Raiden Network Team,
“The Raiden Network Token Model”, October 2017.
On July 19, 2018, the Raiden Network team announced that the product is ready for deployment in the Ropsten Ethereum testnet. Swap.Online would like to make an overview of the history and present state of the Raiden Network technology, which is considered to be the second-layer scalability solution for Ethereum network tokens and off-chain transactions, and discusses the prospects of its commercial application.
Driving transactions off-chain
As the quantity of transactions on the blockchains like Ethereum or Bitcoin started growing exponentially, it became obvious to the industry that one day, in the future, high transaction fees and long confirmation timeouts will eventually become the downfall of cryptocurrency’s evolution. The extensive solutions based on the banal increase of mining technical capacities seemed to be a feeble remedy. Thus, the only possible resolution was to transfer some part of transaction process from the blockchain in a safe and decentralized manner. After working on the problem since early 2015, the developers from Brainbot Labs Establishment presented the Roadmap of the Raiden project. It was initially planned that the series of decentralized solutions will be implemented in three stages, namely µRaiden or Micro Raiden as a service of many-to-one transfers above the Ethereum network, the Raiden Network as an advanced many-to-many payments service for ERC-20 tokens, and Raiden 2.0 (or ‘Raidos’ referring to ‘dos’ for ‘two’ in Spanish) designed to scale Ethereum’s generalized computation capabilities through a network of satellite chains, which can host any smart contract.
Raiden Roadmap: October 2017. Not so easy to figure something out.
The Raiden Network team raised great awareness the first time with the Micro Raiden, which was launched in testnet in September 2017. As the project developers said, mainly it targeted the dApps interested in ‘using the Raiden Network as a robust, many-to-one payment channel system; one service provider offering services to many recurring customers’. A more advanced and scalable solution was presumed since the very start of Micro Raiden’s implementation. It was said that Micro Raiden requires users to lock up tokens upfront for every potential payee, so, it is not suitable for many-to-many payments. The reason was the reduced technological complexity, which made a quick mainnet release of the product possible.
Apart from the technical aspects of this release, we have to admit that it was a really splendid commercial move, as the ICO of the Raiden Network was announced two days later.
At first glance, the ordinary offering of yet another utility-token set off a firestorm of debates, despite the fact that the team said they will do little to market their ICO. The team was accused of planning a ‘grab-the-cash’ ICO. When somebody asked why ETH itself cannot be used as the currency of the Raiden Network, the Reddit thread collected more than 400 comments by the time it was archived. Even Vitalik Buterin, who usually appreciates all second-layer scalability of Ethereum decisions, was defensive, albeit understanding the motivation of the Raiden Network team.
Vitalik understood the Raiden Network team’s efforts to raise some cash.
As it has already been said, the ICO of RDN was not accompanied by a remarkable media campaign. Nevertheless, after being launched on October 18 and organized on the principle of a Dutch auction, it ended on November 1 with a rather moderate amount of 109,532 ETH (about $32.75 million). The final price at which all the participants received the RDN tokens was 0.0021906 ETH per RDN. The tokens themselves immediately became available for secondary trading. Looking ahead, we need to say that on January 9, 2018, the RDN/USD exchange rate reached its top value (see figure below).
On January 9 2018, one RDN was worth some 8,65 USD.
In the last days of November 2017, the project team released the full version of Micro Raiden in the Ethereum main blockchain. The users met one restriction: the amount of tokens used in some project features was limited to 100 RDN. Lefteris Carapetsas, the developer of the project, wrote in his Github that the main aim of the release was to identify bugs in the code within the framework of the Raiden Network’s development process: “This is a bug bounty mainnet release. We recommend using only small amounts of RDN as channel deposits. As such, we have limited the maximum deposit to 100 RDN”.
The Raiden Network’s release on the Ropsten Testnet has been highly appreciated in the crypto world. What profits does the industry expect from this update?
Raiden Network: Features and Capabilities
It is generally believed that all second-layer Ethereum blockchain solutions (e.g. Raiden Network and its competitors, like the Liquidity Network) solve four main problems: scalability, latency, transaction fees, and privacy.
Traditional public blockchains are able to execute very low quantities of operations per second: e.g. for Ethereum this figure is some 9.6. This problem is solved in the Raiden Network by decentralized peer-to-peer mechanisms. The bigger the Raiden Network becomes, the higher its maximum throughput with the ability of growing ad infinitum.
These blockchains also work very slowly. With 15-30 seconds spent on one Ethereum block, the confirmation of some operations can take up to a couple of minutes. Raiden’s developers say that their transfers “are as fast as text messages”. The amount of coins received is transferred straight to the receiver’s wallet with no need to wait for confirmation.
The elimination of transaction fees seems to be the clearest feature of the Raiden Network. It is an odd thing to say that the transaction cost of a transfer via the blockchain is several times higher than of the one sent by a channel directly peer-to-peer. Raiden’s developers say it will be much more useful with the IoT extension surrounded by machine-to-machine payments.
Privacy issues are among the most sensitive for Ethereum users. The Raiden network foresees that only the amount of tokens sent will be shown to the entire world via the blockchain explorer without disclosing the maker and taker addresses.
Thus, the Raiden Network is designed for both for b2b and b2c commercial implementation with the latter being the focus.
What can we find there for Swap.Online?
Firstly, we can use Raiden solutions for collecting fees. As we suppose, we will avoid the classic model of 0,3 percent from the taker transaction fee. By the way, some of our users will be paying something for their swaps, and this issue is related strictly to the machine-executed micro payments field, which is clearly targeted by Raiden. Particular attention should be paid to the orders placed by the bot, as it is the best example of machine-to-machine payments.
Then, we can use the Raiden network’s solutions for researching the mechanism of Atomic Swaps, which is crucial for Swap.Online. Instant low-fee swaps are our basic ideology, so, we need to know something about this process.
We highly appreciate the Raiden Network testnet release. We will try it and write about our experience. We will also review the most interesting updates of crypto transfer technologies and keep you informed.