The Raiden Network with RDN (Raiden Network Token), its associated crypto asset, provides an off-chain solution for many Ethereum problems. These include the transaction processing time and scalability issues of Ethereum.
Raiden was created with a purpose, taking into consideration the current financial situation of our times:
- The global payment industry collects approximately $2 trillion annually, making it exceptionally lucrative.
- There is no adequate penetration into this payment industry due to the blockchain lacking scalability. Therefore, an acceptable solution addressing this problem is critical.
One of the reasons that that blockchain faces problems in more rapid mainstream adoption is the limitations in its processing power. The blockchain requires exorbitant amounts of processing power. It also needs extended periods of time for the confirmation of transactions.
One of the suggested solutions refers to the lightning network. This network was introduced in the lightning whitepaper as a fix for the congestion and scalability problems for the blockchain.
However, the issue is that the lightning network works only for the Bitcoin blockchain and not for others. This is where Raiden enters the picture. Like the lightning network, the Raiden network strives to offer similar solutions to the Ethereum blockchain.
Need for a Raiden Network
Raiden takes care of the processing time and network congestion problems plaguing the Ethereum network.
In a world where cryptocurrency payments is enjoying global adoption, the Ethereum network needs scaling to compete with other payment channels. The most common payment channels are the Visa and Mastercard credit/debit systems.
To adequately compete with them, Ethereum needs to be able to process in the area of 100,000,000.00 transactions every second. This number, which is almost double the current ability of the Visa system, is a must for Ethereum.
However, contrary to its expected rate, the Ethereum network processes transactions at a dismal 15 transactions per second. Additionally, this number forms the upper limit for the transaction capacity of Ethereum.
Therefore, with Ethereum falling well short of its expected rate, it is important to introduce a system like the Raiden network.
Features of the Raiden Network
To enable scalability in Ethereum, Raiden comes with the following features:
- Private transactions will not be visible on the blockchain’s public ledger.
- Much cheaper transactions compared to those currently on Ethereum. Also, many of the transactions will be occurring off-chain before miners can provide confirmation of the transactions, making it convenient.
- An accelerated confirmation rate of the transfers in the Raiden network will take less than a second
The Raiden network Token
The Raiden Network token (RDN) is a cryptocurrency on the Raiden network. RDN is an ERC-20 token created with the aim of providing added modes of exchange on the network. It’s other purpose is to assist in funding the project.
During its ICO, the development of 100 million RDNs took place. Out of this, half are currently in circulation. Brainbot holds 34% and the rest are in the development fund of the network.
There are several exchanges that trade RDN, including Binance. However, it is essential to initially purchase Ether from exchanges like Coinbase. After establishing the appropriate amount, one can use any number of wallets compliant with ERC-20 like the My Ether Wallet.
Fundamental Mechanics of Raiden Network
Through the Raiden network, payers and recipients can securely transfer their tokens without needing global consensus. To enable this, hash locked and digitally signed transfers known as the balance proofs are used. These balance proofs are completely collateralized through on-chain deposits that are set up previously. The concept that uses this setup is known as payment channel technology. Using a payment channel, bidirectional and practically limitless transfers can occur between two participants. The only condition is that the net sum of the tokens they deposited should exceed what they transfer. The advantage is that the transfers are almost instantaneous and don’t involve the real blockchain; except in the time of on-chain creation and the time the channel closes.
Additionally, the Ethereum blockchain enforces a binding agreement on the Raiden network known as the balance proof. When at least one party presents the value transfers to the blockchain, digital signatures ensure that neither party can back out. This balance of proof is absolutely binding due the lack of accessibility of tokens to anybody else other than the participating parties.
The protocol of Raiden lends the actual strength to the network. The need of making on-chain transactions to open and close a channel make it impractical to create channels with others. This adds an extra level of security to the channel.
Additionally, this network protocol removes the need of having a direct payment link between the payer and payee. If at least one channel exists that connects the two parties, the transfers can occur between them.
Advantages of the Raiden Network
Cheap for all transfers
As described above, the Raiden network makes the transaction cost relatively cheaper than other on-chain transfers. The computational resources on the Ethereum blockchain add the cost to the transfer irrespective of the value transferred. The result is that only medium and large amounts of transfers are suitable for transfer on the Ethereum blockchain. Transactions amounting to a few cents and dollars incur more cost than the transaction value. The Raiden network eliminates this problem, and even carries micro-payments efficiently.
In the Ethereum blockchain network, several steps are necessary for the confirmation of an on-chain transfer. The block time has to be sufficient and the miners have to pick the specific transaction from a host of others before transaction confirmation occurs. However, in the Raiden network, one does not need to wait for the blocks to confirm transfers. As soon as one receives the off-chain transfer, the amount goes to the recipient, at exceptional speed.
As described in the above sections, the transaction speed of the Ethereum network achieves the upper limit of 15 per second. However, with Raiden, the capacity scales in a direct proportion to the total user-base. Therefore, the result is a decentralized, future-proof and efficient transfer network.
Drawbacks of the Raiden Network
- To carry out a Raiden transfer, some user tokens should be locked in the network smart contract forever. The amount additional to the locked value can’t be used again in the network once it is taken out.
- Conducting the transfers of large values incurs the added cost of managing the payment channel, which makes it less lucrative.
Undoubtedly, the idea behind Raiden’s creation was not competing or replacing the Ethereum network. With benefits like private, cheaper and faster transactions and improved scalability, Raiden complements Ethereum and strives towards its mass adoption. Like the lightning network, Raiden could make Ethereum as mainstream as Bitcoin.
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