Understanding PLR Utility Part II: Pillar Payment Network, Synthetic Asset Exchange + Relayers
Please click here to read Part I of the “Understanding PLR Utility” article series.
Introduction
After laying the foundation for smart contract accounts and managed identity via the Pillar Smart Wallet, Pillar is focusing on facilitating frictionless asset exchange across all users of the platform. By acting as a hub, Pillar will enable all users and service providers to open private payment channels with each other. The Pillar Payment Network will provide a way for users to transact assets with connections instantly, privately and for free. The channels are collateralized by an escrow account shared by all parties. With Pillar acting as the heart of the network, it can also allow for cross-channel transfers in any asset supported by the platform. A relayer network enables the use of meta-transactions to handle on chain transaction fees further reducing user friction. Combined together, these features greatly decrease complexity and enhance the overall user experience of the Pillar platform.
Pillar Payment Network
As mentioned above, payment channels allow users to exchange funds for free (no gas), instantly (no confirmation wait) and privately (off chain). All individual transactions between two parties are free, instant and private as long as the payment channel between them stays open and collateralized. The only on chain events are opening and closing a channel. And only the end balance is made public when the final transaction record is submitted on chain. Once a party requests to close a channel, they send a message to print the final balance to the blockchain. Traditionally, any dispute that may arise is handled by a challenge period allowing each party to submit their most recent transaction record. The most recent record would be seen as correct and have the final say in the dispute.
In order to open a payment channel, each party in the channel agrees to stake a certain token amount to secure the off chain transactions between them. The stake of each party is held in escrow allowing them to freely transact with each other up to the value of the total balance. In the case that one party runs the risk of undercollateralization, they are forced to add additional funds to the shared escrow contract or close the channel.
The primary usability challenge for payment channels is the need to enter into escrow and stake assets up front for every channel opened. This is a significant barrier to entry and one that often outweighs the benefits. However, as Pillar builds a network of interrelated contacts, it is able to act as hub between each and generalize this escrow process so that it applies to all parties simultaneously. By staking an amount of PLR, users will be able to open payment channels with any other user or service provider on the Pillar Network. Additionally, since Pillar serves as the hub, monitoring all open balances, any potential dispute will be easily resolved without concern or complexity. Welcome to the Pillar Payment Network!
