TechnologyThe Raiden Network is an infrastructure layer on top of the Ethereum blockchain. While the basic idea is simple, the underlying protocol is quite complex and the implementation non-trivial. Nonetheless the technicalities can be abstracted away, such that developers can interface with a rather simple API to build scalable decentralized applications based on the Raiden.
Raiden Network 101 Blockchains don’t scale well because there needs to be global consensus on the order and outcome of all transfers. Every participant needs to learn about all updates to the shared ledger. Hardware and bandwidth constraints set a limit on the number of updates per second that can be shared in a decentralized network. The basic idea of the Raiden Network is to avoid the blockchain consensus bottleneck. This is done by leveraging a network of payment channels which allow to securely transfer value off-chain, i.e without involving the blockchain for every transfer.
Opportunities:Since it is a highly anticipated project, the Raiden Network will probably have large usage right off the bat. Very few ICOs can claim to do the same.This project moves Ethereum forward in helping to solve the scaling issue. The use case of Ethereum can be greatly expanded with the introduction of Raiden.Network effect is present. The more people use the Raiden Network, the more channels there are, and the more efficient the network will be. If the Raiden Network becomes very large, potentially the vast majority of the Ethereum transactions can be shifted off-chain, making Raiden Network very valuable.
Concerns:The project has been delayed by over half a year – we are not sure when it will actually be finished and rolled out.Raiden Network is more useful in some cases than others. It is not intended to support large value transfers, for example.If other similar scaling solutions are developed, users may prefer to use other solutions that don’t charge a fee.
Conclusion:Overall, we are neutral about the short-term potential and believe the long-term attractiveness of this ICO depends heavily on the valuation of the project. This project has received a lot of criticism because of their decision to go the ICO route. Most people were expecting to be able to use Raiden for free.However, let’s say Raiden was a stealth project instead of a publicized (and highly anticipated) one, and one day the team announces that they can help fix the Ethereum scaling issue by charging a small fee, we believe most people would gladly pay the fee and enjoy the scaling solution.Our thoughts of the tokens for short term and long term are as follows:For short-term holding:Neutral. The Dutch auction format will prevent any unmet demand by design, which makes this project not a candidate for the short-term.For long-term holding:In the long-term, we are not surprised to see RDN tokens being a top-10 most valuable token because of the expected heavy usage. Currently, the number 10 token has a market cap of $181 million (based on circulating token).We believe RDN tokens can offer ICO participants enough long-term upside potential when the fund raised is below $75 million, giving the project a fully-diluted market cap of $150 million.Based on the token sale page, it looks like the $75 million (or around 250,000 Ether) hard cap valuation should occur around October 27.
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