Estimated reading time: 4 minutes, 54 seconds
Have high hopes for blockchain technology, but worried how the networks will grow? Then you’re definitely going to be interested in the Raiden project, a sidechain-based payment solution that looks to solve some of Ethereum’s scaling issues. If that seems complex, don’t worry, were going to break down exactly what this means and exactly what it can mean for blockchain technology. So let us do the heavy lifting while we get you up to speed with the Raiden ICO!
What is the Raiden Project & what problem is it trying to solve?
One of the biggest issues facing blockchains is something called scaling, or increasing the network capacity. The potential of blockchain technology is seemingly limitless, but it’s pretty much still in its infancy. If blockchain technology is going to grow, the strain put on the network may cause several issues, such as transaction backlogs, slow clearing times, and increased fees. We’ve already seen this happen earlier this year (2017) with bitcoin. The debate over how to scale even ended in the longest running blockchain’s first ever fork, creating Bitcoin Cash.
As a result, there has to be a plan to make sure that the network can handle this increased demand. That’s where projects like Raiden come in. According to the project website, the Raiden Network is an off-chain transfer network for Ethereum ERC20 tokens. It provides a fast, scalable, and cheap alternative to on-chain token transfers.
At the same time, the Raiden Network transfers provide users with guarantees of finality, security, and decentralization similar to those known from blockchains. In short, you get the positive features of blockchain, all while overcoming scalability: one of the technologies biggest hurdles.
It’s more than apparent that blockchains do not scale well. Current public, permissionless blockchains are unable to achieve more than a low, fixed number of transactions per second, resulting in several transaction backlogs. Ethereum has been shown to reach its cap at about 10 transactions per second. Short-term scaling solutions merely put a band aid on a growing problem. Raiden aims to be the long-term solution.
The network is specifically designed so the bigger the Raiden Network becomes, the network becomes more resilient and able to handle a bigger capacity.
Blockchains are slow. At the moment, Ethereum mines a new block approximately every 15 to 30 seconds. To reach practical finality of a transaction, confirmation times of several minutes have to be endured, when it should just be several seconds. This significantly degrades user experience and hinders mainstream adoption, especially as a payment solution.
Raiden Network transfers take seconds. The moment you receive a signed Raiden transfer, you can be certain that you now hold the amount included in the transfer. There is no need to wait for any confirmations.
Using blockchain can be expensive. Once a blockchain hits its limit, paying high enough fees to be included in a block becomes a competitive endeavor. As is the case with Bitcoin today, and it actively discourages adoption. Ethereum will be no different, so we should expect higher confirmation times and transaction fees on the order of a few dollars per transaction. For the vision of a global, decentralized, and dependable computer this is highly detrimental.
Raiden Network transfer fees will be several orders of magnitude lower than on-chain transaction fees. Instead of paying for global consensus, you only pay for forwarding peer-to-peer consensus. Low fees allow for a long tail of new use cases which have not been practical before due to high transaction costs. Especially IoT and the Machine-to-Machine economy depend on being able to transfer tiny values. Raiden aims to be the predominant payment layer for these applications.
What are the market conditions facing the project?
There is a definite need for scaling solutions (and if you disagree, you should probably go back and re-watch the start of this video…), and payment channels are the best way to do this. If we are going to see mainstream adoption, payment solutions are probably where we are going to see this first.
Every blockchain is going to face these type of issues. Bitcoin has its Lightning Network, which requires no confirmations before sending a transaction. The balances are reflected as soon as the transaction is sent. Raiden is trying to be the same thing, but for Ethereum.
We’re seeing countries like Japan and Thailand exploring payment solutions on the blockchain. With projects like Raiden, Its only a matter of time before we see realistic blockchain for merchants. And at that point, we’ll be using cryptocurrencies in our everyday lives.
Who’s behind the Raiden project?
The ICO is being put on by Brainbot, an organization that has a long standing relationship with the Ethereum Foundation.
Details of the ICO…
The ICO is currently on-going. Right now, the price of one Raiden token is 0.015 ETH. The token sale will continue until November 13th, 2017 or until the supply is exhausted. As of Monday, October 23, 2017, the total supply of Raiden is 800,000 ether worth of Raiden, but that is going down at about 4 ETH every second.
One important thing to note, if you are purchasing more than 2.5 ETH worth of Raiden tokens, you have to comply with KYC/AML laws.
Raiden is really in a unique position because their implementation and success is dependent on the successful implementations of another project: Ethereum.
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*Patent Maybe Pending