The xDai Stable chain is an EVM-based sidechain. The chain is compatible with smart contracts developed on the Ethereum network.
The xDai token is the native currency of the xDai chain. It is a stable currency, pegged 1:1 with DAI, and is used for on-chain transactions and associated gas fees.
xDai is created through the TokenBridge mechanism, where DAI is locked in a smart contract and the same amount of xDai is minted on the xDai chain. When a user bridges xDai back to DAI, the xDai is burned and the DAI is unlocked. For this reason, 1 xDai always equals 1 DAI.
xDai rewards are paid to stakers based on the total amount of DAI locked in the bridge. Rewards are paid through an interest-earning mechanism whereby the DAI in the bridge is converted to CHAI (an interest bearing stable coin created by MakerDAO). Interest accumulated during a staking epoch is distributed at the end of the epoch to participating stakers. See xDai Rewards for more information.
Validators receive additional xDai through transaction fees (though this is a small amount, as on-chain transactions are very inexpensive).