Powering Micro-Transactions through the Raiden Network

The final quarter of 2017 brought an immense spike in cryptocurrency prices across the board. As one of the largest bull runs of any market, it understandably generated a lot of buzz — even outside of the industry. It also brought awareness of a critical problem across all blockchains. The high level of transaction traffic brought many of the larger blockchains to a complete standstill. Fees skyrocketed, and transactions took hours to complete.

The Raiden Network for Ethereum provides a solution to this problem. Similar to the Lightning Network for Bitcoin, it creates a sequence of payment channels outside of the blockchain itself to resolve transactions quickly.

Large Versus Small Transactions

The number of decentralized applications and dependent systems taxes the relatively slow transaction speed of the Ethereum blockchain. It wasn’t the large transfers of value that bogged it down, rather it was the sheer volume of smaller transactions that came as a result of those applications. The Raiden network’s off-chain solution is specifically suited for alleviating this problem, with decentralized applications serving as the perfect payment channel hub.

Anyone using the application will, by necessity, open a payment channel with the service. From there, they are connected to anyone else involved and can freely transfer funds through this network. While this type of constant transfer would be damaging to the speed of the blockchain, it’s actually beneficial for Raiden. Large transfers of ETH as a means of currency still benefit from direct movement on the blockchain, but these smaller transactions are perfect for the Raiden network.

One-to-One Payments with µRaiden

µRaiden, the younger sibling of the Raiden Network is now available for implementation in most use cases today. µRaiden is a unidirectional payment channel that allows sending tokens to pre-determined receivers in a way that is not recorded on the public blockchain, but is secured by ethereum’s network. This technology can be implemented to help solve some of the scalability and latency challenges today.

KryptoPal provides a unique feature that utilizes µRaiden to resolve the inherent transaction latency that is imposed by many blockchains and decentralized applications. Users inside of a KryptoPal Powered application can open μKPX state channels to enable real-time blockchain transactions and functionalities.

A μKPX state channel maintains the secure transfer of tokens within a state channel without the overhead of Proof-of-Work (a consensus mechanism that effectively prevents real-time transactions) that the Ethereum blockchain employs.

An Ethereum Upgrade

As Raiden adoption increases, so too does the effectiveness of their network. The legacy system that Ethereum currently employs will always be available for raw transfers, but continued integration of Raiden will ensure that those transactions can proceed smoothly. Coupled with the potential switch to Proof of Stake, Ethereum should not have to worry about the type of traffic jam we saw in the recent past.

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