… or how Plasma Design based Payment Hubs could improve the Raiden Network.

This post was edited after some feedback to mainly change the commit reveal scheme to a throw-away private key sharing methodology.

Do you remember the early days of PayPal? They quickly gained adoption by supporting to send money to anyone, even if that person did not yet have a PayPal account. A recipient would receive an email with a link that, when clicked, lead to a PayPal page, where the money could be claimed after signing up for the service. This was a win-win. Great user experience and quick inflow of new users for the service (the lesser told story is about how PayPal struggled for years to cope with fraud).

Would it be possible to create the same easy onboarding mechanism for a decentralized and trustless system like the Raiden Network (without the fraud)?

Trying to find an answer to this question, we have been researching around the idea of integrating plasma chain based hubs with the Raiden network. Existing users would be able to pay users who have no account yet, by creating a payment, which can be claimed by the payee based on the info received in an email.

How would it work?

Easy, as Raiden + Plasma = ❤

The main ingredient of such a system would be the support for payment hubs, which could use a single deposit to serve settlement claims from multiple addresses. One can think of such a hub as something similar to a fully collateralized bank which is transparently doing the accounting of what it owes to whom while making sure, that the sum of all claims does not exceed the deposited amount. Basically a centralized database with an audit trail. But blockchains exist foremost, as the operators of such centralized systems usually can censor transactions, cheat and double spend.

That’s where the Plasma design pattern steps in. In cooperation with a blockchain, it supports centrally operated, but transparent accounting, with the option to exit an agreement in case an operator cheats, without being at risk to lose money.

Benefits of Plasma Design based Payment Hubs

If we were to introduce Plasma Design (PD) Payment Hubs to the Raiden Network, we could gain quite some interesting properties:

Improved economic efficiency, by reducing the required rigid collateral in the system

Users can receive payments without having opened a channel on the blockchain

Users can be offline, when receiving payments

Most importantly, with such a system we could have payments sent to users that don’t even have an Ethereum address yet.

Putting it all together

So how would this work in practice?

Assume Alice wants to send a payment to Charlie who is not even aware of Ethereum or Raiden yet.

Alice chooses Hubert as the PD payment hub from which Charlie shall be able to claim the payment There is a path of payment channels from Alice via Bob to Hubert Alice creates a time hashlocked multihop payment via Bob to Hubert, with the instruction to credit the sent amount to anyone who can sign a message from a temporary address which she provides. Hubert adds above claim represented as a UTXO to the state of his plasma chain, Alice validates the update of the chain. Once Alice sees, that her payment is covered by Hubert’s plasma chain merkle root notarized on the main chain, she’ll release the preimage to the hashlock. At this point, a Raiden Network payment from Alice to Hubert happened, which resulted in Hubert creating a UTXO which can be claimed by anyone who can sign a message from which the address Alice provided can be recovered. User Alice sends a message to user Charlie with instructions, a reference to the UTXO waiting for Charlie on Hubert’s plasma chain and the throwaway private key she used to generate the temporary address. Charlie installs the Raiden Network software, which creates an account for him. Charlie signs a message with the privkey Alice sent him to prove that he can claim the UTXO which is credited to and then spendable by his newly created account. Charlie can now use this UTXO to pay anyone in the Raiden Network via Hubert, claim the amount on-chain or use it to open a regular channel in the Raiden Network.

And that’s how the Raiden Network could support payments to potential new users of the system.

Conclusion

Researching on the possibility of supporting PD Payment hubs in the Raiden Network is really exciting for us as it can potentially open up new possibilities for a frictionless user onboarding experience as well as an improved economic efficiency.

This is part of a series on technical challenges, research and development around payment channels and their infrastructure armed with the knowledge we acquire through the development of the Raiden Network.

The Raiden project is led by brainbot labs Est.