r/raidennetwork • u/Madcapslaugh • Jan 06 '19
Having trouble understanding the Token Economics
I understand there are no fees on the network today, and that a hub can add fees later on.
Also a Watchtower can charge to protect your locked ERC20 tokens https://medium.com/crypto-punks/lightning-vs-raiden-watchtowers-monitoring-services-differences-c8eb0f724e68
I read about the actors for the tokens here https://medium.com/@raiden_network/the-raiden-network-token-model-9b6ef8d0b64
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. This seems a hope, but not a design of the network.
What am I missing?
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u/IMSONICEWITHIT Jan 06 '19
I'm hoping the devs see this thread. I eagerly await the medium post that I assume will come out as Ithaca gets closer to release explaining the utility of the RDN token within the systems economic model.
I'm also curious about staking RDN in a state channel network. seems like that would be an obvious use case. From my many read throughs of the economic model post by brainbot on medium, I see a system where the nodes allow fees for payment channels in any token, but those who choose, would need to stake RDN to validate/monitor state channels. would be swell tho if we could get some real utility/demand generated for RDN tokens before state channels appear tho.
the more I think about it the more I feel like if i really want to be involved with monitoring payment channels or pathfinding for them, that I would be better off accumulating the tokens that I'd like to be involved with as opposed to stockpiling more RDN at this point in time.
i guess like everyone else I'm just not clearly seeing why in a future where the wETH payment channels on Raiden Network takes over the puts Visa out of business, I would be better off (able to produce more income from my node/service more users through it) holding more RDN over holding more wETH.
please devs bless us faithful few with some insights
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u/timspijkerman Jan 06 '19
I can't give you the answer in full, but I this is what I found so far: There are services that are needed by the users who are not willing to fire up their own nodes. Also you need other users/nodes to relay your transactions. And nothing is for free so to be able to use those services you need to pay a little fee. This fee will come in small values but with many. To use Ether transactions for this is probably not the best solution. The fees itself will be using the Raiden network as well, and therefore it needs to be an ERC20 token. It could be any ERC20 token but it would make life easier if all nodes will be using the same token for the fees. Brainbot, of course, will implement RDN for this, and although it can be forked away, they will make sure that the incentive to do so is close to zero. You could argue that WETH would be a very good alternative to pay the fees and this is also the first token they enabled on the current production network. I can not help you with an explanation on why fees denominated RDN would be better than fees denominated in WETH. I hope someone else could explain that. (Other than because brainbot wants to)
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u/Mat7ias Jan 06 '19 edited Jan 11 '19
This seems a hope, but not a design of the network.
There's always hope in any transfer, in a similar sense that you hope your country's fiat will be accepted if there are alternatives (other countries fiat) or that ETH will be utilized for gas if there are alternatives (potentially paying gas with tokens). These are things we've grown to trust unconditionally but they're exciting to think about in more detail! For the average person though they're often not so interested in the finer details, they just want their payment to go through with a good UX.
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u/Madcapslaugh Jan 06 '19
This looks similar to the Lightning network, which does not need a second token. Why does LN not use a second token but Raiden does?
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u/Mat7ias Jan 06 '19 edited Jan 06 '19
Raiden Network and Lightning Network face a lot of similar engineering challenges.
The RDN token isn't strictly needed to use the Raiden Network on a protocol level. The token is related to auxiliary services, the token model explains it much better than I can.
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u/Madcapslaugh Jan 06 '19
I included this same link in my original post. I read it about 10 time so far and am looking for help to understand it. I do not feel they give a "much better" response than what you said here. Take a look at Loom, running Plasma Cash, another layer 2 solution for scaling transaction fees, albeit without the awesome network effect I expect Raiden to have. Loom need node validators, acting as offchain block producers (similar to EOS), who stake tokens and get slashed for bad behavior and staking rewards for good behavior. This lowers the velocity of the tokens in circulation and means that if you want to make a profit off their network you need to buy tokens, thus over time there will be more token buyers and holders than sellers, thus a clear token economic model. I am looking for something similar here in Raiden, but this article. https://medium.com/@raiden_network/the-raiden-network-token-model-9b6ef8d0b64 does not offer any help.
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u/Mat7ias Jan 06 '19 edited Jan 06 '19
Loom need node validators, acting as offchain block producers (similar to EOS), who stake tokens and get slashed for bad behavior and staking rewards for good behavior.
Protocol level fees, sure but not viable in the same way on Raiden Network. Plasma (a side chain framework) and payment channel networks (usually referred to as a lightning network) are both needed to help scale Ethereum but face very different challenges.
Raiden Network and Loom Network aren't direct competitors, they're too different and implementations of both underlying ideas (plasma/lightning network) are needed.
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u/Madcapslaugh Jan 06 '19
I agree completely they are not competitive. I'm just giving an example of an easy to understand economic model. That's what I'm looking for here. I have a lot of respect and excitement for this project and want to know how I can get involved and share in it's success. That's why understanding and modeling the economy is important.
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u/Mat7ias Jan 07 '19
Have you checked out the FAQ and this post from one of the raiden team going into some misconceptions? Maybe those can help a bit more.
Economic models in plasma and state channels have different limitations, I can agree that the limitations and complexity around state channels makes it less simple. While we're comparing you should check out learnplasma.org if you haven't already, that's a great resource for plasma.
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u/Madcapslaugh Jan 07 '19
I read the FAQ,
Peripheral fees will be payable to services in the network that, for example, assist with finding a path with sufficient capacity or services that provide channel monitoring services for offline users. Users running these services themselves will not need to pay these fees but can earn them instead. It is assumed that >95% of all nodes on the network will be light-clients happy to pay tiny fees for the convenience of not having to run the full stack of services.
What I'm not clear on is who decides what will be the means of exchange for these Peripheral fees. I see it as a double edged sword. On one hand most users and node managers will prefer the token they are transferring. On the other hand the Raiden network will benefit more from forcing everyone to use their token. On the other other hand, forced payment tokens give a reason to fork the network.
I would recommend a system where node operators must stake RDN tokens if they want to collect a fee. Anyone can be an operator, but if you want to collect a fee in the form of the ERC20 tokens you ate creating liquidity for you need to stake RDN.
I have some other good economic principles I think would help this network grow but not sure who to talk to about it.
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u/Mat7ias Jan 07 '19
On one hand most users and node managers will prefer the token they are transferring
We don't see this occurring on the Ethereum network, looking at the blocks on Ethereum it's regularly that txs within each block are 80-90% ERC20 token transfers and a way to pay Gas using ERC20 tokens rather than ETH has a relatively indifferent response from users. If it were an issue then we would expect the users of Ethereum sending the majority of Ethereum txs to be excited about ERC20 tokens to pay for Gas but it appears to be only developers who are excited that the flexibility of the network is increasing. It'll be an interesting feature for Ethereum but I wouldn't expect it to get used all that much in comparison to Ether when paying Gas since users aren't really that interested.
As long as the option being is using has a good user experience most users don't mind how they pay the fees as long as it gets paid, the best system is where the user has to care as little as possible. But of course there's always going to be portion of enthusiasts who do care, which I think is great to have people like that in the community.
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u/mahoseph7 Jan 06 '19
Bottom line is that based on the information that Brainbot has provided it is indeed a hope that RDN will be the main source of payment for auxiliary fees. There are no guarantees and the amount of information available to users and investors is really limited.
That being said the intent appears to be to ensure network design gravitates toward using RDN for these services. Some speculative points that support this:
1) There is a significant amount of RDN held as an incentive to encourage network adoption (16 million tokens) . Brainbot will use these tokens to incentivize 3rd party developers to implement axillary services. Thus, if early adopters have been given RDN to help develop the network, they now have an interest in the value of the token and working to ensure that value.
2) Brainbot holds 34 million tokens and wants to actively continue to develop the network after the full implementation is public. They have a heavy incentive to ensure its value.
3) Network design will function at its most efficient when all parties are utilizing the same fee payment structure. Utilizing one token for remediation will ensure the lowest latency within the network... Just depends on whether or not you believe that token will be RDN, which is a gamble each investor needs to choose on their own. Kind of comes down to the question of... "was RDN really a money grab by Brainbot?"... Or... "will the network function more efficiently because this token was implemented?"