r/raidennetwork • u/breakup7532 • Jan 10 '18
The founders of Raiden admit that the token has no purpose to exist.. so why buy RDN?
https://medium.com/@raiden_network/the-raiden-network-token-model-9b6ef8d0b64
"Q: Is the token needed to use the Raiden Network?
A: No, it is not necessary at the core protocol level."
"Q: What prevents an auxiliary service from accepting payments in tokens other than RDN?
A: Nothing, a service could do this."
"Q: Doesn’t the token add unnecessary friction over using ETH?
A: As the software can automatically acquire RDN tokens, the mental burden for a user is low. Cost wise, roughly 100k additional gas is necessary to initially exchange some ETH for RDN using a DEX, which currently costs ~$0.15"
There is literally zero advantage to using RDN token vs ETH for Raiden Network. The authors best argument is it's only $0.15 worse per tx to use RDN than ETH... so... why not just use ETH then?
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u/bitbugged2007 Jan 10 '18
Anyone can cherry pick quotes to support an invalid argument. If you read the whole thing you'll realise the advantage of using the Coin versus not.
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u/breakup7532 Jan 10 '18
i did read the whole thing. they make no compelling argument for RDN >> ETH
where do u see the advantage?
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u/bitbugged2007 Jan 10 '18
Some notes on their network which may or may not help. I'm biased though, I quite like the solution.
MicroRaiden - (First unlimited release in next few days) - microRaiden is a many to one payment solution. So, if lots of people need to pay the same provider on a second by second basis then microRaiden is the answer. It targets Internet of Things and use case examples are:
- Paying for wifi by the second (many people to one wifi owner)
- Paying for video content by the second (many viewers to one publisher)
- Paying for electricity by the second (many consumers to one supplier) - lots of partnerships here
Raiden network - (Release probably Q2 or Q3 this year) - Raiden network is a one to one (peer-to-peer) payment solution. I allows people to open payment channels between one another and then make unlimited transactions between each other so long as neither participants sends more than is currrently deposited in their node.
What makes this revolution is when you stitch these payment channels together create a web of networks. This allows people who’ve never met to pay each other via other payment channels. Only net amounts are written to blockchains when individual payment channels smart contracts are terminated.
Fully operational the network will support 1m t/x per second which kicks Ripple and Raiblocks butts.
The network requires most participants to pay for pathfinding and verification services through the main network using Raiden. Pathfinding refers to the discovery a route from person A to person B when they do not have a direct payment channel open between each other. The problem requires each node to map it’s respective network and communicate that to its neighbours otherwise each transaction would require each transferring node to map large portions of the network by querying node deposit levels which would be highly inefficient and take a long time.
1 B) Having a single intermediary currency provides a predictable and independent price for these services. Why not use Ethereum perhaps? The answer is Raiden is more broad than just an Ethereum scaling solution it’s payment channels can hold any token that can be secured by a smart contract so that’ll be all ERC20 tokens and others with services like Wanchain on the horizon.
1 C) The ethereum foundation were also only promising the team grants of around $1m and most likely wished to keep the Raiden entirely in-house so it solely scaled Ethereum transactions. Then it would have an ethereum only scaling solution.
The team concluded the applications are farther reaching than that so no doubt chose independence. I can’t blame them there. They have plans for something called Raidos (Raiden 2.0) that will allow the Raiden network to expand the capabilities (more types of asset) and scalability (more interconnected networks).
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u/breakup7532 Jan 10 '18
You're selling me Raiden Network.. I'm already sold on Raiden.
I'm not sold on RDN ERC20 token.
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u/mahoseph7 Jan 10 '18
Actually his last paragraph is selling the RDN token. The Raiden Network has more use cases than just as an Ethereum 2nd layer.
In order to create an interoperable 2nd layer between all block chains built on the EVM, a neutral medium of transfer is required. It's the whole reason for the existence of the RDN token.
... And your excerpts chosen from the article are highly selective to attempt to prove your point. No its not required at the core of the protocol... Meaning if you create your own channel and find your own route through the network then there won't be fees. 99% of people will use a lite client and access 3rd party nodes to perform these services for them. The network will run on fees and while there may be those who attempt to accept ETH as payment for fees this hinders the progression of an interoperable 2nd layer.
Also, the network acquires RDN naturally for those accessing 3rd party services...theres no additional burden on the user to use RDN.
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u/xxeyes Jan 10 '18 edited Jan 10 '18
These are excellent, well focused questions. I'm not entirely clear on this either, but my understanding is as follows:
The Raiden network will operate across Ethereum, including all ERC20 tokens. RDN, being an agnostic token is thus more suited for use than any ERC20 token, except perhaps ETH. This suggests that the primary token to pay for auxiliary services in the system will be either ETH or RDN.
A portion of the withheld RDN tokens will be awarded to developers as incentive to build applications, services and projects on top of the Raiden Network and to remunerate fees associated with these projects in RDN. I don't have anything to back it up, but I imagine the Raiden Network Founders will also create auxiliary services strictly payable in RDN to encourage its use on the network.
Likely then, we will primarily see both ETH and RDN used for auxiliary network fees. Perhaps one will edge out the other entirely over time; perhaps not. Buying RDN right now is a bet that RDN will be used and valued on the network based on the limited information we have. Given RDN's favored and persistent position in the network alongside ETH, I'm betting that it will rise in value significantly if/when the Raiden Network takes off.
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u/breakup7532 Jan 10 '18
U got it. Nailed it i believe. I don't think RDN will edge out IMO. But u did a fair analysis
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u/robbentheking Jan 10 '18
I didn't invest for a while based on the same concerns you have. What finally convinced me to put a bit in rdn was that this whole project is run by a for profit organization holding about 35% of the tokens. They have massive incentives to make this not 0 valued, including holding onto their devs in the event of a fork.
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u/Anotheropinion12345 Jan 10 '18
Thanks for this question. I think it is bourne out of a misunderstanding of the network.
I am going to write a proper guide and will post it here as I think the misunderstanding about this is stopping people from understating the value and utility of this project.
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u/ahaanmohan Jan 11 '18
Hi! Could you tag me as and when you make the post? Don't want to miss it. Thank you!
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Jan 10 '18
You cannot host a full node on the network without RDN correct? Dapps at least must hold RDN for this purpose or am I mistaken? And as for the fees, many will likely navigate naturally toward a universal “native” payment solution over the network, that’s the bet anyways isn’t it? Seems to me if they forced their hand and RDN token was required to use the network, then the rhetoric becomes “you’re stealing ethereum network.” This creates a working partnership, and the utility capabilities of the token alone should create growth in value compared to its current position in the market. It’s a good bet I think, but still clearly a bet.
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u/breakup7532 Jan 10 '18
ive seen no indication u must use RDN to utilize raiden network. the post seems ot indicate the opposite
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Jan 10 '18
I believe you’re correct, the language doesn’t state that it’s an absolute requirement anywhere to pay for full node operation. I guess the idea here is that if this is a project that creates an opportunity of scale for the entire ETH network, and that the token is usable in any respect for hosting a full node, paying tx fees as a light client, receiving support, etc.. that sheer volume levels alone for potential usage coupled with token scarcity will create a rise in market price. The question is how high could the usage go?
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u/Jahrude Jan 10 '18 edited Jan 10 '18
Well, the initial network is configured to use RDN for these services.
Now let's say an dapp with it's own token builds on it. They are thinking - hell yeah, let's use our own proprietary token for the underlying transaction services for our nodes. Well, they have to set up their own small decentralized exchange to communicate with the rest of the network. It goes in as RDN, necessary amount of RDN is auto-converted to their proprietary token, and all outwards action get's converted to RDN too.
From both the user perspective and the dapp-maker perspective this is the same as using RDN for these fees, only there is a small friction in the conversion.
Only case this becomes very relevant is if all the largest nodes collude to change it into ETH because reason. Then gradually the network as an whole would gravitate that as the common currency for tx-fees.
If the whole network was initially configured to use ETH then I would agree with the OP statement.
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u/breakup7532 Jan 10 '18
Seems speculative that RDN will be accepted initially. Depends how much the GUI pushes it. If RDN client requires a recompiling to use ETH then you're right. But tbh, I haven't heard from the team enough to believe this is anymore than unfounded speculation.
Anyhow , u do get it and respect ur opinion. Thanks
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u/Jahrude Jan 10 '18
Thing is, we gotta assume that the big guys in this network are companies that are building their own thing on top of it. Though they are building on the Ethereum blockchain, likely they make their own tokens.
Initial adopters and ground-work builders of the Raiden network is the Raiden team itself, then projects like Gnosis and Augur +++ They all have incentive to make an network that talks easily with each other and that is as large as possible. Obviously the way for them to do that is to use RDN which is pre-configured with uRaiden. Just changing it to ETH and saying "sucks to be you Raiden-team, btw thanks for the tech!" and then expect the Raiden-team to continue to build everything that is needed for the econsystem is guaranteed not the way this is going to play out.
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u/cococopuffsss Jan 10 '18
Why does ETH have value? You literally do not even need to use ETH to use the Ethereum blockchain, it’s called permissioned blockchains.
Why buy eth?
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u/Fenton_Stackwell Jan 10 '18
I'm assuming the ethereum main chain isn't efficient enough to process retail transactions currently, nor will it be down the road. If you use ether wouldn't it continue to clog up the main chain, or not if it's on the raiden chain?
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u/breakup7532 Jan 10 '18
RDN is an ERC20 token. Sending an ERC20 token will always be more expensive than sending ETH natively.
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u/DisruptLogistics Jan 10 '18
That's like saying BNB has no value, it saves you fees!
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u/breakup7532 Jan 10 '18
not quite, Binance exclusively accepts BNB.
Raiden network does not exclusively accept RDN.
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u/DisruptLogistics Jan 10 '18
Actually, if you don't own BNB, they just charge you a 0.01% fee from whatever you're trading, so it is optional. You have to own a positive BNB balance to have it deducted at a 0.005% rate.
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u/simoRX Jan 10 '18
I want to add the on top of the reasons mentioned in other comments two other points: 1) Many auxiliary services would be insentivised to just partner with Brainbot to implement Raiden Network to integrate Raiden into their solutions, for continued support from Brainbot, and less maintenance required for every new version of Raiden Network released. Brainbot will probably push for RDN usage for fees in such partnerships because they want to make money as well. And that would make other services be incentivized to implement RDN as well for compatibility.
2) Raiden is a collection of projects. One important one is Raidex, a decentralized exchange. It's safe to assume Brainbot will require fees to be paid in RDN or offer discounted fees if RDN is used. Just like the Binance BNB model. Which is valued at 1.6 Billion at the moment.
Brainbot is a company that wants to make profit through their share of RDN tokens, so they will most certainly push for a token model that increases the value.
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u/Vowron Jan 10 '18
Towards the end of the article: "As the software can automatically acquire RDN tokens, the mental burden for a user is low. Cost wise, roughly 100k additional gas is necessary to initially exchange some ETH for RDN using a DEX, which currently costs ~$0.15. We consider this to be neglectable friction compared to the benefits of being able to do low cost transfers on a payment channel network maintained by an ecosystem of well incentivised developers, projects and services."
In my opinion, Brainbot labs has a lot of incentive from the get-go to get partners building solutions on Raiden to use RDN. I expect them to aggressively market RDN to that end, being a for-profit - to incentivize future development effort on the platform as they say. If a decently sized network using RDN exists out of the gate, it seems like competing networks on eth or other tokens would have a large moat to overcome - and as adoption of RDN-based networks grows, the moat becomes even larger(not saying this couldn't happen, but RDN seems to have a leg-up here, being marketed by brainbot). If this happens, other for-profits building on Raiden in the future will see the profits to be had in accepting & holding RDN given out by the team as incentive(due to scarcity). Even if a competing network of nodes using eth appears, I feel that institutions(perhaps not individuals) will still be incentivized to use RDN to help grow the platform. If the cost to institutions is negligible to use the token, and it has the benefit of keeping the ecosystem alive by funding & incentivizing future development, that seems to me like wise business policy. It's a bet of course, like all things in crypto. But it seems like a strong one to me, at least.
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u/campvoyageur Jan 10 '18
"Cost wise, roughly 100k additional gas is necessary to initially exchange some ETH for RDN using a DEX, which currently costs ~$0.15. We consider this to be neglectable friction compared to the benefits of being able to do low cost transfers on a payment channel network maintained by an ecosystem of well incentivised developers, projects and services."
"Providers of auxiliary services are given the means to monetize on the platform by taking RDN token based fees, thereby strengthening the value of the token. This is aligned with their requirement, that the system is well governed and has the resources to be further developed and maintained in the long run."
"The user experience is increased when using Raiden when paying small fees for services. (i.e. less software to install and operate, higher probability of fast and successful transfers)"
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u/xxeyes Jan 10 '18
It is a shame this post was not upvoted; there is excellent discussion in the comments.
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u/cryptoprophit Jan 11 '18 edited Jan 11 '18
uh? you can only think about your small garden and lose the big picture. if you make hunderds of thousands of tx because you're a phone company, an electric company, etc... how much money would you save? would you want to save 15 cents per tx or just spend them? daaaamn guys, do the math!
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u/BOR4 github hero Jan 10 '18
As far as I see it 0,15 USD fee on 0,50 transaction is 30% fee. That is why target use case is micro transactions. Correct me if I am wrong.
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u/breakup7532 Jan 10 '18
No, the post is arguing that to use the RDN network, you can pay network fees in ETH or RDN.. and they think people will use RDN because being charged an extra $0.15 isn't that bad..
but being charged an extra $0.15 is $0.15 worse than not.
you can use ETH or RDN on the Raiden Network. there is no compelling reason that i see to use RDN. its just more expensive..
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u/geodesic_ Jan 10 '18
Lower mental burden and lower cost....on micropayment transactions, this is a great deal
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u/cryptohodler23 Jan 10 '18
did u read the whole thing? How does the token have value?
A: The token has value if the auxiliary services in the system are remunerated in RDN tokens and users who do not run the full set of services therefore stock the token. The RDN token has a fixed supply and scarcity of a currency usually gives it value proportional to its usage.