Raiden Network

  • Cryptoasset Report
  • October 8, 2018

The Raiden Network is an off-chain scaling solution for Ethereum that facilitates rapid microtransactions through payment channels.

Overview

Raiden describe their project as ‘Ethereum’s analog to the Bitcoin Lightning Network.’ Raiden is essentially an off-chain scaling solution for transacting ERC-20 tokens that allows for low-fee, near-instant, privacy-preserving payments. Raiden aims to encourage a market for payment channels, whereby users are incentivized to maintain payment channels through which other (dispersed) parties can connect and exchange on the Raiden network. Nodes propping up payment channels, who are effectively loaning their tokens to the next node in a payment channel, can charge fees. In this manner, Raiden’s network is designed to scale in capacity proportionally to adoption—as more nodes enable payment channels, the network gains more routes for those wishing to transact.

Protocol Details

Since the Raiden network facilitates off-chain token transfers in the temporary absence of global consensus, transactions via Raiden are not beholden to the Ethereum blockchain’s latency. This means that transactions can be locally confirmed without having to wait for sufficient propagation and verification from the Ethereum network. Payment channels are established by depositing tokens on the Ethereum mainchain before opening up communications about their respective ownership off-chain via a protocol. Agreement between depositors determines the ownership of these tokens.

Once tokens are deposited in the Raiden Network’s smart contract, the owner’s control over the tokens is suspended until the payment channel successfully closes. Interaction between the Raiden network and the mainchain occurs when payment channels open or close. To prevent double spending, payment channels are established between pairs, whereby neither party can remove their deposit until both parties have presented a proof of their balance. The tokens passing through multiple parties in an extended payment channel are secured with a cryptographic hash to which only the intended receiver of the funds holds the key. This key will initiate the transaction’s completion and settlement amongst all parties. The payment only completes when this puzzle is solved. Messages sent via the Raiden Network will have their IPs obfuscated to mitigate the risk posed by DDoS attacks. Raiden anticipates a market for increased privacy measures to emerge amongst payment channel providers; a provider could offer services for obfuscating holdings by deliberately rebalancing payment channels.

Asset Details

The Raiden token, the RDN, will function as a medium of exchange on the network and is designed to motivate developers working with Raiden to share a common metric and avoid multiple exchanges. Raiden plan to provide automated acquisition of RDN such that users do not feel this friction. Following the generation event, RDN will be utilizable on the Ethereum micropayments network µRaiden, which is a payment channel system differing from the Raiden Network, in that payment channels are considered from just the sending party’s perspective rather than both participants. Users can pay per instance of use for APIs, data storage or similar. There will be a fixed supply of 100 million RDN, of which half will be distributed via public auction, 34% retained by Brainbot labs Est.— who are leading Raiden’s development— and 16% to an external development fund. The Raiden token launch will follow the form of a same-price Dutch auction, with a fixed percentage of tokens being offered, which means that everyone gets the same price by the auction’s end. This is designed to encourage fair participation over time, and, since everyone pays the same final price for their tokens, the sales method also removes ambiguity about the network’s potential maximum valuation.