What Is XDC Network? How does It Work? A Complete Beginner’s Guide[2024]

Blockchain has genuinely transformed global businesses, offering a secure and transparent method for recording transactions. It’s a game-changer in finance, healthcare, supply chain, and beyond, streamlining operations and boosting efficiency.

The XDC Network – an enterprise-ready, open-source blockchain is suited for real-world decentralized finance with tokenization at the forefront. With its developer-friendly hybrid architecture, XDC Network facilitates hybrid relay bridges, interoperability, and spontaneous block finality. This article explores the XDC network and discusses its benefits and use cases.

What is XDC Network?

XinFin’s XDC Network is an enterprise-ready, Layer-1, EVM-compatible, open-source, hybrid blockchain protocol specializing in tokenization for real-world decentralized finance. It uses a special type of delegated proof-of-stake (XDPoS) for consensus to ensure quick transaction times, minimal gas fees, and a remarkable 2,000+ transactions per second (TPS).

XDC Network is backed by the XDC Community, leading to the formation of the XDC Foundation, which was established in 2021 to promote the growth and adoption of XDC through collaboration with a community of developers, trade experts, and content creators.

Key Features of XDC Network

• High Throughput: XDC boasts impressive transaction speeds, capable of handling thousands of transactions per second.  
• Low Transaction Fees: Designed to be cost-effective, XDC offers significantly lower fees compared to many other blockchains.  
• EVM Compatibility: Supports Ethereum Virtual Machine (EVM), allowing developers to easily port smart contracts from Ethereum.  
• Trade Finance Focus: XDC is specifically optimized for the complexities of trade finance, enabling tokenization of assets and efficient cross-border transactions.  
• XDPoS Consensus: Utilizes a Delegated Proof of Stake (XDPoS) consensus mechanism for fast and secure block generation.

How does XDC Network work?

XDC Network is a high-performance blockchain platform built for enterprise use in trade finance and asset tokenization. It uses the XinFin Delegated Proof of Stake (XDPoS) consensus mechanism, which involves validators performing a small amount of Proof of Work (PoW) when proposing a new block to achieve consensus. This method ensures the network consumes minimal energy and is highly resistant to spamming.

XDC network architecture

XDC’s delegated proof of stake also uses real-time voting to choose a pool of validators who are responsible for the following:

• Ensuring the integrity of the XDC Network.
• Converting transactions into legitimate blocks.
• Keeping their notes in sync with the network all the time.

Reward mechanism

In each 900-block iteration — known as an epoch — a checkpoint block is created solely for implementing reward processes. This block — referred to as the block signer — holds all block signatures. Block signers are responsible for tallying the number of signatures sent to the smart contract during the epoch, and rewards are based on the number of signatures associated with a Masternode.

Block creators are chosen in a circular and sequential order, ensuring every Masternode holder has an equal opportunity to create and sign a block. In the current XDPoS implementation, if a Masternode fails to create a block, there’s a 10-second delay before the next Masternode in the sequence takes its turn.

There’s also a reward-sharing structure among coin-holders and Masternodes elected with coin-holder support. In the initial two years of each epoch consisting of 900 blocks, a 250 XDC reward is given, distributed among Masternodes based on the number of signatures associated with each node. After this period, Masternode rewards are divided into three segments:

• Infrastructure reward (40%): Goes directly to the Masternode.
   
• Staking reward (50%): Shared proportionally among the pool of voters for a specific Masternode, with a token stake as the criteria.
   
• Foundation reward (10%): Directed to a special account controlled by the Masternode foundation, initially run by the XinFin Network founding company.

Coin-holders who un-vote before the checkout block won’t receive rewards in the staking reward portion.

ISO20022 standard

XDC uses the ISO20022 financial messaging standard to ensure compatibility between its blockchain and legacy financial systems. It allows businesses and governments to easily move into a more robust decentralized network that uses XDC’s smart contract capabilities. 

Developers can quickly and easily implement their Ethereum smart contracts on the XDC Chain with minimal changes required because it is EVM compatible.

XDC can support public, private, or consortium-owned chains and be used for almost any task. This network’s versatility has been demonstrated by its use in various applications, including peer-to-peer trading platforms, insurance powered by blockchain, online digital asset-linked identity, end-to-end land registry record management, and more. 

With its speed, security, and trustless structure, XDC’s EVM-compatible blockchain can support several DeFi applications and pave the way for a time when financial markets operate globally and decentrally around the clock, with no one central party having more power or access than any other.

Low gas fees

XDC Network shines with near-zero gas fees, perfect for cost-effective enterprise use. Its 2-second block finality ensures swift and efficient transaction settlements. Notably, it supports Ethereum Virtual Machine (EVM) compatibility, making migrating tokens and projects like ERC-20 and ERC-721 easy.

EVM compatible

Its EVM compatibility allows developers to build autonomous decentralized applications (DApps). Smart contracts on the XDC Network execute seamlessly, enabling trustless transactions with automatic enforcement of contractual terms. Their high interoperability extends to integration with legacy systems like SWIFT and ERP, securing data transfer across platforms.

Tokenization is another benefit the XDC Network offers — allowing assets like property, commodities, and securities to be represented digitally. These tokens, tradable on XDC Network and other compatible blockchains, boost liquidity and accessibility. 

Use cases

XDC Network combines the strengths of public and private chains, offering versatile solutions for enterprises. Here are some key use cases:

• Trade finance: Secure and efficient global trade financing, reducing fraud risks and speeding up transactions.
   
• Supply chain management: Smart contracts on XDC Network streamline supply chain processes, cutting costs and enhancing transparency and traceability.
   
• Tokenization: Real-world assets like commodities and real estate can be tokenized, enabling fractional ownership and efficient trading.
   
• Cross-border payments: Fast and low-cost cross-border payments, decreasing reliance on intermediaries and fostering financial inclusion.
   
• Identity verification: A tamper-proof platform for secure identity verification, mitigating identity theft and fraud risks.

What is the XDC coin?

The XDC coin is the native coin of the XDC protocol, facilitating transactions and smart contract executions. With a total supply of 37.7 billion (as of January 2024) and approximately 13.8 billion in circulation, its distribution includes:

• 40% for founders/core team.
• 27% for ecosystem development.
• 27% on pre-placement.
• 6% for the XDC Foundation treasury.

$XDC provides access to XDC Network functionality like smart contract execution and Masternode staking. Masternodes —vital for network consensus —secure and stabilize the system, earning XDC as a reward. Staking is open to all, letting holders earn rewards for contributing to network security and transaction validation.

XDC token standards

The XDC community values interoperability, adopting token standards for smart contracts and dApps on the XDC Network. XDC Tokens adhere to the following standards: 

• XRC20

XRC20 is the technical standard for fungible tokens on the XDC Network. It dominates token implementation in smart contracts, representing various digital assets. Wallets and exchanges universally accept XRC20 tokens.

• XRC721

XRC721 is the Non-Fungible Tokens (NFTs) standard on the XDC Network. As the standard for creating NFTs, it sets the baseline for smart contracts, ensuring proper ownership, management, and trading of unique items.

• XRC1155

XRC1155 merges the XRC20 and XRC721 standards. This multi-standard token allows the creation of multiple tokens within a single contract. With XRC1155, one smart contract can represent and govern an infinite number of tokens, providing a versatile and efficient solution on the XDC Network. 

How secure is the XDC Network?

XinFin Delegated Proof of Stake (XDPoS) consensus process allows the XDC Network to consume insignificant energy levels while being impervious to spam.

Based on an advanced BFT consensus protocol, a proposed forensics-enabled consensus mechanism (dubbed XDC 2.0) will ensure no forking in the finalized blockchain as long as the proportion of antagonistic Masternodes in each epoch stays below one-third.

Adopting XDC 2.0 will result in a faster block time, but more importantly, confirmation becomes finalization — transactions will be finalized six seconds after they are included in a block.

About the XDC Network Improvement Proposal (XIP)

XIPs play a crucial role in the XDC Community, serving as proposals for new features, gathering technical input, and documenting design decisions on the network. Influenced by Ethereum Improvement Proposals (EIPs) and Bitcoin Improvement Proposals (BIPs), XIPs allow developers to shape network standards.

While covering core protocol specs, client APIs, and contract standards, XIPs provide a framework for the XDC platform. While anyone can submit an XIP, editors maintain a high technical standard to ensure proper formatting. Before formalizing an XIP, ideas are proposed on the developer forum, vetted by the community, and then written on GitHub for review by all interested parties. This collaborative process ensures thorough discussion and community involvement. 

What major problems does XDC Network address?

XDC Network addresses key challenges in public blockchain networks through its XDPoS consensus mechanism:

• Reduced energy consumption: In contrast to Bitcoin and Ethereum’s PoW mining, XDC’s XDPoS cuts down energy consumption by one-tenth.
• Near-zero gas fees: XDC Network achieves near-zero gas fees with the XDPoS consensus, making micro-transactions feasible.
• Improved scalability: XDPoS tackles scalability concerns by significantly increasing Transactions Per Second (TPS).
• KYC-based node: The XDPoS consensus mechanism introduces an independent KYC-based node, addressing the challenge of anonymous network members.

XDC Network in Tangem Wallet

XDC is coming to Tangem Wallet as part of our Winter Blockchain Marathon. Tangem users can securely receive, send, store, and swap their XDC coins and other tokens built on the XDC network.

The Tangem Wallet is a solid cold storage choice for a few reasons. First, it offers top-notch security with an EAL6+ CC-certified chip that protects against all attacks. Then, the convenience of a physical card that you can carry anywhere and use with any NFC-enabled smartphone.Learn more about hardware wallet technology and how Tangem Wallet works.

Advantages and Disadvantages of XDC Network

Advantages of XDC Network

• High Scalability: XDC Network can handle a large number of transactions per second, making it suitable for enterprise-level applications.
• Low Transaction Fees: The network is designed to be cost-effective, with minimal transaction fees.
• EVM Compatibility: Supports Ethereum Virtual Machine, allowing developers to easily port smart contracts.
• Trade Finance Focus: Tailored for the complexities of trade finance, offering solutions for supply chain management and cross-border payments.
• XDPoS Consensus: Provides fast block generation and enhanced security.

Disadvantages of XDC Network

• Centralization Concerns: The XDPoS consensus mechanism relies on a limited number of masternodes, which raises concerns about decentralization.
• Competition: The blockchain space is highly competitive, with numerous other platforms offering similar features.
• Adoption Rate: Widespread adoption of XDC Network, especially in traditional industries, might take time.
• Regulatory Challenges: The evolving regulatory landscape for cryptocurrencies could impact XDC’s growth.

While XDC Network offers several advantages, it’s essential to consider the potential challenges and risks before investing or building applications on the platform.

XDC Hybrid Blockchain and XDPoS Consensus: Enabling Secure Transactions

At the core of XDC Network lies its native token, XDC, serving as the base utility token for the XDC hybrid blockchain. With this token, users can settle transactions within decentralized applications (dApps) built on the XDC network. XDC Network facilitates real-time cross-border trade with its integrated wallet solution powered by the advanced XDC protocol. XDCPay, an extension for browsers, grants users access to XDPoS-enabled dApps.

‍

Unveiling the XDPoS Mechanism for Consensus

XDC Network employs the innovative XDPoS (XinFin Delegated Proof-of-Stake) mechanism, a decentralized system of transaction validation. This mechanism utilizes real-time voting to select a pool of validators or delegates, who play a crucial role in maintaining the integrity of the XDC hybrid blockchain. The democratic nature of XDPoS ensures transparency and fairness, supporting horizontal scaling and promoting an environmentally friendly approach to blockchain technology. Learn how XDPoS works here.

XDC Blockchain’s Hybrid Design for Real-World Trade Finance Applications

The hybrid design of the XDC Blockchain caters to real-world use cases, combining the advantages of both private and public blockchains. It offers an independent KYC feature, enabling corporate clients to develop their own identities while ensuring compatibility with enterprise regulators and participants. With a transaction rate of up to 2000 TPS (transactions per second) on the public chain, the XDC Blockchain provides a seamless user experience while allowing efficient operation of regulatory nodes.

‍

‍

XDC Smart Contract Development and Managed Blockchain Solutions

XDC Network offers comprehensive smart contract development services, optimizing the delivery of decentralized applications (dApps). Through these services, XDC Network supports timely support and maintenance, ensuring the smooth functioning of dApps built on the network. Additionally, XDC01 Hybrid Protocol, the exclusive protocol of XDC Network, combines the benefits of private and public blockchains, offering a future-proof solution for various trade and financial transactions.

XDC Network Ecosystem

The XDC Network ecosystem is steadily expanding, focusing on real-world applications, particularly in trade finance. It comprises various components:  

Core Components

• XDC Token: The native cryptocurrency powering the network.  
• XDPoS Consensus: Ensures network security and efficiency.  
• EVM Compatibility: Allows for seamless integration of Ethereum-based projects.  

Key Ecosystem Players

• Trade Finance Platforms: Several platforms leverage XDC for trade finance solutions, including TradeFinex and XDC Trade Network.  
• DeFi Applications: While not as prominent as on Ethereum, XDC is home to some DeFi projects, offering services like lending, staking, and yield farming.
• Wallets and Exchanges: Various wallets and exchanges support XDC, providing users with options for storing and trading the token.  
• Developer Tools: The ecosystem includes tools and resources for developers building applications on the XDC network.  

Challenges and Opportunities

The XDC ecosystem is still in its development phase. While it has made significant strides in trade finance, expanding into other sectors and attracting a wider developer community are key challenges. Opportunities lie in exploring new use cases, such as supply chain management, digital assets, and payments.

XDC Network’s Future

The future of XDC Network depends on several factors:

• Continued Adoption: Increasing adoption by businesses and institutions in the trade finance sector.
• Ecosystem Development: Building a robust ecosystem of partners and developers.
• Technological Advancements: Staying at the forefront of blockchain technology.
• Regulatory Clarity: A clear regulatory framework for cryptocurrencies.

By addressing these factors, XDC Network can solidify its position as a leading enterprise blockchain platform.

Disclaimer ||

The Information provided on this website article does not constitute investment advice ,financial advice,trading advice,or any other sort of advice and you should not treat any of the website’s content as such.

Always do your own research! DYOR NFA

Coin Data Cap does not recommend that any cryptocurrency should be bought, sold or held by you, Do Conduct your own due diligence and consult your financial adviser before making any investment decisions!