Payment-Channel Network for Ethereum
Raiden is a technology that leverages off-chain state networks to extend Ethereum with some nice properties for asset transfers:
- Scalable: it scales linearly with the number of participants (1,000,000+ transfers per second possible)
- Fast: Transfers are confirmed and final within the fraction of a second
- Confidential: Single transfers don’t show up in the global shared ledger
- Interoperable: Works with any token that follows Ethereum’s standardized token API
- Low Fees: Transaction fees can be 7 orders of magnitude lower than on the blockchain
- Micro-payments: Low transaction fees allow to efficiently transfer tiny values
The technology enabling this is similar to the proposed Bitcoin Lightning Network.
The basic idea is to switch from a model where all transactions hit the shared ledger on the blockchain (which is the bottleneck) to a model where users can privately exchange messages which sign the transfer of value.
Raiden uses a network of p2p payment channels and deposits in Ethereum to preserve the guarantees expected from a blockchain system.
Raiden is implemented as an extension to Ethereum. A Raiden node runs alongside an Ethereum node and communicates with other Raiden nodes to facilitate transfers and with the Ethereum blockchain to manage deposits. It offers a simple API which makes it easy to use Raiden in DApps.
- Micropayments for content distribution: Alternative to Paywalls, Ads and Subscriptions. (Figure a decentralized youtube where the creators of a video are paid for every second watched)
- Decentralized M2M markets: especially in IoT where tiny chunks of bandwidth, storage, cpu time, energy, sensor data, etc. can be traded.
- Frictionless Token Systems: Game Tokens, Reward Tokens, Private Currencies
- API Access: Accessing and monetizing APIs on a per use basis is at the core of the upcoming - Machine-to-Machine economy
- Fast Decentralized Exchanges
Complementary to Ethereum
Vitalik Buterin: “State channels are an important technology that has the potential to greatly improve the scalability and privacy of many categories of blockchain applications; in conjunction with sharding and other privacy-preserving cryptographic technologies, they are an important ingredient in helping decentralized systems to achieve the properties that mainstream individual and institutional users expect and deserve.”