The detector system of the X-Ray Integral Field Unit (X-IFU), one of the two ATHENA focal plane instruments will be an ambitious step forward in the field of astronomical X-ray detection. We describe its baseline configuration, consisting of 3840 Transition Edge Sensors (TES) microcalorimeters with an energy resolution of 2.5 eV FWHM, spanning a 5 arcminute field-of-view and allowing an imaging resolution of 5 arcsec. The detectors are read out in 96 channels of 40 pixels each, using frequency domain multiplexing (FDM). Each channel contains a dual-stage SQUID pre-amplifier and a low-noise amplifier (LNA). In order to enhance the dynamic range of the SQUIDs a specific technique, baseband feedback (BBFB), is applied. The generation of the carrier and feedback signals, and the signal processing are done in the digital domain. We review the requirements for the main elements of this system, needed to ensure the high performance of the detector system. From the resolution requirements for the detectors follows a budget for contributions to the energy resolution on top of the intrinsic detector resolution. This budget forms the basis for the assessment of the dynamic range requirements for the SQUID and the LNA and the DACs and the ADC. Requirements are also derived for the levels of crosstalk and non-linearity in the readout chain.