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The Raiden Network is off-chain solution for performing peer-to-peer ERC20-compliant token and Ether transfers based on a state channel technology. It promises to deliver users finality and security of transactions, but with significant cost and latency reduction. In theory, anyone can use the Raiden Network without having RDN tokens which are necessary for additional services only. The Ethereum ecosystem could be expanded greatly by implementing the Raiden Network on top of the Ethereum blockchain which have serious scaling issues. The Raiden Network is proposed by Heiko Hees, a core developer of Ethereum blockchain, and in development since 2015 that gives the project a competitive advantage over other blockchain scaling solutions. Some of these solutions are also complementary to The Raiden Network. Token distribution will be done via Dutch auction that is thought to lead to the accurate token price discovery and to allow anyone interested to get tokens.

About

Brainbot Technologies, a smart contract and blockchain consulting company, is developing several open source projects that aim at scaling Ethereum by using state channel technology. One of them is the Raiden Network which is actively in development since 2015. It is supposed to be what the Lightning Network is for Bitcoin — a fast, scalable, and cheap alternative to on-chain micropayments. The Raiden Network is implemented as an extension to Ethereum where Raiden and Ethereum nodes run separately and communicate with each other only to manage deposits or to settle token transfers. This requires paying some Ether for gas cost (Ethereum mining fee), and the Raiden Network native RDN tokens will be used for additional services.

Platform use-cases

End users (light clients) can make ERC20 tokens and Ether transfers by using a light client without any transaction fees denominated in RDN tokens. Founders assume that most participants in the Raiden Network will be light clients.

can make ERC20 tokens and Ether transfers by using a light client without any transaction fees denominated in RDN tokens. Founders assume that most participants in the Raiden Network will be light clients. Full Node Operators open multiple state channels which create a backbone of the Raiden network. Like in Ethereum blockchain, a full Raiden node supposed to be properly secured and provides a high uptime which is costly for Full Node Operators. In order to be compensated for running node Full Node Operators will be rewarded in RND or ERC20 tokens for providing a set of services which are useful to light clients (see Economics and token section below).

open multiple state channels which create a backbone of the Raiden network. Like in Ethereum blockchain, a full Raiden node supposed to be properly secured and provides a high uptime which is costly for Full Node Operators. In order to be compensated for running node Full Node Operators will be rewarded in RND or ERC20 tokens for providing a set of services which are useful to light clients (see Economics and token section below). Developers can build applications and services on top of the Raiden network and earn RDN token as fees for the services they provide to users.

In the future, Full Node Operators and Developers should have a vote in protocol upgrades.

Market

As founders claim on their web-site the obvious use case for the Raiden Network is payments. The Raiden Network allows to transfer both Ether and any Ethereum-based assets that comply with the ERC20 token standard. As of October 17, 2017, a total of 9135194 Ethereum unique addresses and 9497 ERC20 token contracts are registered on Etherscan with thousands of new addresses and dozens of new tokens appearing each day. Amount of transactions on the Ethereum blockchain showing exponential growth since the beginning of 2017 with a historical maximum of 496 376 transactions per day on September 6, 2017 which is approaching the Ethereum blockchain throughput limit. It not only slows down the network’s performance causing network congestions but makes it unsuitable for instant payments. Founder Heiko Hees claimed that the Raiden Network will help to scale up the Ethereum network from 25 transactions per second to more than 1 million transactions per second which is potentiallyuseful in such application areas as retail payments, instant token swaps, and micropayments (especially in machine-to-machine economy).

Competitors

Although the Raiden Network is under development since almost the inception of Ethereum blockchain in 2015, there are several other scaling solutions that has appeared on the scene recentely.

Sharding is an improvement to Ethereum protocol and will allow to scale overall transaction capacity, basically by partitioning the overall state of the blockchain into different shards, and allowing each part of the state be stored by different nodes in the network. This concept is similar to database sharding in traditional software systems. While sharding helps to scale, it will still have suboptimal latency, cost and privacy issues compared to the Raiden Network. Sharding is still under development and could be implemented on-chain only after Ethereum switch to Proof of Stake consensus mechanism.

Plasma, proposed by Joseph Poon and Vitalik Buterin in August, 2017, is a concept to scale transaction capacity using hierarchical trees of side chains. It is essentially a series of contracts that run on top of the Ethereum blockchain which enforces the validity of the state in the Plasma chains (side chains) where majority of computations performed. The main difference in comparison to state channels is that in Plasma not all participants have to be online to update a state. But similar to sharding, it will have latency and fee problems as supposed to the Raiden Network. Both Sharding and Plasma are complementary to the Raiden Network.

TrueBit, proposed by Jason Teutsch and Christian Reitwießner in March, 2017, is another off-chain solution just like state channels. It is a system that verifiably executes computations off-chain by allowing anyone to post a computational task, and anyone else to receive a reward for completing it. Neither Plasma nor Truebit have scheduled an ICO yet, even more Vitalik Buterin posted on Twitter that will be no Plasma ICO at all.

Technology

Raiden Specification (white paper is not available). How it works. Video

An open source project (code on Github) built using Ethereum smart contracts

(code on Github) built using Ethereum smart contracts Is still in development. A developer preview released on testnet, but it should not be considered as a Minimum Viable Product (MVP) and is not safe to use on the Ethereum main net according to team`s statement on Github

Based on payment channels technology that enables off-chain transfers of on-chain tokens where only creation and settlement of payment channels have to be performed on the blockchain. This works for different groups of users: a user can deposit the ERC20 tokens in a payment channel smart contract (on-chain, Ethereum mining fee required). Then, he/she can freely transfer deposited ERC20 tokens (off-chain, no fee required). A settlement is performed after all transfers are done (on-chain, Ethereum mining fee required)

Several participants may not be able to know each other to transfer tokens. In this case Raiden enables Multihop transfer, a network of channels in which each participant is transitively connected to everybody else (see picture below where every user can transfer tokens to F even if F has payment channel only with A)

It scales with a number of users: the bigger the Raiden Network becomes, the higher its maximum throughput will be

with a number of users: the bigger the Raiden Network becomes, the higher its maximum throughput will be Token transfers are as fast as text messages because any confirmations on blockchain is not required

as text messages because any confirmations on blockchain is not required The Raiden Network fees will be much lower than on-chain transaction fees for small value transfers. Team recommends to perform large-scale transfers on-chain since The Raiden Network is not intended to support them

will be much lower than on-chain transaction fees for small value transfers. Team recommends to perform large-scale transfers on-chain since The Raiden Network is not intended to support them Transfers will be private between the state channel participants. When channels are settled, only a total sum of transactions will become visible on the Ethereum blockchain

between the state channel participants. When channels are settled, only a total sum of transactions will become visible on the Ethereum blockchain There is API for developers available

Interoperability : Blockchains supporting the Ethereum Virtual Machine (Polkadot, Dfinitiy, Cosmos, Hyperledger Burrow, EOS and others) will be able to use the Raiden Network

: Blockchains supporting the Ethereum Virtual Machine (Polkadot, Dfinitiy, Cosmos, Hyperledger Burrow, EOS and others) will be able to use the Raiden Network μRaiden (Micro Raiden) is a light open-source version of the Raiden Network available on testnet. It is intended for many-to-one payment setups and could be used on the mainnet today in such micropayments areas as pay-per-request APIs, micropayments for storage, bandwidth, computations, and livestream tipping.

Raidos (Raiden 2.0) aims at generalizing state channels over other blockchains with the smart contracts that will make it possible to transfer not only ERC20 tokens but other digital assets. Raidos is only a concept and its development has not yet started.

Economics and token

Raiden has its own token RDN (ERC20 compatible)

(ERC20 compatible) RDN will have a fixed supply with no inflation mechanism

with no inflation mechanism Total supply: 100 000 000 RDN

In theory anyone can use the Raiden Network without having RDN tokens. RDN will be used for additional services and to access the µRaiden system

In future versions of the Raiden Network RDN tokens might also be used to govern protocol upgrades

Protocol level fees will be denominated in Ether or ERC20 tokens that are transferred in the payment channel and are necessary to keep the payment channel network balanced. Full Node Operators will use fees to prevent their channels from being depleted over time

will be denominated in Ether or ERC20 tokens that are transferred in the payment channel and are necessary to keep the payment channel network balanced. Full Node Operators will use fees to prevent their channels from being depleted over time Peripheral fees will be payable in RDN tokens. These are the services provided by Full Node Operators that, for example, assist to find a path of payment channels with sufficient capacity

Company

Raiden is developing by Brainbot Technologies (see Legal overview section below).

Team

The current team of Brainbot Technologies consists of 11 people: CEO and technical stuff only. It is not clear who of them works full-time but there are around 9 frequent contributors with more than 50 commits to the project GitHub. The Raiden CEO and its founder Heiko Hees is a core developer of Ethereum since March 2014 with a previous experience of founding two companies: PediaPress and Die Firma GmbH. A consultant Oliver Bunting is a director of CryptoCoins Consulting Ltd. with a background in software development. No advisors and partners are announced.

ICO

There was no pre-sale , and Raiden is not funded by the Ethereum Foundation

, and Raiden is not funded by the Ethereum Foundation Starts on October 18th, 2017, 15:00 GMT and is designed to last at least a couple of days according to the team

on October 18th, 2017, 15:00 GMT and is designed to last at least a couple of days according to the team Holds in a form of Dutch auction meaning the price of the tokens would decline over the course of the sale. The exchange RDN/ETH rate starts very high and decreases over time until all tokens are exchanged. All participants will get the same final exchange rate which is determined at the end of the auction

50% of all RDN tokens are for sale

of all RDN tokens are for sale Token offered for sale : RDN Token (RDN)

- Issued on the Ethereum blockchain, ERC20 compatible

- A total of 100 million RDN tokens will be issued, 50M RDN (50%) will be sold

: RDN Token (RDN) Issued on the Ethereum blockchain, ERC20 compatible A total of 100 million RDN tokens will be issued, 50M RDN (50%) will be sold Contributions accepted in ETH

in ETH Token price for ICO : Participants get tokens for the same final price, which is set by the auction, irrespective of the time of their bid

: Participants get tokens for the same final price, which is set by the auction, irrespective of the time of their bid Bonus staging : no

: no ICO instructions on how to register and contribute : not yet available

: not yet available ICO webpage : not yet available

: not yet available Terms of Sale : not yet available

: not yet available Distribution date : ICO participants will receive RDN tokens in one week after the end of ICO

: ICO participants will receive RDN tokens in one week after the end of ICO RDN token smart contract code can be found here, its audit here

Token distribution

Total token supply : 100,000,000 RDN, fixed

: 100,000,000 RDN, fixed 50% — to ICO participants

34% — retained by Brainbot Technologies for future development

16% — external developer fund (providing development grants to the selected high potential projects and teams that help build and grow the Raiden ecosystem)

Use of proceeds

The team says to spend the entire funds raised for the Raiden development.

Legal overview

RDN token issue lacks of legal information. There are no accessible indications of the issuing company. It is highly likely that Brainbot labs Est. or Brainbot technologies AG are connected with the project. These companies may be engaged in the development process. The issue may be provided by another company.

Furthermore, there is no legal contract that regulates the relationships between buyers and the issuer. Therefore, local contract law systems can be applied.

RDN token can be considered as utility token. They are digital representation of pre-paid services of the platform. It appears that they are not covered by major securities legislation systems.

Summary

It is a highly anticipated project because it can potentially helps Ethereum to solve its scaling issues. The Ethereum ecosystem can be expanded greatly with the variety of use cases which require fast, cheap and secure token transfers

But Raiden Network is not suitable to transfer large amounts of tokens since throughput depends on payment channel deposits

There are multiple blockchain scalability solutions that are being developed, but Raiden is one of the earliest with a good development progress and seems to combine low cost, low latency and scalability which are necessary for making blockchain-based payments viable. However, users may prefer to use other solutions that don’t charge fees

It has a little media coverage and a lot of criticism from the community (even from Vitalik Buterin) because of the team decision to raise funds through the ICO

There are also concerns about the token auction since a similar model arguably did not perform well in terms of fair token distribution for Gnosis, another Ethereum-based project that tried a similar model of Dutch auction. Despite attempts to discourage speculation, Gnosis tokens sold out quickly, with $12.5 million raised in roughly 15 minutes and only 5% of tokens being sold. However, Raiden will be different from Gnosis project, since a fixed amount of RDN tokens (50% of total supply) instead of a fixed amount of ETH will be offered during the ICO

Useful links

For more details on the project check the project’s website, specification or join their Riot.im.

You can also check Raiden’s profile on cyber•Fund website or improve Raiden’s page on Github.

Done by @cyberanalytics — the team of the cyber•Fund company that conducts the analysis in fields of crypto-economics and blockchain industry.

You can also read this article on Steemit.

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