POA Network’s Tech Lead, Igor Barinov, as a way to create a stablecoin that is the native coin to its blockchain, via bridging an ERC stablecoin to its own sidechain. In October 2018, xDai went live with its stablechain, with Dai chosen as the stablecoin to peg xDai to.
Due to the centralization of the validator network at launch, the team developed POSDAO as a new consensus mechanism for the network, with a second token – STAKE – acting as a consensus token to decentralize the network. POSDAO is a Delegated Proof-of-Stake consensus mechanism that involves new validators being selected each week for a staking epoch and being rewarded in STAKE for validating new blocks, with new validators cycling in each week. POSDAO was integrated in its first phase on April 1st, 2020, birthing STAKE.
STAKE itself was created as an ERC-677 token with an initial supply of 8,537,500 STAKE, to be emitted over time. Alongside this, from August 2020, there will be an additional 15% APR of emissions to reward validators, calculated against the total staking amount in each staking epoch (a weekly basis).
As xDai is a stablecoin pegged to Dai, which itself is pegged to 1 USD, there is no need to analyse the price-history of the token. However, STAKE is not pegged and therefore speculative, in part, and as it has only been traded since May 2020, there is very little available price-history, though the little available price-action will be analysed in the Technical Analysis section. For now, it will suffice to say that STAKE formed its all-time high against BTC at 23,960 satoshis in late May 2020. Its all-time high against the Dollar was $3.98. Its all-time low is currently 11,1190 satoshis, or $1.07.
xDai has a very simple purpose, which is to facilitate stability of payments via a dual model approach comprising xDai (its native stablecoin) and STAKE (its consensus token).
As stated on their website:
“The xDai Chain is a stable payments blockchain designed for fast and inexpensive stable transactions. xDai is used for transactions, payments and fees, and STAKE is used to support Proof-of-Stake consensus.
xDai is the ideal cryptocurrency for everyday payments and transactions. Fees are extremely low, payments are very fast, and the value remains stable at ~ $1 US Dollar per xDai. User-friendly tools make xDai easily adoptable for crypto and non-crypto users alike! Users only need xDai to complete payments (a single stable token for payments + fees).
STAKE is a multi-chain staking token designed to secure the payment layer. Staking allows block producers (validators and their delegators) to provide transaction consensus and receive staking incentives for honest block production. STAKE is not required for everyday chain transactions or users, it is only required for consensus providers. STAKE is also not stable, it is a volatile token whose value is determined by the marketplace.“
I look forward to evaluating the team’s progress.
Let’s begin with some Metric Analysis:
Below are listed a number of important metrics relating to STAKE, all of which are accurate as of 18th June 2020. For anyone reading this who has yet to read a Coin Report, it might be worth reading this section of the first report, where any potentially unfamiliar terms are explained. For any terms or metrics specific to this post, I will provide explanations besides the figures.
Price: $1.60 (17,130 satoshis)
Circulating Supply: 1,741,884 STAKE (source)
Total Supply: 8,537,500 STAKE
Exchange Volume: $3.327mn (excluding wash trading, this is less than $100k)
Network Value: $2.792mn (298.39 BTC)
Maximum Supply: N/A
% of Max. Supply Minted: N/A
Network Value at Max. Supply: N/A
Exchange Volume-to-Network Value: 119.14% (excluding wash trading, it is ~3.58%)
Average Price (30-Day): $1.63
Average Exchange Volume (30-Day): $3,626mn (~$110k excluding wash)
Average Network Value (30-Day): $2.83mn
Average Exchange Volume (30-Day)-to-Network Value: 3.88%
Volatility* (30-Day): –0.0579
Average Daily On-Chain Transactions (30-Day): 122.5
Average Daily Transactional Value** (30-Day): $141,880 (including exchange transfers)
NVT*** (30-Day): 19.7
% Price Change USD (30-Day): -6.5%
% Price Change USD (1-Year): N/A
USD All-Time High: $3.98
% From USD All-Time High: -54.1%
Premine % of Max. Supply: N/A
Premine Location: N/A
Liquidity (calculated as the sum of BTC in the buy-side with 10% of current price across all exchanges): 0.548 BTC
Liquidity-to-Network Value %: 0.18%
Supply Available on Exchanges: 33,178 STAKE
% of Circulating Supply Available on Exchanges: 1.9%
*Volatility is calculated by taking the average price over the given time-period, calculating the difference between it and the highest price and it and the lowest price over that same time-period, and multiplying those figures together. The closer to 0, the less volatility during that period, and vice-versa. Read this for more on volatility.
**Transactional Value in $ is calculated by taking the daily transactional value in STAKE and multiplying it by price.
***NVT is calculated by dividing the Network Value by the Average Daily Transactional Value. See here for more on NVT.
Supply Emission & Inflation:
Block Reward Schedule: Significant number of vested tokens released over next 365 days from Private Holders, Foundation and Advisors, and Ecosystem fund + 15% APR of total amount staked on a weekly basis post-August 2020, in perpetuity, which is used to reward delegators and validators. (Source)
Average Block Time: N/A
Current Block Height: N/A
Annual Supply Emission: 3,832,771 STAKE (656.66 BTC) (only for the first year)
Annual Inflation Rate: 220.04% for the next 365 days.
Circulating Supply in 365 Days: 5,574,655 STAKE
The following details were taken from here.
IEO Period: April 28th 2020
Total Coins: 8,537,500 STAKE
Coins Available For Public Sale: 400,000 STAKE
Coins Sold: 400,000 STAKE
Total Raised: $220,000
Average ICO Price Per Coin: $0.55
Token Distribution and Breakdown: 400k STAKE distributed in public sale for $220,000; 562k STAKE distributed in private sale for $225,000; 1,4mn STAKE distributed in seed round for $500,000, totaling 27.8% of original supply sold for $945,000. 46.9% of supply allocated to the Ecosystem fund; 8.2% to the Foundation Reward; 7.6% to advisors and 9.6% to Liquidity provisioning.
Address Count: 268
Supply Held By Top 10 Addresses: 4.5%*
Supply Held By Top 20 Addresses: 5.49%
Supply Held By Top 100 Addresses: 7.76%
Inactive Address Count in Top 20 (30 Days of No Activity): 1
*Excluding the top 7 addresses from calculations, as well as address #9 (and #18 among top 20) as #1 is the Distribution smart contract containing 6.5mn STAKE out of circulation, #2 and #3 are BitMax addresses containing 1.2mn STAKE, #4 is the public sale and liquidity provision allocation (currently being distributed) and #5 is another smart contract address that is unlabeled. #6 and #7 are also unlabelled smart contracts and #9 and #18 are Uniswap addresses. As such, the top 10 privately-owned addresses are address #8, #10-17 and #19.
Well, there’s rather a lot to unpack here, so let’s begin with the metrics related to on-chain transactions, as these are some of the most relevant for xDai’s purpose:
Thankfully, STAKE has an Etherscan explorer, which simplifies my research process, particularly for on-chain transaction analysis. Using this source, I found that xDai averaged 122.5 Daily On-Chain Transactions for the past month, amounting to an Average Daily Transactional Value of $141,880, including exchange transfers, as there are far too many too manually deduct from 30 days of data. This is very impressive as it gives xDai a 30-day NVT of 19.68; around a quarter of Bitcoin at present. However, remember that this is inclusive of exchange transfers. That said, even if exchange transfers count for half of the on-chain transactions being conducted, this would still give xDai an NVT of less than 40. This means that, relative to its Network Value (market cap), xDai appears to be highly undervalued.
Before we move on to other metrics, I’d like to quickly highlight STAKE’s s30-day Volatility of -0.0579. This is around average among prior reports and gives us no clear indication as to a potential accumulation range against the Dollar. We will have to look to Technical Analysis later in the report for more clarity.
Now, let’s take a look at the remaining General metrics before moving on to Supply Emission and concluding with Distribution:
I found STAKE to have buy-side Liquidity of 0.548 BTC within 10% of spot price across all listed exchanges, equating to 0.18% of its Network Value. This is in the bottom third of liquidity found amongst all previous reports. Though it isn’t particularly high, this is likely in part a symptom of STAKE’s lack of prominent exchange listings, although it would be good to see more demand coming in at current prices in the orderbooks.
Concerning sell-side Liquidity, xDai was found to have 33,178 STAKE available for purchase in the orderbooks across all listed exchanges, equating to 1.90% of its Circulating Supply; again, within the bottom-third among previous reports, indicating an equally modest desire to sell at any price. Clearly, STAKE is not really being placed on the books very much; this despite the fact that 1.2mn STAKE is held in BitMax addresses (as we shall come to shortly). Part of this will certainly be explained by the fact that the BitMax sell-side is not showing anything beyond $2, thus only ~26k STAKE is appearing in the book.
Now, let’s take a look at the volume-related metrics:
xDai reportedly traded $3.327mn of Exchange Volume in the past 24 hours, equating to 119.14% of its Network Value; a hugely impressive figure, if only it was accurate. Having checked over the markets, the vast majority of this is wash-trading. As such, having discounted these figures, I calculated that STAKE traded less than $100k over the past 24 hours. This equates to 3.58% of its network value – a still-impressive figure for speculative interest.
More importantly, its Average Daily Volume for the past month (again, discounting wash-trading) was ~$110k equating to 3.88% of its Average Network Value for the same period; a clear sign of sustained speculative interest.
Moving onto Supply Emission, this is more complicated to calculate for STAKE, as many tokens are being vested over the following 365 days according to their release schedule, plus a 15% APR scheme will come into play in August post-launch of POSDAO, to reward validators and delegators. This 15%, however, will be calculated against the total amount staked on a weekly basis, thus it is impossible to really predict.
As such, I have omitted it from my calculations for the next 365 days. I calculated that 3.83mn STAKE will join circulation over the next year (656 BTC-worth at current prices). This gives STAKE a high annual inflation rate of 220% for the next year (it will be considerably lower the following year).
However, most significant is the relationship between this Supply Emission and the Volume metrics mentioned above:
Given that 3.83mn STAKE are expected to join circulation over the next year, we can work out that the average daily supply emission is 10,490 STAKE, or 1.8 BTC-worth at current prices. This equates to $16,850 of daily supply emission. As xDai traded ~$100k of volume over the past 24 hours, and an average of $110k of volume daily for the past month, we find that STAKE’s average daily supply emission is covered ~5.9x by its 24-hour volume and 6.5x by its Average Exchange Volume.
Further, Liquidity of 0.548 BTC is not enough to cover the average supply joining circulation on a daily basis.
Finally, let’s take a look at Distribution:
There are only currently 268 holders of STAKE, but the token itself is only a couple of months old so this is fairly unsurprising.
With regards to concentration of supply, the top 10 addresses control 4.5% of circulating supply; the top 20 control 5.49%; and the top 100 control 7.76%. However, it is important to note that these figures are based on addresses #8, #10-17 and #19 for the top 10, as the top 7 addresses (and address #9) are not privately owned. The #1 address is the distribution smart contract with 6.5mn STAKE that is out of circulation but will be released over time; #2 and #3 are BitMax addresses controlling 1.2mn STAKE (or the majority of the circulating supply), which, having done some research, is due to the pre-staking program currently ongoing on BitMax, where 850k STAKE are being staked at present; #4 is an address with public sale funds and liquidity provisioning funds; and #5 is an unlabelled smart contract. #6 and #7 are also unlabelled smart contracts but with significantly less STAKE than the top 5. Address #9 is also an exchange address: the Uniswap address, with 19k STAKE.
Given all of the above, the top 10 privately-owned addresses control only 95,759 STAKE, which is very decentralised for a new token. As I mentioned, clearly the vast majority is being stored on BitMax at present.
And that concludes this section on Metric Analysis.
Let’s have a look at the xDai Community.
There are two primary aspects of community analysis: social media presence and Bitcointalk threads. I’ll begin with the former before moving on to the latter.
Concerning social media presence, there are four main platforms to examine: Twitter, Facebook, Telegram and Discord.
xDai is present on all four platforms bar Facebook. To begin, let’s look at the various social metrics that I calculated from the xDai Twitter account:
Twitter Followers: 3,370
Average Twitter Engagement: 1.75%
Facebook Likes: N/A
Facebook Posts (30-Day): N/A
Average Facebook Engagement: N/A
As usual, I will be using RivalIQ‘s social benchmark report for evaluation purposes.
Though the xDai Twitter account does not have a huge audience at 3,370 followers, its engagement rate is strong at 1.75%. In RivalIQ’s report, we find that the average Twitter engagement rate across all industries is 0.045%, which means that xDai’s engagement rate is currently 39x greater. As for the Tech and Software industry, the average engagement rate is 0.027%, which means that xDai’s is currently 64.8x greater. Relative to other coins, xDai’s engagement is the joint-11th-highest among prior reports.
There is no Facebook page for xDai.
There are 1,041 members of the xDai (joint with POA) Discord group.
16 new members joined the group over the past 7 days, equating to a 1.5% weekly growth rate.
The group is well-organised, with a plethora of channels available across many topics of discussion. For our purposes, I will focus on Home, News and xDai.
The Home channel did not have a great deal of activity, with only 8 messages posted across the past week. Moreover, xDai also only had one post over the past week, which isn’t great. Lastly, News has had no posts since March 31st, 2020.
Overall, clearly Discord is not a hub for the xDai community.
There are 11,032 members of the xDai Telegram group.
This is clearly the community hub, as opposed to Discord, with daily discussion occurring within the group, though it is not a constant stream of activity.
Here are my key takeaways from the past week of discussions:
- One of the primary focuses for the team is enabling seamless usage of xDai, ideally by building a fiat gateway that allows for an instant deposit of xDai into any wallet of choice.
- The purpose of STAKE is governance, with the amount of STAKE committed towards the network acting as a vote towards integrity of validation. In the future, it will be available for Easy Staking (more on this later).
- 1000 STAKE will be required for delegation on the network post-August 2020, when POSDAO phase two is implemented. 20,000 STAKE is currently required for Validator status.
- The community are very keen on an IDEX listing.
- There is currently a pre-staking program on BitMax, where 850k STAKE are currently being staked earning 36.4% APR.
- The community are actively discussing ways in which they themselves can assist in marketing xDai as many believe there is not a sufficiently targeted marketing campaign at present.
- There is active, engaged discussion in the utility of xDai with much helpful information available for new users within the group.
There is no BitcoinTalk thread for xDai.
And that concludes my evaluation of the xDai community. Let’s now take a look at the Development of the project.
For the following Development analysis, I will be evaluating project leadership, the website, the roadmap, the whitepaper, the wallets and finally providing a general overview:
There are 7 developers listed on the website:
- Igor Barinov: Product and Operations (Founder of POA Network)
- Victor Baranov: BlockScout, Nifty Wallet, Core Dev
- Vadim Arasev: POSDAO, xDAI Core Dev
- Alex Kolotov: TokenBridge, Research
- Kirill Fedoseev: TokenBridge, Research
- Max Alexeenko: App Dev
- Andrew Gross: Technical Writer
As far as I can tell, there is no information available on potential team members outside of the field of development. It may help to bring in some members from other fields of expertise beyond technological development, particularly to foster community growth and a professional image. Many fundamentally sound projects have faded away due to obscurity.
The xDai website can be found here.
The xDai website is extremely informative and utterly comprehensive, with reams of detail available for new users on every component of the ecosystem.
It is very much basic in its design and utilitarian, as one might expect given the development-focused team, but as xDai is not a business or product in the traditional sense this does not detract from the project; if anything, it makes perfect sense to have it designed like a web-based book.
As I said, there is an abundance of material here and this report would exceed 10,000 words were I to attempt to cover everything here, but, given that the website effectively acts as all relevant documentation for the project, I will cover the essentials segmenting the information for readability.
Notable features include:
- A native stablecoin (xDai) that is pegged 1:1 with Dai, operating on a bridged sidechain. This allow for inexpensive and fast transactions, as well as single-coin utility (where Dai requires both DAI and ETH for gas).
- A neutral network, with an express purpose of providing stable transactions, free of speculation and volatility.
- On-Chain Randomness, whereby validators produce random numbers that are used for validator selection, allowing for further decentralization of the network.
- DPOS Consensus, that allows for permissionless consensus via POSDAO.
- A Multi-Chain Staking Token(STAKE) that will reward delegators and validators for securing xDai, with additional sidechains also having the opportunity to use STAKE for security, thus allowing for multi-chain staking.
- Two bridges that connect xDai to the Ethereum Mainnet, connecting the two via the Dai-xDai bridge for transactions or the DPOS bridge for STAKE.
- Stable, secure and fast peer-to-peer payments
- Community currencies that enable local trade
- A platform for blockchain games with micropayments and predictable cross-chain interactions
- A platform for prediction markets
- DAO governance via on-chain voting
- Easy-to-use utility within cryptocurrency events and conferences for those unfamiliar with the technology
Validators must lock 20,000 STAKE (approximately $32k, at present) in order to gain Validator status, each assisting in supporting xDai, with 12 validators currently listed on the website:
- POA Network
- Burner Wallet
- AnyBlock Analytics
- Galt Project
Dual Token Model
The Dual Token model is xDai’s approach to achieving a fully decentralised stablecoin, comprising of xDai itself – the stablecoin – and STAKE – the consensus token.
The purpose of xDai is stability in transactions, with it pegged 1:1 with DAI, which itself is pegged against $1. In order to mint xDai, one must get DAI and convert it via the Bridge.
As validation of xDai remains semi-centralized to this day, the team developed POSDAO as a consensus mechanism for a separate token to govern xDai, allowing for permissionless consensus once public staking is implemented in August 2020.
This separate consensus token is STAKE, which incentivises validation of xDai transactions by validators and delegators, who are rewarded in STAKE, with a 15% APR reward scheme based on the total amount of STAKE locked in each staking epoch, which occurs on a weekly basis. The initial supply of STAKE was created as 8.5375mn, with much of this remaining out of circulation at present, though due to join circulation over the next couple of years as tokens vested from private sales, public sales and other allocations are released.
There are also weekly recaps posted to the site, as well as a comprehensive FAQ and numerous tutorials for using both xDai and STAKE for new users.
The xDai roadmap can be found here.
The xDai roadmap is presented in text format, like the rest of the website, and is valid as of 28th May 2020. There is plenty of clarity here, with detail provided on individual goals as well as further reading links.
It begins with the fiat to xDai on-ramp in Q4 2019, which is currently still in process. This will allow more seamless usage of xDai, as currently users have to first get Dai and relay it via the xDai Bridge.
The next stage of the roadmap in Q4 2019 was the Multi-collateral Dai to xDai Bridge, which has been completed. This allowed for Dai and Sai to both be deposited, but since April 15th 2020, Sai has no longer been supported.
Then, in Q1 2020, the team completed the Chai to Dai Bridge Contracts update, allowing for users to earn interest on tokens deposited on the bridge balance, as Dai is converted to Chai and earns interest.
In Q1-Q2, the first phase of the POSDAO consensus upgrade was completed, with it being successfully activated on April 1st, 2020. This birthed STAKE, which is used to reward validators.
Phase two of the POSDAO upgrade is scheduled for August 2020, which will increase decentralization and enable permissionless consensus. as there will be opportunity to validate or delegate within the wider community.
For Q3 2020, we can expect privacy preserving transactions via zero-knowledge protocols and Easy Staking STAKE on Ethereum, which will allow for STAKE to be deposited and earn a predetermined interest rate with no minimums and no need to bridge to xDai. This will reduce the circulation of STAKE, increasing security for POSDAO and thus the xDai stablechain.
For Q2 2020, with implementation currently at 50%, the team are developing synthetic assets on xDai using the UMA protocol, which will allow for xDai-based derivatives on fiat currencies.
For Q1 2021, we can expect L2 scalability for token transfers on xDai, with the team researching Polkadot, Cosmos and others to implement scalability solutions for token transfers. The aim is to enable scaling of transfers up to 1000x for native tokens and synthetic tokens on top of xDai.
For Q2 2021, we can expect phase three of the POSDAO upgrade, which will be a custom-built chain to utilise POSDAO, HoneyBadger BFT and Multi-Collateral DAI.
Overall, there is a lot going on here and plenty of ambition, as well as accountability.
There is a highly technical, 68-page whitepaper available here on POSDAO but all relevant information for new users is provided on the website, as detailed above.
The current availability of wallets for xDai includes the Alpha wallet, which is a mobile wallet with a built in DApp browser; the Burner wallet for spending; the DEX mobile DeFi wallet; Metamask; the Nifty wallet; Poketto Cash, a mobile wallet for iOS and Android; the Portis web wallet; the Saturn wallet, which is a browser extension; and the Status wallet, which supports private messaging and secure mobile transactions.
For storing STAKE, as it is an ERC-677 token, it can be stored anywhere an ERC-20 token can be, including hardware wallets.
And that concludes my Fundamental Analysis of xDai and its tokens.
Let’s now look at the price-history of STAKE:
As we can clearly see from the above charts, there is very little price-history available at all for STAKE.
Beginning with STAKE/BTC, price began early trading in mid-May, printing its all-time high shortly afterwards at 24k satoshis. Price then dropped off quite sharply, spending a week dumping until it formed the current all-time low at 11.2k satoshis at the turn of the month. Since June, price has rallied back up towards the all-time high but is finding resistance at 22k satoshis and is consolidating between it and support 16.5k satoshis, with volume increasing on average.
Turning to STAKE/USD, here we can more clearly see a pennant forming with trendline resistance and trendline support converging. A series of higher-lows has been forming since the all-time low at the beginning of the month at $1.07 and I would expect to see an upside breakout towards new all-time highs above $2.22 within a couple of weeks.
Given the lack of available price-history, the more pressing question (instead of is price attractive relative to historical prices?) is STAKE, as a proxy of xDai as a network, undervalued at current prices? In my opinion, it is, and though there are clearly issues to be ironed out and a lot of supply to join circulation over the next 365 days, I do believe that the current utility of the network provides a good case for higher prices in the future. The issue will be, as mentioned before, the inflation and whether demand and liquidity will come in to meet the supply that the next year will bring into circulation.
I personally will be waiting to see how the next couple of months play out for xDai before looking at buying a position of STAKE but it is certainly on my radar. Moreover, if prices ever came down towards $1 again, I would absolutely be a buyer as that would place the forward network value (market cap based on supply in 365 days) at a maximum of $6mn, which, when placed in context of xDai’s utility, seems a bargain.
This report is now approaching 5,000 words, and it is time to draw it to a close.
My final grading for xDai is 7 out of 10.*
*If this report was purely focused on developmental quality and ingenuity, the grading would be an 8 at present and likely a 9 in a few months time, once more of the roadmap is completed.
Here, you can find my grading framework, for reference.
Lastly, here is a link to a Google Sheets file with any significant data from previous reports compiled for cross-comparative purposes. I will keep this updated as I continue to write these reports.
I hope this report has proved insightful and that you’ve enjoyed the read! Please do feel free to leave any questions in the Comments, and I’ll answer them as best I can.