The State Of The Raiden Network
Reflections on our origins, progress & future
Raiden is at a critical juncture. We have completed building the Raiden protocol as it was originally envisioned. Our goal was to provide a scalable payment solution — one optimized for a world in which everyday purchases can be made using ERC20 tokens. We have successfully built it. However, the market demand we anticipated and the world we envisioned has not yet materialized. Even so, we are still working to improve the Raiden protocol and adapt to an evolving market.
Soon after the launch of the Ethereum Mainchain, the community embraced an expansive vision of the Ethereum ecosystem, including hundreds of use cases covering all aspects of society. They also anticipated the scaling problems that would inevitably result from mainstream adoption. Ethereum would require a fast, inexpensive and trustless payment Layer 2 solution — something similar to the Lightning Network for Bitcoin.
We were inspired by this vision and started developing the first Layer 2 solution for Ethereum — state channel based peer-to-peer ERC20 token transfers.
The project name “Raiden Network” was inspired by the Japanese god of thunder and lightning (a nod to the Lightning Network) and the popular fighter in Mortal Kombat.
By the summer of 2016, we released the initial proof of concept of our scalable payments solution on Ethereum mainnet.
In late 2017, we conducted a token generation event (TGE) in order to fund the development and growth of the Raiden project. More than 4,000 community members participated. The expectations of the Raiden and Ethereum communities were very high. Raiden was expected to be *the* solution that would scale Ethereum and enable everyday purchases using ERC20 tokens.
In the following years, we built a team of up to 20 developers and worked diligently to deliver the Raiden Network. More than 80 developers have contributed, logging more than 16,000 commits on GitHub, and culminating in 4 major mainnet releases. We also gave countless talks at conferences and meetups, and supported the developer community to build on the Raiden protocol at hackathons.
In late 2021, the Raiden team achieved an important milestone: the Coruscant & Krittika Releases, which featured the protocol, the smart contract system as well as two independent client implementations (Python and Typescript). This milestone marked the complete implementation of the original Raiden Network project scope, with the features and properties we envisioned as set out in the TGE terms and conditions.
We set out to build a payment channel technology for peer-to-peer ERC20 token transfers, and we have done so. But no significant adoption of this technology has materialized.
There are two main reasons:
Market Demand Lower Than Anticipated
Seven years ago, the Ethereum community sought a scalable peer-to-peer token transfer solution capable of processing small everyday payments using ERC20 tokens.
Today, in 2022, multiple bull-and-bear cycles, ICOs, DeFi, NFTs, Gaming, L2s, the Merge, and regulatory changes have changed the Ethereum ecosystem in ways we could not have foreseen 7 years ago. While we are seeing plenty of use cases on Ethereum, everyday payments using ERC20 tokens is not one of them. The demand for a scalable payment solution is way lower than we and the Ethereum community originally anticipated.
The Emergence Of More Advanced Scaling Technologies
When we started the project in 2015, payment channel networks were the only known decentralized approach able to scale token transfers. The Raiden Network was committed to implementing this cutting-edge technology.
Since then, new scaling technologies (e.g. rollups) with different trade-offs have emerged. Even in many payment use cases, rollups offer a superior scaling solution.
Although there are still use cases where payment channels can shine, the potential addressable markets shrank significantly.
Fixing The Gas Issue
As Ethereum became popular, gas fees on Ethereum increased dramatically, causing problems. High gas fees are a significant barrier to Raiden Network adoption because they make setting up Raiden payment channels (which allow users to enjoy nearly costless transactions) prohibitively expensive.
To overcome this obstacle, we are currently reworking Raiden Network to sit on top of Ethereum rollups, which will allow users to set up a Raiden payment channel at a fraction of the gas fees needed to do so on Mainnet. This adaptation will reduce the setup costs to acceptable levels and make Raiden a viable option for projects looking to implement or build on payment networks.
Finding The Niche
Although rollups have many benefits, payment channel networks like Raiden have some unique properties regarding latency, transfer cost, and decentralization. In theory, the Raiden Network still offers one of the very best trustless foundations for payment products with massive scale. The challenge moving forward is to discover the niches in which these characteristics are crucial, thus creating new opportunities for the Raiden Network to thrive.
The Raiden project is led by brainbot labs Est.
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The wording and concepts regarding financial terminology (e.g. “payments”, “checks”, “currency”, “transfer” [of value]) are exclusively used in an exemplary way to describe technological principles and do not necessarily conform to the real world or legal equivalents of these terms and concepts.