What is a Raiden Network?
Emerging blockchain technology is rapidly revolutionising the way global transactions are made – but, as public ledgers grow in popularity there are certain issues that need to be ironed out along the way. One of these issues is the processing capacity of blockchain services – and that’s where Raiden Network comes into play. Let’s find out more.
Blockchain and the need for speed
Blockchain based networks have captured the interest of many companies but their limited processing capacity has restricted the extent of their adoption. The Ethereum network, a blockchain as a service (BAAS) model, is being used by hundreds of businesses to build their foundation by using the ERC20 token standard. However, in terms of speed, the Ethereum network is far behind the processing capacity of Visa or the online transaction capacity of a bank. This can be gauged from the fact that currently, an Ethereum network can process around 15 transactions per second in comparison to 45,000 transactions per second by Visa. The basic reason for this is that public blockchains like Ethereum require every transaction to be processed by every single node in the network. So, how does one rectify this?
This is possible through either the on-chain or off-chain scaling of a network. While the former refers to increasing the capacity of a blockchain by adding bigger blocks or changing any of the features of the protocol, the latter refers to increasing the utility of the network without touching the blockchain. Off-chain scaling is possible by batching multiple payments into one transaction or using payment channels or any other mode. But such changes are possible only with the help of some additional software. One off-chain scaling solution for Ethereum is the Raiden Network.
Understanding the Raiden Network
This solution enables near-instant, low fee and scalable payments via the Ethereum blockchain. Compatible with any ERC20 compatible token, Raiden Network is an ongoing project, the goal of which is to research state channel technology, define protocols and develop reference implementations. The Raiden Network protocol is not a competitor to Ethereum but a mode to allow Ethereum-compatible tokens to be utilised.
The proponents of Raiden Network believe that high fees, coupled with long confirmation times, pose hurdles to the mass adoption of Ethereum and other blockchains. As a result, the network, aims to solve the scalability problems of Ethereum by delivering near instant, low fee solutions, regardless of the number of transactions being processed on the network.
How Raiden Network Works
Raiden Network aims to switch from a model where all transactions hit the shared ledger on the blockchain to a model where users can transfer tokens through private exchange messages, without involving a global consensus protocol. But even in the new system, the concept of securities and guarantees remains intact.
The technology behind the Raiden Network is actually a layer on top of the blockchain, which creates a cooperative union between it and the basic framework of Ethereum. The most important feature of this network is that it removes the need for global consensus, which currently restricts the Ethereum network’s ability to scale to improved levels. By eliminating the need for global consensus and and not involving the entire blockchain every time a transaction is made, scalability can be achieved.
Raiden Network’s protocol features payment channels that allows for off-chain transactions that can be completed effectively and securely, with the help of cryptographic proof and smart contracts. The off-chain transactions don’t require network consensus which is expensive, slow and resource heavy.
Another feature of the Raiden Network is its bidirectional payment channels that allow for back and forth token transactions. The network also incorporates Multihop, hash-locked transfers that enable the tokens to pass through several nodes, instead of a single node, while being secured with a key. These tokens cannot be claimed on-chain, unless the secret key is provided by the original sender.
Raiden Network has already evinced keen interest amongst Ethereum users, with many partnerships already in place. It has been developed by Germany’s Brainbot Technologies AG, a software company engaged in blockchain protocol development.
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