The Raiden Network is the system allowing for instant low-fee transactions in the Ethereum network, which is an equivalent to the bitcoin's Lightning Network solution. Raiden's founder Heiko Hees is also one of Ethereum developers.
The main idea of the project lies in scaling a blockchain by using payment channels that enable secure off-chain transactions. Developers claim that Raiden will increase the throughput of Ethereum and tokens on the Ethereum blockchain from 25 to 1,000,000 transactions a second.
How it works
The payment channel is opened for two users willing to make a cryptocurrency transaction. Using this channel, one could transfer funds an unlimited number of times, provided that the amount transacted does not surpass the amount deposited which is specified in the contract previously set in the network. The process can last until one of the parties decides to close the channel. An open channel provides instant transactions at low fees; the entry is added to a blockchain when the channel is initially opened and settled when it is closed.
For a transaction to go through, it is not always necessary to open a direct channel between a payer and a payee; the transaction can be processed if there is at least one route linking two parties in the network of channels.
Advantages of the Raiden Network:
A scaling solution;
An unlimited number of transactions;
Fees optimized for transferring medium and large cryptocurrency payments, as well as efficiently transferring micropayments.
Disadvantages of the Raiden Network:
Payment network channels are a complex technology not only in terms of the concept but also in terms of realization. The idea has been in existence for two years, yet it has not been enough to investigate every possible nuance.
Even in the roadmap, developers themselves cannot provide the deadline for completing the system.
Raiden Network Token (RDN) is an ERC20 token which acts as the system's internal currency. RDN is used for paying transaction fees and sending other payments, which helps ensure stable demand for tokens. The primary function of RDN is to incentivize network's operators to launch and control the payment channels.
The number of RDN tokens is limited. 100 million tokens were issued, the half of which was sold in an ICO that had started on October 18, 2017. The coins were sold in a Dutch auction. During the token sale, Raiden raised 109,532 ETH despite the criticism from the community and Vitalik Buterin himself who was against the campaign. That being said, the project is developed without drawing in capital from the Ethereum Foundation.
The longevity of the blockchain project depends on fast, cheap, and scalable transactions. Remember when CryptoKitties caused Ethereum network congestion? Then you should realize that Ethereum has problems with the aspects mentioned above. In the current situation, the Raiden Network can increase the throughput not only of Ethereum but also other projects built atop it.