Understanding How XRD Works

XRD, the native token of the Radix network, plays a crucial role in the Radix DeFi (Decentralized Finance) ecosystem. Radix aims to solve several challenges associated with decentralized financial applications, such as scalability and user experience. Below we break down how XRD works and its place within this structure.

Radix Engine

At the core of the Radix technology is the “Radix Engine”, a framework designed for building decentralized applications. Rather than relying on traditional blockchain methods like Ethereum's Solidity or Bitcoin’s Proof-of-Work (PoW), Radix employs a system known as "Cerberus". Cerberus breaks down transactions into parallelized operations, creating an environment where apps can run simultaneously without causing bottlenecks. This approach allows for higher throughput but also supports the secure locking and unlocking of XRD tokens during various transactions.

Consensus with Cerberus

Cerberus is the Radix consensus algorithm, built explicitly to manage hundreds of thousands of transactions simultaneously. Cerberus employs a unique sharding approach, dividing the computational workload across different sections of the network. Unlike many sharding systems, which fragment the network with each shard managing its own ledger, Cerberus shards communicate directly with each other. This method ensures that XRD tokens, whether stored in a wallet or used in a DeFi protocol, remain consistent and secure across the network.

Delegated Proof of Stake (DPoS)

Radix uses a form of Delegated Proof of Stake (DPoS) for its network security. XRD holders can stake their tokens to delegate to validators who secure the network. In this model, users who do not have the technical capabilities to run a node can still participate in securing the network. Validators who perform well are rewarded in XRD, and token holders who delegate their XRD to these validators can receive a portion of this reward. However, this not only incentivizes network security but ensures a vested interest by all stakeholders in the smooth running of the Radix blockchain.

Smart Contract Executions

As with most blockchain-based systems, smart contracts are a critical function of Radix. However, Radix offers an additional layer of security through its Scrypto programming language. Scrypto is specially designed to minimize common errors seen in other blockchain-based contracts, such as reentrancy attacks. This means that when a decentralized application interacts with XRD, the transaction and associated contracts are checked for vulnerabilities, thereby protecting user funds and reducing the chance of exploits.