What is the Raiden Network (RDN)?

The Raiden Network (RDN) is one of the first generic scalability solutions released on the Ethereum mainnet. Built as Layer 2, it is a Payment Channel Network, or a network of individual payment channels that can connect with each other like the internet to allow payment from Party A to Party Z. This network runs connected to but more importantly off the Ethereum main chain. But before we continue let’s understand how it interacts with Ethereum.

To get funds onto the Raiden Network you need to deposit (lock up) funds (ERC20 tokens) off the Ethereum chain. This is done via the Raiden Network Smart Contract which has an API so that any app creator can easily plug in this feature into their app.

Whilst the funds are on the Raiden Network you can make multiple payments back and forth between multiple parties without affecting the load of the Ethereum Network.

When you finally decide to withdraw your funds from the Raiden Network back onto the Ethereum Network you will again utilize the Raiden Network Smart Contract to do so.

A nice way to think of it is that your account on the Ethereum Network acts as your “Savings Account” (rarely used / larger transactions) whilst your account on the Raiden Network will act as your “Current Account” (regular use / smaller payments back and forth).

Where is the Raiden Network (RDN) in its development lifecycle?

The Raiden Network has just released (22 December 2018) it’s first mainnet version, called Red Eyes. This is an Alpha version and as such is very basic in its initial creation.

The Raiden Network accepts ERC20 tokens however for Red Eyes, the only ERC20 token that can be deposited is wrapped ETH (WETH). A max cap has also been set for Red Eyes, at 250 WETH for the entire network with a maximum deposit of 0.075 WETH per node. These limitations are to minimize the user risk of using this Alpha release.

Users using Red Eyes will find that they can easily transact with other parties that they have a payment channel open with. Red Eye’s mechanism for pathfinding is however is very rough and ready, and when pathfinding is required to pay someone you don’t have a direct payment channel open with then it the network’s protocol layer will use a brute force attempt at identifying the path for payment. That is to say, payment channel networking is done on a recursive trial and error basis for the shortest path — If the shortest path attempt fails it will try the next shortest path and another until a path is identified or not. This is method of pathfinding is not optimal.

Being a Protocol service, if another Payment Channel is used to successfully to facilitate the routing of a payment then the Raiden node with the open channel will also receive a small Protocol fee for the routing service provided.

Note Red Eyes, like Ethereum Frontier, is an Alpha release and the unexpected can occur so… User Beware!

When does the Raiden Network (RDN) move out of Alpha?

Assuming no major bugs are found in Red Eyes, Ithaca the second version release is expected sometime in 2019, noting that the testing of Ithaca has already been opened in Github.

Ithaca introduces Monitoring and Pathfinding services that can be run on top of a Raiden Node making Raiden a more usable and robust Network not just a collection of individual payment channels.

Ithaca will allow Party A to send funds to Party Z efficiently so long as there are connecting payment channels between Party A and Z. That is it may go via Party D,G,K,T,V before it gets to Party Z’s wallet. Or it may be as easy as A to K to Z. Where Party K has several payment channels open with various Parties including A and Z.

The Ithaca Raiden Network achieves this through Pathfinding Services. Like the name suggests this service, provided by a Raiden Node, will assist with finding paths between unconnected parties (that is parties that do not have direct payment channels open with each other.)

The Raiden Network like a Internet of Payment will then use this Pathfinding Service to connect up parties for payment. The major advantage over Red Eyes here is that the Pathfinding Service reduces the payment latency speeding up the payment process between parties.

The Ithaca release will also introduce Monitoring Services. Those Raiden Nodes offering the service will monitor payment channels for users ensuring that no malicious activity takes place between parties whilst one party is offline. The service will help to keep users funds on the Raiden Network safe, allowing users to NOT have to remain logged into the Raiden Network 24/7!

As an Auxiliary Service, the Raiden Nodes providing Monitoring and Pathfinding Services will in turn get paid peripheral fees by the users that connect via a light client for services provided when using the Raiden Network.

These two services (Pathfinding and Monitoring Nodes) will also allow added potential usability options in the future such as connection to the Raiden Network without having to run a full Raiden Node. Instead they will be able to connect via a light client directly to the Raiden Payment Channel Network.

In so doing Ithaca’s Pathfinding and Monitoring services offers some really powerful options, especially when you consider Payment Cards, Smart devices used as part of the Internet of Things or other mobile dApps that do not need nor want their users to run a full node all the time to make use of the transaction speed on the Raiden Network.

How does the Raiden Network (RDN) achieve 1 Million Tx/s?

The beauty with the Raiden Network is that as it grows, the faster it becomes. More payment channels allows for quicker transactions as the network like the internet finds shorter transaction paths between parties, especially so after the Ithaca release.

What makes for a successful Raiden Network (RDN) Node?

A successful Raiden Node will be provide users with balanced channels for payments to route through them as well as auxiliary services for their customers.

Potential service providers could include: Decentralised Exchanges, Merchants, Wallet Providers, Internet of Things systems, Decentralised Finance dApps, Games, Mesh Networks, Payment Service Providers, Card Providers, etc.

How does the Raiden Network (RDN) help Ethereum (ETH)?

A fully functioning Raiden Network will assist with the transaction load of the Ethereum Network by taking the smaller transactions off chain whilst actually making Ethereum a more usable and attractive Network in terms of the scalability options offered.

The Raiden Network on Layer 2 offers another string to the Ethereum bow by allowing Ethereum to scale payment transactions (currently the number one reason for the existence of currencies).

What future services or trends in Ethereum can benefit from the Raiden Network (RDN)?

If you believe in the Internet of Things (IoT) story then you believe that micro payments and technologies like mesh networks are gonna be big. Raiden can assist with managing this type of payment transaction load off the main chain (in Layer 2) for Ethereum.

If you believe in the decentralized finance and the stable coin story then you believe that we will use decentralized financial products and stability coins going forward to make payments as part of our daily transactions. Raiden can assist with managing this type of payment transaction load off the main chain (in Layer 2) for Ethereum.

If you believe in the decentralized exchange story then you believe that decentralized exchanges are going to be a big feature in the financial tech landscape. Raiden can assist with managing this type of payment transaction load off the main chain (in Layer 2) for Ethereum.

If you believe in the smart contract story where decentralized autonomous contracts manage multiple payment transactions between parties. Raiden can assist with managing this type of payment transaction load off the main chain (in Layer 2) for Ethereum.

If you believe in the Ethereum story then Layer 2 technology like the Raiden Network is essential for scaling and making payment transactions within the smart contract blockchain space usable in the real world.

Is there any value in the Raiden Network (RDN) Token?

The ERC20 token RDN is the native token of the Raiden Network. To understand the value of the RDN token one needs to understand the fee structure and future governance model of the Raiden Network.

The Raiden Network has two fee structures:

Protocol Service Fees — these are fees that are payable by the user for using the Raiden Network Protocol, that is Routing of payments through another Node’s payment channel. These fees are paid in the ERC20 token being transferred. These fees can only be avoided if a direct payment channel is open between the two parties and no intermediaries are used.

Now if the only purpose for using the Raiden Network was to establish single Payment Channels between parties that are known to each other and if brute force recursive query of nodes was acceptable for path finding then there would be no need for the RDN token.

However this limits the scope of the Raiden Network. If the Raiden Network is to become a central player in the payment transactions of the Ethereum Network then the use of Auxiliary Services will become a prerequisite of making full use of the power and speed of the Raiden Network.

Peripheral Fees — are the fees that are are payable by the user for using any Auxiliary Services that run on top of the Raiden Network.

Auxiliary Services currently planned on the Raiden Network:

Monitoring Services — (Ithaca Release) When nodes go offline or light clients are used to connect to the Raiden Network a monitoring service will be provided by multiple third party Raiden Nodes to ensure no malicious activity takes place whilst the account holder is offline. Nodes providing Monitoring Services will as such require payment for this service. Pathfinding Services — (Ithaca Release) Raiden Nodes will have a map of their local cluster. Using these maps nodes will coordinate with other nodes to establish the quickest possible path between two Parties that are not connected via a direct payment channel. As this service will be provided by several Raiden Nodes across the network a fee will generally be incurred for this service. Light Client Services — (Post Ithaca) Raiden Nodes running this service will allow users to connect to the Raiden Network without having to run a full Raiden Node. This service can incur a cost to the user but may also be offset depending on the nature of the service providers business.

As the utility token of the Raiden Network the RDN token will act as the universal common token for these Auxiliary Services.

Network Governance — The RDN token has also been suggest to be used to govern and manage the growth and development of the network protocol.

As both a utility and governing token it will incentivise parties using and actively invested in the Raiden Network to acquire the RDN token to ensure they have a larger say in the governance of the protocol.

It is also worth noting that as the Raiden Network grows, has dApps built to use it and potential integrations into other EVM networks that there may be other uses for the RDN token within the Raiden Network going forward but for now these are the current proposed uses of the RDN token.

What does the future hold for Raiden Network (RDN)?

Like Ethereum, the Raiden Network is a first stepper in its respective space — Layer 2 technology and it already has a few years head start on the competition.

Source: Nervos Layer 2 Night — Prague Edition

To understand where we are in the development lifecycle of this space, then the current Layer 2 technology is probably where Ethereum was 4 years ago. Very few projects and teams are involved in this space, in fact the majority of teams involved in studying and developing this technology appear in the above photo and are working on Layer 2 for Ethereum.

Being so new it is a very exciting space and is going to become more and more important to the Blockchain landscape in the next few years. The Ethereum Foundation has already realised this and it is for this reason that they are providing and offering so many grants towards Layer 2 technology.

In this regard this initial release of the Raiden Payment Channel Network is just the beginning of the Raiden Network story.

There are still a few things up Raiden’s sleeve:

Raidos — Raiden Dos or Raiden 2.0 will include a ton of new features and will look at State Channels. Raidex — A decentralised exchange run on top of the Raiden Network Other EVM/eWASM Networks — Whilst nothing has been set in stone it should be noted that Raiden can run on any network running the current or future Ethereum Virtual Machines. Examples of other EVM networks include; JP Morgan’s Quorum, Hyperledger’s Burrow, WanChain, Ethereum Classic, Polkadot Parachains running the EVM/eWASM, etc.

The Raiden Network like Ethereum has an incredible amount of potential to offer that benefits to the wider community. If you believe Ethereum is going to change the way the world works then the Raiden Network will facilitate a significant component of that story.

Want to dig deeper into the Raiden Network (RDN)?

The Raiden Network has a great community Telegram group run by the community for the community with key Raiden Team Members regularly participating in discussion: https://t.me/RaidenNetworkCommunity

You can also follow the Raiden Network here:

Reddit: https://www.reddit.com/r/raidennetwork/

Medium: https://medium.com/@raiden_network

Twitter: https://twitter.com/raiden_network

Website: https://raiden.network/

Disclosure: I am not part of or paid by Brainbot or the Raiden Network. I hold both ETH and RDN tokens. Images used here are used with permission or have been copied from linked Raiden Network Medium posts. Whilst I did seek advice when writing this, do note that these are my own thoughts and musings and therefore should not be considered an endorsement from Brainbot or the Raiden Network.