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How does Raiden work and improve the scalability?


There are so much of talks like Internet of Things and Machine to Machine interactions and it has been growing at a faster rate lately. Blockchain projects are trying to integrate and synchronize with this. Raiden makes micro-transactions feasible for IoT. Raiden improves the scalability by off-chain transactions.

In off-chain transaction it allows collection of nodes to establish payment channels between each nodes and this is done locally, means neighbor to neighbor, without transacting directly with the main blockchain, so it does not clog up the capacity of the main blockchain.

Naturally the off-chain transaction will become faster as well as cheaper than the on-chain transaction; as there is no need to wait for the block confirmation and it can be recorded instantly. Fees can be paid for forwarding the transactions between nodes. Mines can be paid a fee to include this off-chain transaction later on in the next block. But the criteria here is that any node processing a transaction must hold greater than or equal to the amount of transaction.