Raiden network will make the Blockchain more Efficient

Raiden network will make the Blockchain more Efficient

February 21, 2018 by Janhavi Arora
Raiden Network

The Raiden Network is an off-chain scaling solution, enabling near-instant, low-fee and scalable payments. It’s complementary to the Ethereum blockchain and works with any ERC20 compatible token. The Raiden project is work in progress. Its goal is to research state channel technology, define protocols and develop reference implementations.

Raiden is a payment network built on top of the Ethereum network. The goal of the Raiden project is to provide an easy to use conduit for off-chain (i.e. not on the Ethereum blockchain) payments without the need of trust among the involved parties.

This is done by broadcasting transactions on the blockchain only during settlements, and not at each individual transaction between the two parties.It is one of the more notable efforts making progress towards this goal, using “off-chain” technologies to increase network capacity.


  • Scalable – Scales linearly with the number of participants
  • Fast – Transfers can be confirmed within a subsecond
  • Private – Individual transfers don’t show up in the globally shared ledger
  • Interoperable – Works with any token that follows Ethereum’s standardized token API (ERC20)
  • Low Fees – Transfer fees can be orders of magnitude lower than on the blockchain
  • Micropayments – Low transaction fees allow to efficiently transfer tiny values


The main problem with blockchains is scalability.Scalability is the major issue for users who want Bitcoin to fill its promise of making transactions both cheap and fast. Blockchains don’t scale well because there needs to be a global consensus on the order and outcome of all transfers. Every participant needs to learn about all updates to the shared ledger. Hardware and bandwidth constraints set a limit on the number of updates per second that can be shared in a decentralized network. The basic idea of the Raiden Network is to avoid the blockchain consensus bottleneck. This is done by leveraging a network of payment channels which allow to securely transfer value off-chain, i.e without involving the blockchain for every transfer.

The Raiden Network aims to bypass the need to create on-chain scaling options by creating new off-chain solutions that effectively add layers to the blockchain network and move the responsibility of scaling away from the blockchain layer. The value of the Raiden Network Token recently jumped by more than 31%.. It was first proposed as an extension to Bitcoin called the Lightning network. Raiden network takes some of the ideas from the Lightning network and implements them on Ethereum. Both Lightning and Raiden are currently still in development and we have yet to see which blockchain will be the first to get an implementation of a state channel network – allowing for fast, private, secure, inexpensive decentralized payments.


Raiden brings the payment network off-chain. The reasoning behind this is, not every payment needs to be agreed to globally – we only need to have both participating parties to agree to it and to have a proof of the transfer of assets between them. This brings us a different perspective on consensus – instead of global consensus we can use local consensus among participants.

This is achieved using state channel technology, built on top of Ethereum. While Raiden enables us off-chain payments (transfers), smart contracts enable secure on-chain settlement

Raiden Network offers checks that will never bounce back when cashed at that bank. Suppose Jack and John want to interact with each other using Raiden. This is how they will go about it

  • Jack and John open an off-chain payment channel via deploying a smart contract.
  • Both parties invest some form of security deposit in the smart contract.
  • Suppose Jack wants to send 2 tokens to John, he signs the message “2” and sends it to John. John now has proof of Alice sending him 2 tokens.
  • Now, suppose Jack wants to send John 3 more tokens.He will update the state of the message to “5”. This shows that the message is conveying the previous and the latest transaction as well.
  • The moment John wants to redeem the 5 tokens, he will go the blockchain and close the channel. He will get the 5 tokens from the deposit that was initially made in the channel.
  • The information will be relayed to the blockchain and the only record that will be stored is the final 5 token deposit made to John


Raiden transfers require some of your tokens to be locked up in a smart contract for the lifetime of the payment channel. Similarly to only withdrawing small amounts of money from an ATM, you would not want to lock up too much value in a payment channel. Once you withdraw money from an ATM, you cannot use it for anything else, like online payments or wire transfers. Likewise, and since each participant in the network will likely have multiple channels open at the same time, payment channel deposits are expected to be comparatively small, making it difficult to transfer large amounts of tokens over the network of channels.

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