Raiden Network

Ethereum transactions are public, whereas Raiden transfers will be private between the payer, the payee, and the nodes forwarding the transfer. When channels are settled, only the sum of transactions will become visible to the entire world.

Raiden Network transfer fees will be several orders of magnitude lower than on-chain transaction fees. Instead of paying for global consensus, you only pay for forwarding peer-to-peer consensus. Low fees allow for a long tail of new use cases which have not been practical before due to high transaction costs. Especially IoT and the Machine-to-Machine economy depend on being able to transfer tiny values. Raiden aims to be the predominant payment layer for these applications.

Using blockchains is expensive. Once a blockchain hits its limit, paying high enough fees to be included in a block becomes a competitive endeavor, as is the case with Bitcoin today. Ethereum will be no different, eventually leading to even higher confirmation times and transaction fees on the order of a few dollars per transaction. For the vision of a global, decentralized, and dependable computer this is highly detrimental.

Raiden Network transfers are as fast as text messages. The moment you receive a signed Raiden transfer, you can be certain that you now hold the amount included in the transfer. There is no need to wait for any confirmations.

Blockchains are slow. At the moment, Ethereum mines a new block approximately every 15 to 30 seconds. To reach practical finality of a transaction, confirmation times of several minutes have to be endured. This significantly degrades user experience and hinders mainstream adoption.

The Raiden Network will provide a payment system based on payment channel technology that scales with the number of its users. This means that the bigger the Raiden Network becomes, the higher its maximum throughput will be, with practically no upper limit in sight.

Blockchains do not scale well. Current public, permissionless blockchains are unable to achieve more than a low, fixed number of transactions per second. Ethereum has been shown to reach its cap at about 10 transactions per second. Short-term scaling solutions, like raising maximum computation performed per block by a constant factor, will not be able to support continued mainstream adoption.

Next to payments, the exchange of tokens is probably the second most prominent use case of blockchains. This is even more so the case, if the current trend of tokenization continues. Decentralized exchanges built on Raiden Network’s atomic token swaps feature allow to instantly exchange tokens at low cost.

Blockchains are a hot candidate to become the payment infrastructure of the upcoming machine-to-machine economy. IoT may increase the number of commercial transactions by an order of magnitude and the cheaper the cost of transfers become, the more use cases emerge. Micropayments can be used to get fine grained access to APIs, bandwidth, computing power, storage, electricity, basically any infrastructure. The same goes for content or entertainment such as webpages, gaming, video or audio streaming. Already today many proposed DApps rely on tiny payments between participants in the network to incentivise cooperative behaviour.

Cash as we know it is on the retreat as there is a trend towards cashless societies. Scalable blockchain based payments can help to preserve the private and decentralized nature of cash while updating its user experience to the expectations of a new generation.

There are quite a few high profile Ethereum token based projects competing to bring blockchain based payments to the masses. Especially in developing countries these efforts may potentially improve the life of millions. The Raiden Network can be a crucial building block, as significant adoption relies on scalable technology and competitive fees.