In this review, we will look at Radix DeFi Protocol, a layer-1 network that seeks to solve challenges within the DeFi ecosystem. In particular, this guide delves into the key features and components that make up the Radix protocol, its native token (XRD), and why decentralized app developers use the platform. Additionally, we have included a brief guide to get you started on how to stake XRD tokens for passive returns.
About Radix DeFi Protocol
Radix is a layer-1 decentralized protocol focusing on DeFi applications. DeFi, which stands for ‘decentralized finance,’ is an emerging blockchain application in which access to financial instruments is democratized, effectively getting rid of intermediaries such as banks.
Products such as cryptocurrency loans, savings, and early-stage investments are done in a peer-to-peer (P2P) manner allowing DeFi users to access them without prequalifications, restrictions, and other conventional means.
Radix was created in 2017 by its current CTO and Head of Engineering, Dan Hughes, an experienced developer within the blockchain field with a history running from as way back as 2011. Hughes was previously involved in Bitcoin scalability projects, including Blocktrees (2013), Directed Acyclic Graphs (DAGs) (2015), and Channelled Asynchronous State Trees (CAST) in 2016.
The precursor to Radix was Tempo which he worked on at the beginning of 2017 and which informed his invention of Radix later that year. In effect, Radix borrows a significant chunk of its underlying ideology from Tempo, including the important concept of sharding to increase blockchain transaction throughput.
Radix aims to displace Ethereum as the go-to platform for dApp (decentralized applications) developers. As a result, it has launched a proprietary Ethereum Virtual Machine (EVM) alternative dubbed the Radix Engine, a Rust-inspired programing language for dApp development called Scrypto, to compete against Ethereum’s Solidity and opted to implement delegated proof of stake (dPoS) as a consensus mechanism.
It is worth noting that Radix’s public mainnet launch happened in July 2021, following four years of active development and testing since the project’s announcement in September 2017. Within that period, Radix core developers launched the native XRD token on the Ethereum network to help in fundraising efforts.
Recommended video: Introductory video to Radix
The Problem with DeFi
To better understand Radix Protocol, it is important to understand the challenges it was designed to solve within the DeFi space, which is currently dominated by Ethereum. The Radix team has split its approach into four main categories, which are:
1. Security
Hacks, exploits, and dApp failures are a common scene within the DeFi space, and Radix attributes this challenge to the complexity of Ethereum’s Solidity development language and its vulnerability. According to Radix, Solidity is too specialized and complex, increasing the chances of deploying vulnerable code.
As a solution, Radix proposes its alternative Scrypto dApp development language, which is based on Rust, one of the most popular general-purpose languages. Scrypto is both simple to use and familiar to a majority of developers with a Rust background.
Adopting a common language means that there are more developers to tap into to join the Radix community, and these devs bring along years of experience and tried and tested tools. The most significant benefit of this scenario is that the developers are less prone to releasing vulnerable code.
Even newcomers to programming in Scrypto can benefit from resources within the community and leverage experience from their more experienced counterparts.
2. Redundant code
With the current implementation on Ethereum, most dApps are created on standalone smart contracts meaning that the underlying code is not reusable even though it performs similarly to other pieces of code. Essentially, even though, two dApps perform the same function, their code will be unique.
This phenomenon increases code development resources making it more expensive and slow to create dApps.
On the contrary, Radix has designed a dApp deployment environment that encourages code sharing through modular development and code standardization. This means that a developer working on a new application can take advantage of freely and easily available code modules within the community repository without spending the time to create the code from scratch.
The Radix route is more resource economical, cheaper, and faster. Additionally, reusing popular code increases the safety and security of smart contracts.
3. Self-incentivized developer ecosystem
The current convection within the blockchain space is that each network has created a treasury to fund project development within the specific community. This typically centralizes decision-making as the treasury decides on who and which projects to fund.
Radix proposes to decentralize the treasury governance and directly incentivize developers to contribute towards the building of the network’s code repository. Developers can work on deploying modules to be reused by other dApp developers and are therefore compensated by these consequent dApp creators that make use of their code. Radix calls this system the Developer Royalties program.
This incentive system has several benefits, including faster dApp deployment times, less vulnerability in code used to create the smart contracts, and stimulating a vibrant development environment.
4. Network scalability
The biggest challenge facing Ethereum is its limited transaction throughput which throttles dApp scalability. Ethereum currently uses the popular Proof of Work (PoW) consensus mechanism that was first successfully implemented within Bitcoin.
PoW has several demerits including slow transaction speeds and being unfriendly to the environment.
Radix has opted for the more eco-friendly dPoS mechanism through the Cerberus consensus technology to achieve high throughput figures enabling DeFi dApps launched on the network to have fast execution time. Fast-executing dApps contribute to positive user experiences.
Radix DeFi key components
There are three components that make up the Radix protocol. These are:
- Radix Engine (Execution layer);
- Cerberus (consensus layer);
- Delegated Proof of Stake (Consensus mechanism).
The three features complement each other to ensure that the network achieves its goals which include fast and secure dApp execution. Let’s take a closer look at each component.
1. Radix Engine
The Radix Engine can be compared to Ethereum’s Virtual Machine representing the layer upon which the smart contracts are hosted and executed. It can be referred to as the application or execution layer.
Think of it as a world computer on which smart contracts can be launched and executed. Smart contracts are self-executing pieces of code that are deployed on the blockchain.
The Radix Engine saw its first iteration released during the launch of the Radix mainnet in July 2021. This release was dubbed Version 1 (REv1). Version 2 (REv2) was released in December 2021 as part of the network upgrade dubbed Alexandria.
The main difference between the Radix Engine and Ethereum’s Virtual Machine is that the former employs well-structured finite-state machines (FSM) to manage the issuance of tokens and resource allocation. Additionally, the Radix Engine’s behavior is also altered by the use of the Cerberus consensus layer as opposed to the resource-intensive PoW used on EVM.
2. Cerberus Consensus Layer
The main proposal behind the Cerberus whitepaper that was published in 2020 is the use of shards to enable seamless blockchain scalability. Sharding is the process of splitting one blockchain network into several constituent parts, running in parallel to one another.
Transactions are thus processed atomically on any of the shards with rules put in place that define how to sequence transactions, merge the blockchain history and avoid confusion.
Ethereum is also looking to implement sharding in a future upgrade as part of its migration from PoW to a Proof of Stake (staking) network. The difference between Radix’s and Ethereum’s sharding implementations is that with Ethereum, the core devs have proposed limiting the number of shards to only 64.
Radix’s developers, on the other hand, propose unlimited shards, effectively leaving room for unlimited scalability of the network.
3. Delegated Proof of Stake (dPos)
The third crucial piece of the Radix Protocol is the consensus mechanism dubbed dPos. The mechanism is not unique to Radix, as it has been employed by several other decentralized networks, including EOS, Tron, and Cosmos.
With a dPoS network, stakeholders (token holders) can participate in transaction validation by delegating their responsibilities to node operators. In return, node operators share their rewards from transaction validation with their delegates.
Node operators are required to stake a portion of their tokens to qualify as transaction validators within the network. The stake acts as a security feature to incentivize appropriate behavior by the nodes. Any unacceptable actions will lead to slashing, which is the process in which the stakeholder loses a portion or the entirety of their tokens permanently.
It’s worth noting that slashing is, potentially a risk shared between the node operators and their delegators, depending on the terms of engagement between the parties. If that’s the case, it behooves the delegators to carry out proper research when choosing a node operator to stake with.
The Radix (XRD) and e-Radix Tokens (e-XRD)
XRD is Radix Protocol’s native platform token issued on the Radix network. It should not be confused with the e-XRD token. Both of these are sister tokens, except the latter is issued on Ethereum.
Other than their launch platforms, the two tokens were also created on different dates, with e-XRD being the first to launch in November 2020, while XRD was released in July 2021 with the launch of the Olympia Radix mainnet.
e-XRD was initially named XRD as it was the only one available when it was initiated and was created to enable the distribution of tokens to community members and raise funds for project development.
Since Radix’s mainnet was still under development at the time the tokens were instantiated, the developers opted to deploy the token issuance smart contract on the Ethereum network in compliance with the ERC-20 token issuance standards.
In July 2021, when Radix mainnet was released with XRD tokens, the ERC-20 variants were retained but renamed to e-XRD for differentiation. The two tokens can be swapped one for the other on a 1:1 basis on any platform that supports either or both.
So far, you can access these tokens on the following cryptocurrency exchanges:
Utility
The XRD token serves two main purposes:
- Transaction fees – these are the payments made by DeFi dApps to run on the Radix protocol. Every transaction processed on the platform is paid for using XRD. However, these charges are implemented only to deter spamming and any fees collected are burned out of circulation.
- Staking – as a dPoS network, node operators require XRD tokens to stake. Staking ensures that they are well incentivized to perform as expected and avoid compromising the network or causing negative outcomes.
Other functions that XRD and its e-XRD counterpart token can perform include facilitating value transfer. As assets, users can send and receive both of these tokens as payments for services or goods offered.
Additionally, either token can be used within its respective network for DeFi purposes such as savings, loans or yield farming, etc.
How to Stake XRD? (step-by-step guide)
Staking with Radix Protocol is simple and straightforward. First, you need to download the Radix Desktop Wallet and install it on your desktop computer. Once done, the application will launch automatically to the start page and request you to agree to the usage terms. Click on the agree button to proceed.
Step 1 – Create a Wallet
Before staking your XRD tokens, you need to have a self-custody wallet. To create one, select the first option on the start-up screen of the Radix Desktop Wallet.
Next, copy the seed phrase provided to a secure location.
Confirm that you have copied the phrase, then provide a password and PIN as indicated. The application will guide you through the process until you are done.
The next step is to name your account for easy identification. Provide a unique name.
Click [Save] once done to go back to the home screen.
Step 2 – Stake your XRD tokens
Now that you have created your wallet, ensure that you have loaded some XRD tokens. Purchase them on your favorite cryptocurrency exchange. We have provided a list of platforms that support the asset above. After buying your tokens, transfer them to your wallet for staking.
Click on the [Stake & Unstake} button on the left side of the home screen.
On the next screen, select the [Stake Tokens] tab.
Fill in the address of the node operator (Validator) you wish to stake with. To get a list of the available validators, visit the Radix Explorer website.
Provide the number of tokens you want to stake. You can only stake assets you hold within your wallet; therefore, this number cannot exceed your wallet balance.
Next, confirm the staking transaction by providing your wallet PIN.
Finally, click [Confirm Transaction] to complete the staking process.
Is Radix Protocol safe?
Safety can be considered from two broad perspectives: individual and protocol safety. Every individual has the responsibility to safeguard their assets at whatever cost.
Therefore, ensure that you store your XRD tokens in a safe location preferably on an air-gapped computer or a hardware wallet that supports XRD. e-XRD tokens can be stored on any Ethereum-compatible wallet.
In terms of safety, as provided for by the Radix protocol, it is relatively safe compared to most other platforms. The core development team has focused on ensuring the platform is safe to use.
Most dPoS staking networks are prone to Sybil attacks, whereby a single nefarious node operator takes control of the network by taking control of a majority of the validator nodes.
They can achieve this by misrepresenting themselves and launching multiple validator nodes that can then receive delegated tokens. Alternatively, they can hack other nodes and take control of their validation rights and thereby control the network.
Radix encourages its community to be vigilant against the centralization of validation power by carefully researching validator nodes before delegating their tokens to these nodes.
The protocol has taken the extra step of graying out nodes listed on the Explorer list with substantial amounts of XRD staked to discourage other delegators from staking with them.
Not to forget, Radix is designed from the ground up to encourage the safety of dApps using the modularization of code and the use of the Rust-inspired Scrypto programing language.
Radix Protocol Pros & Cons
Pros
- Radix protocol is relatively secure with no security incident reported so far since its mainnet launch in July 2021;
- Compared to Ethereum, Radix is highly scalable, fast, and cheaper to run dApps;
- Smart contract development on the platform is quick and easy thanks to the use of modular programming;
- The platform uses staking which is more eco-friendly and less resource-intensive;
- Staking earns passive income for community members.
Cons
- Delegated PoS networks are prone to Sybil attacks, and Radix Protocol is relatively new and still vulnerable to such an attack;
Community support channels
You can follow along and join the vibrant Radix community on their public channels here:
Final thoughts
Radix Protocol is attempting to solve one of the biggest pain points of Ethereum and most other major blockchains – scalability. With its implementation of the dPoS-inspired Cerberus consensus mechanism, it is able to scale to an infinite theoretical figure.
With Ethereum upgrading to a staking mechanism with sharding technology, it could partly solve its current problem and possibly fend off promising upstarts such as Radix a little longer.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Frequently Asked Questions on Radix DeFi Protocol
What is Radix Protocol?
Radix is a decentralized public blockchain built to host and deploy decentralized applications (dApps) within the DeFi marketplace.
Is Radix Protocol a Blockchain?
Yes, Radix Protocol is a standalone blockchain, having launched its mainnet on July 2021.
What is the difference between Radix XRD and e-XRD tokens?
XRD is the native Radix mainnet platform token, while e-XRD is an ERC-20 token on the popular Ethereum blockchain. The value of both tokens are similar, and their issuance is based on a 1:1 basis to maintain a value peg.
What is the utility of XRD and e-XRD?
XRD serves two main purposes on the Radix platform. These are staking and payment of transaction fees. e-XRD, on the other hand, can only be used within the Ethereum ecosystem for DeFi-related functions such as savings, loans, or yield farming, depending on the dApp on which it is used.
