Disclaimer: I contributed the non-KYC cap of 2.5ETH to the Raiden Token Auction. This article is not financial advice.

The Raiden Network is an off-chain network with the ability of super fast and super cheap transactions of ether as well as ERC20 tokens. Their solution is highly scalable so it’s been the main horse in the race of scaling Ethereum. Raiden consists of three separate parts: μRaiden, Raiden and Raidos.

μRaiden is the first product which covers a simple use case of the Raiden network. μRaiden enables many-to-one payments, so for example payments of many users to a one vendor or dApp.

Raiden is the fully fletched network that allows many to many payments with the characteristics described above: fast, cheap, scalable.

The Raiden Network is an off-chain transfer network for Ethereum ERC20 tokens. It provides a fast, scalable, and cheap alternative to on-chain token transfers. At the same time, the Raiden Network transfers provide users with guarantees of finality, security, and decentralization similar to those known from blockchains.

Raidos is their idea of generalized state channels using side chains. This means that Ethereum could potentially run any kind of smart contract or transfer any type of digital good with satellite chains.

The big Problem of Raiden

Shortly after announcing their first product release, μRaiden, they also announced their ICO and token model.

This created an outrage in the Ethereum community mainly for two reasons:

Raiden is seen as such an integral project to Ethereum’s vision that many assumed it was developed and funded by the Ethereum Foundation and integrated into Ethereum’s core.

The ICO craze has turned insane with many scams and massively overfunded and overvalued projects crowding the space. This created an ICO fatigue in the community which probably hit its peak with the Raiden token auction announcement.

In Defense of Raiden

I want to go over the main criticism of the Raiden token auction and share my opinion on the matter.

The token is not useful!

The RDN token will be used to pay auxiliary products in the network. While auxiliary implies that it’s not really necessary I believe that this is simply wrong. Without those services, like advanced path finding services, the network will be very inconvenient to use. Nobody will want to run a full node without receiving a reward either. I think a simple to understand metaphor is the internet: While it’s free and built on open source technologies, nobody would be able to use it without their ISPs, DNS providers and convenience service providers such as Google. All of these get paid and everyone thinks that’s alright.

But they could simply use ETH for their fees!

This is a very important point of criticism that almost every ICO has to face. I partly agree with that point. However using your own token is a great way to reward early contributors, early network participants and everyone else who helps enhancing the network. Oh, and it’s a great way for fund raising. Check the Ethereum website for why it’s a great idea:

The Ethereum landing page promotes ICOs as one of the main use cases of Ethereum.

Their ICO is just a greedy money grab

The Raiden team was very clear on the goals and mechanics of their token sale. This was not intended to be a quick flip for pre-sale participants (there was none) or early VC investors. With their token auction structure they ensured the long term funding of their project. A project that is so important to so many people in the community. The company developing Raiden is a for-profit organisation and their developers want a fair salary for their work - we don’t live in communism and I consider this a good thing. They simply raised what the market deemed as fair.

Vitalik offered to fund them though

If you had the choice between getting funded by one overlord or thousands of enthusiastic community members excited about your product, which would you choose? There are no details available as to Vitalik’s conditions so I don’t want to speculate much about this topic. From all known facts the ICO was clearly the right choice.

Open source contributors don’t get any reward for their work

There are 32 contributors to the Raiden codebase on Github. It’s not easy to find the number of employees of Brainbot labs (the company developing Raiden) but from the regularity of contributions crushcrypto assumed 8 employees. After the 8 most frequent contributors there are only contributors with very small additions to the codebase. However, no matter how small the contribution, it can be still very valuable to a project.

It is unlikely that any of the contributors knew about an upcoming ICO so I assume they contributed in the knowledge of helping an underfunded project. While an open source contribution should never come with the expectation of a reward of any form other than acknowledgement, I think it would be a fair move by the Raiden team to reward the contributors from their “External Development Fund” (which holds 16% of all RDN token).

Conclusion

All things considered the Raiden token auction created a lot of bad press for the project. I think this is because the project was held against the highest standards, morally as well as technically. People care about this project and that’s why it created a strong emotional reaction in the community.

Analyzing the situation more rationally paints a picture of a level headed and professional team that made the right decision at the right time for the project’s success.

The ICO structure was a turn off for flippers and anyone expecting quick gains. This allowed the true believers to fund the project. Now Raiden is funded well enough but through the community’s outcry also heavily undervalued. I hope once the dust settles and they demo more of their disrupting technology more people will realize this and support the project.