Offering a fast, reliable, and affordable payment system is critical to providing meaningful decentralized services to the financially marginalized. This can only be achieved by solving the scalability problems most blockchains face today and is one of the reasons why solutions like the Lightning Network on Bitcoin and Raiden on Ethereum have received so much attention.
The transactions per second in the Bitcoin network are significantly lower than those of payment systems such as Visa or Mastercard. While the Bitcoin network can process around 7 transactions per second (tps), Visa or Mastercard have the capacity to process up to 25,000 tps. This means a difference of more than 300,000%.
The main factor limiting Bitcoin to 7 transactions per second is the size of the block. Bitcoin has a maximum size in megabytes that a block can support, so the sum of the size in bytes of all transactions cannot exceed a fixed size that exists at the consensus level in the network. Considering that the average size of a transaction in Bitcoin is 300 bytes, we need a required storage space of 7.2MB per second if we want to support the same number of tps as platforms like Visa or Mastercard. Knowing that the blocks in Bitcoin are generated every 10 minutes, the size of the block would be approximately 4 gigabytes and the database would be increased at the rate of 18 terabytes per month. This scenario would lead to a loss of the decentralization of the nodes and therefore a similar solution is hardly feasible.
RIF Lumino enables users to make off-chain payments (what is commonly known as off-chain) on any token implemented in RSK quickly, with low fees and protected by the network of Bitcoin miners. Lumino is the first implementation of the RIF Payments protocol, the idea of which is to improve scalability and interoperability between many payment networks, and whose potential is to grow to thousands of transactions per second as the network expands.
“Our goal is to make RIF Lumino compatible with the Lightning Network and other off-chain networks to improve interoperability and the user experience,” said Alejandro Narancio RIF Chief Architect.
RIF is a third layer solution based on RSK’s smart contract platform, which is itself a Bitcoin sidechain. For this reason, RSK is the most secure smart contract platform in the world with a hashing power of around 50% of the Bitcoin network.
– Every blockchain is like a skyscraper. Adding blocks to the blockchain is like adding a new floor to the building. The basics of this building are the protocol and the on-chain infrastructure. So if you really want to scale to 100 million users, you’d better make sure the foundation is well built. ” Sergio Lerner IOV Labs Chief Scientist.
Although the RSK network has added smart contract features and improvements to on-chain scalability (around 100 tps), it is not enough to achieve transaction processing levels equivalent to those of major payment processors around the world. Trying to scale on-chain only would lead to problems later. That’s why RIF designed this third tier solution for off-chain scaling.
Let’s remember that off-chain (or off-chain) transactions are token movements that are not recorded directly on the blockchain and therefore do not depend on the validation of the network. Instead, a certain number of transactions are carried out and the amount of all of them is the one that will be recorded on the blockchain after a certain amount of time. The advantages of such a transaction processing are: low transaction costs, immediate confirmations, increased privacy and the number of transactions per second.
By using various stable currencies, among which the DoC stands out, RSK creates a highly efficient financial system. A financial system that has no maintenance costs, that has transaction costs of a fraction of a cent of a dollar, and that can build reputation profiles for access to financial services without physical collateral. Those who do not have a bank account can conduct crypto transactions on a daily basis while benefiting from the stability of the fiat currency.
“We want to lay the foundation for an inclusive financial system by nature that can serve not only those who are excluded from our society today, but also all those who want to use it. And this is possible thanks in part to RIF Lumino because it enables low transaction costs in a fraction of a cent. Diego Gutierrez Zaldívar, Co-Founder and CEO of IOV Labs.
When a highly efficient financial system is combined with the fact that there are no maintenance costs on the blockchain (you can open an “account” and leave it open without having to pay for it), an ecosystem is created that is the key to financial inclusion.
In summary, RIF Lumino Payments offers the perfect framework for the development of decentralized financial solutions for the weakest, eliminates brokerage costs and at the same time reduces transaction costs exponentially with outstanding transaction values per second.