Similar to Bitcoin, Ethereum has been struggling with scalability accounting for only 10-15 transactions per second (TPS), which is hindering the ability of Ethereum to reach mass adoption.
In an attempt to solve these issues the Raiden Network allows for small token transfers. These payment networks exist on the blockchain, while the digital signatures and hash locking occur off of the blockchain. Read more about off chain and on chain transactions her. The sum of the tokens is then held in a smart contract for the lifetime of the payment channel to ensure overspending of credits does not occur, and to ensure that every user pays their amount owed.
Therefore, Raiden Network allows for a greater number or participants, and thus, the allowance of more transactions to take place while lowering the costs to users.
