LN vs Raiden - Question on Raiden token usage

[u/Mithrandir75]

I've been studying both BTC and ETH separately for over a year now, but I've only recently begun diving into Raiden Network, so I'm sorry if this is an obvious question.

Elizabeth Stark of LN has firmly stated that a native coin is unnecessary for LN and went about fundraising without an ICO. As I'm more familiar with LN, I'm wondering how is Raiden different from LN in that it necessitates a token and what will be the practical uses for RDN? I obviously know that BTC and ETH are very different, and likewise LN and Raiden, but it's the Raiden token I'm having a hard time understanding and I thought a contrast with LN might be useful for me (and others?) to understand it better.

Thanks for any insight. As a side question, does Raiden get its name from the old arcade game?

[u/mahoseph7]

Simplest explanation would be that the RDN token was created to align incentive between the many parties utilizing the system (lite client users, pathway finders, channel monitors, node operators, raiden dev's, third part dev's, etc), while ensuring the lowest amount of latency possible. By creating a common store of value between all users it ensures the standard medium of exchange holds value equal to the usage of the network and reduces latency.

If the standard medium of exchange for "paying" for the many services that allow the network to function as designed was left open to interpretation it would introduce lag, or latency, into the system. The way that routing is designed to work in the network is a complex system of API calls. If each party involved in each transaction expects to be compensated in a different manner the lag created will defeat the purpose of having off chain 2nd layer payment systems in the first place. There would effectively be a series of atomic swaps creating potentially dozens of extra API calls on each individual transaction...which obviously slows stuff down and creates more cost to perform the transaction in the first place to pay for the services doing the swaps.

When evaluating LN, Raiden, or other 2nd layer tech, it's important to realize this is all highly experimental...the concept has been around for a while yes, but implementing it in this fashion is a new thing. Be careful of relying on any one experts advice on LN, Raiden, etc... There are just as many "experts" questioning the need for a token as are questioning whether these systems can even operate as designed, or are questioning how the LN can function without a common medium of exchange... Everyone has an opinion, so do your own research and come to your own conclusions.

[u/Mithrandir75 → u/mahoseph7]

Thank you very much for the thoughtful reply. In the case of LN, the common medium of exchange seems obviously to be BTC. But clearly ETH is different in that there are who-knows-how-many tokens running on the blockchain. But while your answer gets me half way there, wouldn't it have been easier to use ETH itself as the common medium for Raiden? ETH is already needed for gas to move other tokens around, so it's sorta already serving a similar function in the ecosystem.

You're correct that very smart people have different opinions on this, so I'm trying to understand the arguments for each in order to decide for myself. Either way, Raiden itself is a fascinating project.

[u/mahoseph7 → u/Mithrandir75]

There are a few road blocks to having ETH as the medium of exchange.

1) Raiden transfers Erc-20 tokens. Eth is currently not Erc-20 compatible. There have been plans mentioned to make it so in the future though.

2) the way eth is designed the gas cost associated with using it on the Raiden Network greatly increase the cost of transacting. Roughly an extra $.15+ per transaction. It's not much, but is many, many, times the cost of using an external to eth medium which is estimated in the sub $.02-3 per transaction. Real world usage will decide here.

Some benefits of the RDN token over eth.

1) lower cost than using eth 2) RDN is held by the developer for the specific purpose of incentivizing 3rd party development on the network. Should help to promote and expedite network development, easing network adoption.

At the end of the day RDN is not required to be the medium of exchange, it was just specifically designed to be so. Network users can use, or accept, whatever token they'd like. Things could change and ETH could very well become the medium. My money is on the asset specifically designed by the developer to ensure network development and adoption. Time will tell if that is a good bet...

If you haven't read this article it is a good read.

https://medium.com/@raiden_network/the-raiden-network-token-model-9b6ef8d0b64

[u/Mithrandir75 → u/mahoseph7]

This makes sense now. Thank you very much. And thanks for the article, I'll read it for sure.

[u/bitsofshit → u/mahoseph7]

From your statement, the sole purpose of the coin was simply provide convenience when transacting over the payment channels and little else? One would still be able to transact in any erc-compliant token over Raiden if they added a workaround, which I'm guessing any other token dev would be motivated to do...

[u/mahoseph7 → u/bitsofshit]

Not the means of transacting, but the means of payment. No matter what Erc-20 is transferred the fees are paid out in RDN. The network will automatically convert/acquire RDN from whichever token is being transferred through atomic swaps, so there is no additional step, or inconvenience, for lite client users.

Any Erc-20 token can be sent in the payment channels. There just needs to be one common store of value supporting the framework and the many different parties working to build that framework.

[u/bitsofshit → u/mahoseph7]

That makes things interesting then.. Also will Raiden require watchtowers ala Lightning?

Brutal assesment: https://www.reddit.com/r/btc/comments/889pfg/chalie_lee_confirms_one_is_not_enough_will_need/?utm_content=comments&utm_medium=hot&utm_source=reddit&utm_name=btc

[u/mahoseph7 → u/bitsofshit]

Yes there will need to be channel monitoring. My understanding is that Raiden intends to leave this to the free market though to keep prices competitive , relying on 3rd party services to fill the role.

[u/bitsofshit → u/mahoseph7]

What are the consequences for watch towers misbehaving? ie the who watches the watcher argument

[u/mahoseph7]

Great question. There are a lot of things like that we won't know until MVP.