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xDai is a cryptocurrency built from the MakerDAO DAI token. Dai is a stable token on the Ethereum mainnet designed to track the US dollar. Users can obtain xDai through various methods (such as with a credit card), but the underlying creation is always based on Dai-meaning the xDai token keeps a 1:1 value relationship with Dai. Here’s the creation flow for xDai:
Dai is deposited (locked) in a smart contract on Ethereum. As a result, it stays inside that contract and cannot be transferred until the contract gets a verified unlock signal.Via a bridge mechanism known as the TokenBridge, information about the locked Dai is relayed to a smart contract on the xDai chain.The xDai chain contract then mints the same amount of xDai.After minting, this xDai can be used on the xDai chain. In practice, users just change the network in their wallet, and xDai becomes available under the same Ethereum address.To convert xDai back into Dai, the steps are performed in reverse. xDai is burned (destroyed) inside the xDai chain smart contract, and a verified signal is issued to unlock the equivalent amount of Dai on the Ethereum mainnet. The released Dai is then sent back to the user’s Ethereum mainnet address.
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