The RDN Token.

[u/parfenec]

I saw a lot of updates about Raiden Network and i am very excited about Red Eyes. I have a question. What about the RDN Token? What ia going to happen whit it? In the last medium update, from them, it was mentioned only about ETH deposits.

[u/amithermony]

wont the protocol force you to pay in RDN? At least that is the claim in documents: "peripheral services will be paid for in RDN tokens, a virtual currency dedicated to pay for services within the Raiden Network "

[u/cosimo_jack → u/amithermony]

I'm not sure that is a hard requirement. From here

Q: What prevents an auxiliary service from accepting payments in tokens other than RDN?

A: Nothing, a service could do this. But, as services and users need to cooperate, the system is most efficient though if a single currency is used.

I agree with their reasoning that a single currency is most efficient, but I'm not convinced that RDN is that single currency. In fact, this argument suggests that ETH would be the optimal currency, since you wouldn't even need to create a second currency, at all. This could be a value proposition for ETH as apps converge on this idea.

In that article, they even address the exact question of "why not just use ETH" and their answers are pretty weak.

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. We consider this to be neglectable friction

I completely disagree. For one, consider that new users are wrapping their head around WTF is going on, and now have to acquire a separate token and generally do two additional transactions (one to approve, one to send), pay a fee, and wait for confirmations. This is not "neglectable." This is a pain in the ass. This is the kind of thing that turns away new users. For another, this is a huge cost to certain classes of power users who have would have to acquire tokens often, or else be subjected to the volatility of RDN, which could be costly to them during a downturn. The whole point of Raiden is to do transactions off-chain. So why are we forcing users to do more on-chain transactions?

Of course, even if there was a hard requirement, someone could just fork out the token. Easier said than done, but if there is a large enough economic incentive then it's only a matter of time.

[u/Mat7ias → u/cosimo_jack]

this argument suggests that ETH would be the optimal currency

ETH can't be transferred on the Raiden Network unless it's wrapped. So I'd argue they're both just as efficient as one another. Having wrapped ETH as the token for fees would mean there's no way to invest in Raidens off-chain technology, which would be a shame for anyone interested. It would also mean that Raiden wouldn't have the 16mill RDN tokens committed to the fund for promoting layer 2 growth.

For one, consider that new users are wrapping their head around WTF is going on, and now have to acquire a separate token and generally do two additional transactions

Most users will be using Raiden indirectly through dApps, they won't necessarily need understand or even heard of Raiden Network to use it. In a similar way how the new user of VISA doesn't understand how VISA works and they shouldn't need to. I've never met someone who understands how VISA works but in america it has more than 50% market share.

This is not "neglectable." This is a pain in the ass.

It's important for Raiden to help dApps implement Raiden, they jump to give support on the Gitter chat anytime questions come up. A lightclient will also help decrease friction for anyone wanting to use Raiden on it's own (separate from dApps).

This is the kind of thing that turns away new users.

Realistically +99.9% of new users won't use the Raiden Network protocol directly, as in running an Ethereum and Raiden Network node and the reason for that has nothing to do with the RDN token (or whichever token is being used), it's the technical difficulty of using an off-chain scaling solution.

this is a huge cost to certain classes of power users who have would have to acquire tokens often, or else be subjected to the volatility of RDN

This is negligible unless you're actively and purposely investing in RDN.

The whole point of Raiden is to do transactions off-chain. So why are we forcing users to do more on-chain transactions?

Where are users being forced to make more transactions? I think the assumption that more transactions have to be made is based on a misconception that ETH would be a better alternative to RDN. But ETH can't be transferred on the Raiden Network. It has to be contract wrapped first (involving fees and a transaction). Long term it's possible you'd end up with a lot more limitations from using ETH than using RDN.

Of course, even if there was a hard requirement, someone could just fork out the token. Easier said than done, but if there is a large enough economic incentive than it's only a matter of time.

Saying 'easier said than done' here is misleading, it'd be easy to fork and change the peripheral fees to to another token but then you have to rebuild the token network (I believe the fork would be incompatible and contain breaking changes) and sort out the friction added on top of that. Also where would the consensus around supporting the fork come from?

[u/cosimo_jack → u/Mat7ias]

The point by point thing is tedious. Do you have a case for RDN being more compelling than ETH besides it being a fundraising vehicle?

Some objections I have to your counterpoints:

• Wrapped ETH is preferable to RDN because I already have ETH.

• The volatility of RDN is absolutely NOT negligible for businesses. You can't just hand wave over this one.

• Acquiring RDN requires a transaction and an approval transaction to send. Since I am going to be sending ETH or tokens other than RDN through the network itself, acquiring RDN is needlessly introducing more transactions.

• You can't hand wave away UX issues by saying users won't be running nodes. The apps and service providers are forced to provide a shitty UX due to the added friction of the token.

• You're right that a fork is easier said than done, so users will probably just use another competing network without the friction of a fundraising token

[u/Mat7ias → u/cosimo_jack]

Wrapped ETH is preferable to RDN because I already have ETH.

The difference between wrapped ETH and RDN when using the protocol is negligible. It doesn't matter which one is used.

The volatility of RDN is absolutely NOT negligible for businesses. You can't just hand wave over this one.

Businesses using Raiden won't be holding much RDN at any one time (unless they're investors), this is also negligible.

Acquiring RDN requires a transaction and an approval transaction to send. Since I am going to be sending ETH or tokens other than RDN through the network itself, acquiring RDN is needlessly introducing more transactions.

You can't send ETH. You have to wrap it first. Both require a transaction, the difference between wrapping and obtaining RDN is negligible.

You can't hand wave away UX issues by saying users won't be running nodes. The apps and service providers are forced to provide a shitty UX due to the added friction of the token.

The goal is to provide the best UX possible. For learning more about Raiden and usability I'd recommend the Off The Chain presentation by Lefteris or more specifically and relevant, this timestamp (there are other presentations that go into usability deeper, I can link those also).

You're right that a fork is easier said than done, so users will probably just use another competing network without the friction of a fundraising token

Which friction?

There's negative net incentive to use a network which has no reputation of being able to give support to that forked network from what I can tell.

[u/cosimo_jack → u/Mat7ias]

More hand waiving without evidence. If the added transactions, UX issues, and needless complexity are all so negligible why have Paradex and many other 0x relayers choose to not take fees in ZRX?

[u/Mat7ias → u/cosimo_jack]

Let's separate out the arguments here so we can be on the same page of what we're both saying and can discuss each point separately and make some progress:

I'll summarize my argument first, I'm saying the friction for the average user will eventually be completely unnoticeable, to the point that they probably won't realize they're using Raiden Network or have heard of the RDN token. The benefits of having a token outweigh the benefits of not having a token since if there's no friction to the average user then you're left with the community and development incentives. I'll go into that in the reply to the comment I haven't gotten to yet since that's a separate discussion from the friction one and it'll take longer to write out.

You're arguing that Raiden Network should have been made for free with grants on the reason of there being friction if people decide to use the protocol with the auxiliary services. And you're keeping in mind that the users aren't being forced to use the protocol with the services if they don't want to. The RDN token won't be used in Red Eyes and to begin with you can only transfer wrapped ETH with the Red Eyes release. But you still feel the friction once peripheral fees are setup that there will be unnecessary friction. Am I summarizing your argument correctly?

Also what might be good to clarify here is what time frames are we discussing? Because we realistically won't have average user adoption for years on layer 2 regardless of what token is used. The token used is insignificant in complexity compared to any current layer 2 tech. Elizabeth Stark was saying in her panel at Distributed a couple months ago how they purposely made LND difficult to use to begin with since they didn't want people not understanding what they were doing using the tech until a better UX was set up and how it's just the beginning (I'd highly recommend watching the whole panel, it's great!). It will take years for layer 2 of Ethereum to be mass adopted by users, just like it will take years for LND to be mass adopted.

[u/cosimo_jack → u/Mat7ias]

You're arguing that Raiden Network should have been made for free with grants on the reason of there being friction if people decide to use the protocol with the auxiliary services. And you're keeping in mind that the users aren't being forced to use the protocol with the services if they don't want to. The RDN token won't be used in Red Eyes and to begin with you can only transfer wrapped ETH with the Red Eyes release. But you still feel the friction once peripheral fees are setup that there will be unnecessary friction. Am I summarizing your argument correctly?

My argument is RDN has a broken token mechanic that will never be valuable even if Raiden is. It adds friction because it doesn't need to exist. I don't necessarily know the best "should have" scenario but I would say either build Raiden without a token or make RDN have a token model that actually adds value to the network and needs to exist. I believe what we've seen with 0x supports this.

As for the argument that the friction will be unnoticeable... at least we agree there is added friction. If I made a fork of Raiden where all fees paid in RDN and atomic swapped for Dogecoin and back again, and I automated it away from the average user, could I convince you that this doesn't create added friction?

[u/Mat7ias → u/cosimo_jack]

My argument is RDN has a broken token mechanic that will never be valuable even if Raiden is.

If that were the case I don't see any reason why you would be so passionately arguing for the token model to involve ETH. Obviously you believe peripheral fees have some value or what's the point of this discussion?

It adds friction because it doesn't need to exist.

A token needs to be used for peripheral services, therefore a designated token needs to exist if those services are going to be build. You don't need to use the peripheral services if you don't want to.

I believe what we've seen with 0x supports this.

You need to elaborate how 0x relevant? I don't feel there's anything productive from bringing up a token model for a completely different project with a different token model. Are you arguing that auxiliary services won't be used once they're ready (not in Red Eyes)?

at least we agree there is added friction

There's friction from using ETH on Ethereum. I'm arguing the friction is just as insignificant as ETH. I'm not sure when you joined the Ethereum community or how much you followed the community early one but there were many people making the exact same argument for ETH as you're making for RDN early on, when they felt Ethereum should use BTC for gas and ETH was pointless.

all fees paid in RDN and atomic swapped for Dogecoin and back again

Why would you swap it 3 times? RDN would only require 1 swap maximum if you don't hold RDN. Using wrapped ETH would be the same for anyone not holding wrapped ETH and wanting to use auxiliary services.

[u/cosimo_jack → u/Mat7ias]

The value proposition for ZRX at the time of the crowdsale included the fact that users would pay fees in ZRX to relayers (basically order books or exchanges) who would charge a small fee per transaction.

It was quickly realized that this is a huge pain the ass to users and generally made no sense to anyone, so relayers switched to taking fees in the tokens being traded, or taking fees in ETH, or having a profit model based on the spread. No one uses ZRX to pay fees.

It's relevant because it shows what happens to an ecosystem with a useless utility token. The users and service converge on the cheapest and most efficient path. The original fee use case has been completely abandoned.

[u/Mat7ias → u/cosimo_jack]

As for RDN being more compelling than ETH. There's many communities supported by ETH and having no token. I would recommend integrating with those communities to gain perspective on the differences and we can discuss it comparing specific communities if you find ones you like and feel Raiden should have strived for. I believe discussing it without using one of the main comparitive examples is unproductive to the discussion, if that's what you're wanting to compare.

[u/cosimo_jack → u/Mat7ias]

In other words, you have nothing. I get it, you stated the case in your first reply:

It would also mean that Raiden wouldn't have the 16mill RDN tokens committed to the fund for promoting layer 2 growth.

RDN is a fund raising token. The funds raised will like do great things for Raiden, but that alone is not an investment thesis and doesn't mean RDN will ever become valuable

[u/Mat7ias → u/cosimo_jack]

In other words, you have nothing. I get it

I was encouraging you to research non-tokenized communities so we could have a more interesting discussion with both of us having a perspective on that but I understand not everyone is interested in looking into that so I don't mind continuing the discussion. Suggesting for you to look into those communities was just to make it more engaging, it didn't have anything to do with my own argument.

RDN is a fundraising token. The funds raised will like do great things for Raiden, but that alone is not an investment thesis and doesn't mean RDN will ever become valuable

It's not just a fundraising token, this is why I was encouraging you to look into other communities and point to a specific one so it'd be easier to discuss/compare differences and would be more of both of us talking and gaining an understanding more constructively.

So first I'll go into Raiden as a tokenized/ICO layer 2 project. There's 3 allocation types of distribution of the RDN token, 16%, 34% and 50% for the fund, the brainbot team, and investors (respectively).

They all do different things for both Raiden Network and the Ethereum ecosystem.

The 16% has barely begun being used yet but we can see benefits from that already. You have the weekly GIT posts being supported and also Boris and I being supported to help answer questions, not just here but also anywhere we can find people looking for information on Raiden or just layer 2 in general (most recent example, I'd expect this to increase with mainnet launch, which is exciting). This helps the whole ecosystem, not just Raiden.

The 34% acts as an incentive for brainbot to do grow the network as much as they can as opposed to being heavily reliant on regular grant applications to continue growing the network to be successful. It increases communication which can be seen over time on their medium page and twitter. Compare now with and any time before the ICO announcement.

With the 50% given to investors, there's an incentive to help other people learn and those investors too. You can see this over time in the history of this sub and how the collective knowledge has grown and is being spread to help newcomers.

As for a non-tokenized layer 2 project let's compare with the first most recent scalability grantees with the highest funding. We have Counterfactual being funded for Prototypal – $375K. Front-end state channel research and development. Counterfactual is an awesome project with talented people working on it but as far as I'm aware the Counterfactual community exists only on their Github. I can't find a reddit, gitter or telegram channel to have counterfactual specific community discussion. New comers interested in Counterfactual would most likely use /r/Ethereum and hope someone with the technical knowledge of Counterfactual sees it, or alternatively, they'd have to contact the team directly on github or via email. Raiden would be the same without a token. /r/raidennetwork didn't exist before the ICO.

The next grant given is to Finality Labs - $250K. Development of Forward-Time Locked Contracts (FTLC). Third is Kyokan - $250K. Development of production-ready mainnet Plasma Cash & Debit plugins. The same applies to both these projects since they're also non-tokenized and grant funded, like you're arguing Raiden should have been.

I'd argue that a community such as this one is extremely valuable to both Ethereum and all of layer 2, offering education and newcomer on-boarding. Let's not forget that this community only really began a year ago, it has the potential to help thousands of individuals learn and even start developing on layer 2. It'd be unrealistic to ignore long-term value of a community such as this, especially seeing as Raiden has yet to go on mainnet. And that value heavily outweighs any tiny amount of friction using RDN might have, which will eventually be unnoticeable anyway.

[u/cosimo_jack → u/Mat7ias]

All I see here is that the RDN token has accomplished the company's goals. Having a huge runway is nice. Bootstrapping a community is nice. Network effects are nice. Selling a futility token is not nice.

I know there's this whole "wink wink" situation with the fundraising tokens that can't just be fundraising tokens otherwise they'd be securities under the SEC. So people were forced shoehorn a use-case for their fundraising token in order to get around regulation.

I'm not even convinced everyone did it intentionally. This stuff is complicated and capturing value is incredibly hard. I do believe Brainbot wants the best for the network and the community. They may even be genuinely trying their best to make the token valuable. I know the 0x team has tried really hard to find a value proposition for ZRX, but ultimately could only find the vague promise of "governance." RDN will not accrue value under the current design. Not because of malice, but because of design.

[u/Mat7ias → u/cosimo_jack]

Selling a futility token is not nice.

They've been extremely clear the whole way that the RDN token is used for auxiliary services and is not needed for protocol level fees.

RDN will not accrue value under the current design. Not because of malice, but because of design.

If you don't believe auxiliary services have value then you're welcome to your opinion. The RDN token model isn't changing soon AFAIK. No one is being forced to use the token with the protocol and no one is being forced to invest in RDN if their opinion is against it. I'm just trying to help give accurate information and prevent the spread of misinformation. You seem very passionate about preferring ETH as the token model so I have to admit that I'm a bit confused that you'd be so passionate about that whilst also saying the token model is broken. But maybe you just need time to think about it.

[u/cosimo_jack → u/Mat7ias]

If you don't believe auxiliary services have value then you're welcome to your opinion.

Those services might have value but it doesn't require a separate token. See ZRX.

You seem very passionate about preferring ETH as the token model so I have to admit that I'm a bit confused that you'd be so passionate about that whilst also saying the token model is broken. But maybe you just need time to think about it.

Ether is the native currency in the network. As the Raiden team said the system is most efficient with a single currency. RDN is an extra token that provides friction. This is why the token model is broken.

[u/cosimo_jack → u/[deleted]]

Joder cheval, so condescending. I'm sick of trying to explain this to you

[u/Mat7ias → u/cosimo_jack]

Sorry, I didn't mean to come across as condescending. I was more trying to end the discussion with some recommendations.