The Raiden Network is looking more like a real financial services organization and less like a blockchain experiment.
For instance, Raiden Network builder brainbot labs has established the Raiden Trust to manage the Raiden Network Token (RDN) Ethereum Request for Comment (ERC20) cryptocurrency. In particular, the Raiden Trust will manage 16 million of the 100 million RDN in circulation, a Medium post indicates.
Interestingly, the Raiden Trust operates like a bank. For instance, the Trust will finance the growth of the Raiden Network by financing projects that use the Network and its technology. For example, people trying to build apps or services that use RDN.
Notably, they base the Raiden Trust in Liechtenstein and will act as a central bank that will govern the Raiden Network. However, brainbot carefully refuses to call the Trust a bank. Thus, the supposedly decentralized Raiden Network is getting more centralized.
What is the Raiden Network?
The Raiden Network is a sidechain designed to speed up payments on the Ethereum blockchain.
Currently, Ethereum’s biggest limitation is that its blockchain can only process between 15 and 20 transactions per second (TPS). Consequently, an Ethereum game or e-commerce site could crash if it tries to process over 15 payments at once.
In contrast, Visa (NYSE: V) processes around 1,736 TPS in its payment system, Hacker Noon’s Kenny Li estimates. Therefore, Ethereum payment solutions cannot compete with Visa until they offer a similar processing capability.
Is the Raiden Network Scalable?
Developers cannot scale the current Ethereum blockchain to process over 20 TPS because of its design. In particular, all the encryption and security measures in Ethereum limits the volume of payments it can process and the speed at which it can operate.
Unfortunately, brain bot labs currently does not reveal how many TPS the Raiden Network can process. I searched for the TPS on Raiden’s website and could find it.
Sidechains; such as the Raiden Network, are less-encrypted short cuts around the blockchain. Sidechains are bigger and faster because they are less secure. Raiden calls its sidechains, payment channels.
Thus, a good way to think of a sidechain is as a freeway for cryptocurrency payments. To explain, vehicles move faster on the freeway because it is bigger and has no obstacles like stoplights.
However, sidechains will be less secure and require expensive monitoring and active security measures. The Raiden Trust, or brainbot labs, will need to have a team of security analysts monitoring the Network 24 hours a day and seven days a week.
How Secure is the Raiden Network?
Oddly, full-time monitoring could make the Raiden Network more secure. To clarify, there will always be a guard on duty to catch crooks at Raiden. I think such vigilant monitoring is a far greater deterrent to bad guys than encryption and security managers.
Raiden’s security could track down crooks and turn them over to law enforcement or launch counter attacks. Thus, crooks will take a far greater risk by trying to crack Raiden.
Importantly, brainbot labs is trying to fund full-time security for Raiden through the Raiden Trust. Thus, Raiden is laying the groundwork for a network that is theoretically secure.
Will the Raiden Network Make Money?
Notably, brainbot labs has identified four potentially money-making uses for the Raiden Network.
First, retail payments using ERC20 tokens. The hope is to be able pay with Ethereum-based tokens at cash registers through the Raiden Network. Users could access the network through a payment app like Apple Pay or PayPal (NASDAQ: PYPL).
Such mobile payment apps are lucrative. Statista estimates Apple Pay will have 60 million users by 2021. Additionally, Statista predicts Apple Pay could process $190 billion worth of payments by 2022.
The Raiden Network plans P2P Cash
Second Peer-to-Peer (P2P) cash. P2P are micropayments sent between individuals and they are popular. PayPal’s Venmo P2P solution had 40 million users on 24 April 2019, Expanded Ramblings estimates.
Moreover, Venmo’s payment volume grew from $12.3 billion in 1st Quarter 2018 to $21 billion in 1st Quarter 2019. Thus, Venmo’s payment volume increased by $8.7 billion in 12 months.
I think the big opportunity for blockchain P2P cash is in nations with limited or nonexistent banking systems. People in such environments often no means of sending money to others or receiving money from friends or relatives.
Notably, the World Bank estimates there were 1.7 billion unbanked people on Earth in April 2018. Thus, the potential market for blockchain P2P is vast. Consequently, I think the real challenge is to market blockchain P2P to the unbanked masses.
Commercial Micropayments through the Raiden Network
The proposed use of the Raiden Network for micropayments goes far beyond P2P.
Brainbot labs hopes to use the Raiden Network for Internet of Things (IoT) and machine-to-machine payments. A manufacturer could pay a supplier for components made by its laser cutting machines, for instances. Interestingly, Syncfab is building an Ethereum network to link manufacturers to such machines.
To enable such transactions brainbot hopes to connect the Raiden Network to application programming interfaces (APIs) built into machines, platforms, and apps. Thus, a vending machine; or ATM, could accept RDN or Basic Attention Token (BAT) payments using such an API.
Plus, brainbot hopes to development decentralized applications (DApps) that can manage such transactions. Potential uses for such DApps including gaming, streaming video, streaming audio, webpages, and e-commerce websites.
Importantly, they began testing Raiden Network Payments on the Ethereum Mainnet last year, Market Mad House reports. However, the Micropayments appear to have no commercial users.
Instant Token Swaps on the Raiden Network
Brain bot hopes to solve one of the biggest problems facing cryptocurrency users with instant token swaps. The problem is converting lesser cryptos like Augur (REP) into something you can spend in the real world.
The hope is to create many decentralized exchanges on the Raiden Network where you can instantly swap or convert Augur; or Holo (HOT), into Ethereum (ETH), Bitcoin (BTC), EOS (EOS), USD Coin (USDC), or a fiat currency like the Euro.
Thus, you could quickly turn your Maker (MKR) into something you can use to buy food for your family. Obviously, purchasing necessities like food, fuel, electricity, and housing is the major reason most people want money.
Importantly, several Instant Token Swap services including Coinswitch are in operation. So the technology is viable even if Raiden does not have any of its atomic swap exchanges up and running yet.
How the Raiden Network could Make money
Therefore, the Raiden Network could be theoretically be a big moneymaker.
In particular, I think there could be huge markets for both the Instant Token Swaps and the micropayments. These solutions could be popular because they are an “under-the-hood” technology.
To clarify, they will build the swaps and the Raiden API into other solutions or apps. Thus, most users will never see them, just a most drivers never see important parts of their car such as the fuel injector. You never see the fuel injector because it is under your vehicle’s hood (“bonnet” to our British friends).
Bringing the Raiden Network to the Masses
Consequently, you could build a Raiden Network solution that many users could never see. Thus, it could be possible for people to make Raiden Network payments without realizing it.
For instance, a gaming platform could accept payment from an Argentine user in Pesos through a Raiden API. Convert the pesos into Raiden Network Tokens (RDN) with an Instant Token Swap.
Then send the payment to the game platform owner in Finland. The platform owner will receive payment in RDN through his API. However, he could quickly convert the RDN into Euros with an instant token swap.
What is the Raiden Network Token Worth?
Currently, the Raiden Network Token’s value is largely theoretically. Mr. Market however, gives the RDN some value.
For instance, CoinMarketCap gave the RDN a Coin Price of 25₵; a Market Capitalization of $12.49 million, and a 24 Hour Market Volume of $159.466 million on 19 July 2019. Additionally CoinMarketCap estimates there was a Circulating Supply of 50.594 million RDN and a Total Supply of 100 million RDN on the same day.
Meanwhile, CoinSwitch placed the Raiden Network Token’s Coin Price at 25₵ on 19 July 2019. In addition, CoinSwitch estimated RDN’s Market Cap at $112.488 million and its 24-Hour Market Volume at $159,717 on the same day. According to CoinSwitch there was a Circulating Supply of 50.594 million RDN on 19 July 2019.
In conclusion, I think RDN has some value current value. However, the Raiden Network (RDN) is a token for speculators to watch because of the potential capabilities of the Raiden Network.
If it works as brainbot labs claims, the Raiden Network could make a lot of money. However, only time will tell if that money will make the RDN a good investment.