Tens of thousands of optimistic investors are entering the cryptocurrency-world each and every day. Though a positive indicator for the blockchain community, as tokens like Bitcoin and Ethereum, soar to astronomic heights, many serial technologists doubt the network’s ability to keep up with rising transaction volume.
Popular cryptocurrencies must find scalable solutions that answer to a growing population of interested consumers and enterprises to reach the critical point of mass-adoption.
The Raiden Network (RDN), an emerging blockchain startup, provides an “off-chain scaling solution for performing ERC20-compliant token transfers on the Ethereum blockchain.” Akin to Bitcoin’s Lightning Network, Raiden effectively enables low-fee, highly scalable, near-instant and privacy-preserving payments to the masses.
If implemented effectively, Raiden is poised to accelerate the embracement of blockchain systems worldwide fundamentally. They can also considerably reduce built-up stress on Ethereum’s main-chain, keeping fees low and transactions running efficiently.
Their technology hinges upon an innovative digital signature and hash-lock transfer mechanism (called balance proofing) that allows “secure transfers of tokens between participants without the need for global consensus.”
These balance proofs are fully-binding agreements, enforced by the Ethereum blockchain, that ensure “neither party can back out of any of the value transfers contained therein, as long as at least one of the participants decides to present it to the blockchain.” This system eradicates the threat of scammers, empowering each node within the network with full autonomy and control.
Uniquely, exchanges on the Raden platform are wholly collateralized by “previously setup on-chain deposits and can be performed without any involvement of the actual blockchain itself, except for an initial one-time on-chain creation and an eventual closing of the channel.” Payment channels, as this infrastructure is officially called, enable an infinite set of bi-directional transfers between two participants, “so long as the net sum of their transfers does not exceed the deposited tokens.”
Importantly, transfers made via these payment channels, unlike on-chain transfers, inherently do not require any fees. Instead, intermediary services within the network, “will want to charge fees on a low percentage basis for providing their own channels to the network, leading to complex routing and a competitive channel fee market.”
One of the primary concerns with implementations of the blockchain, aside from increasing fees, is their lack of scalability. The capacity of most blockchain networks is fixed (or at least semi-fixed) to a hard ceiling, independent of user-adoption/activity. The Raiden Network solves this problem entirely, scaling “linearly with the number of users, leading to an efficient and future-proof, decentralized transfer network.”
Furthermore, the network is architected in such a way to connect participants efficiently, providing a “protocol to relay token transfers through routes of channels to make use of the natural channel network topology, rather than attempt to connect each and every participant directly.” In addition to running more smoothly, these multihop transfers are “secured using cryptographic hash locks to ensure that a mediated transfer either succeeds or is rejected entirely by all participants.” This provides high-level security and privacy across their network.
Recently, their team announced ‘Micro Raiden’ (or µRaiden), an instant p2p micropayment network that enables “super fast, unidirectional transfers with zero fees (besides the gas cost of opening and closing a channel.” This implementation, unlike the broader Raiden Network, is designed specifically for the IOT and pay-per-use market that require super-fast transaction times.
This, however, is just one of many new implementations of their technology. As demand for blockchain systems increases over the next few years, alongside consumer education and investment accessibility, it will be interesting to see how companies like Raiden evolve. 2018 promises to be an exceptional year not only for the company but also for the broader blockchain ecosystem as more developers and capital enters the space.