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Raiden is an off-chain scaling protocol being built for the Ethereum blockchain platform. It's meant to enable near-instant, low-fee and scalable payments on Ethereum that work with any ERC20 compatible token, much like the Lightning Network does for Bitcoin.
Raiden uses bi-directional payment channels to enable secure transactions between parties without the need for global consensus. The participants collateralize their off-chain transactions with on-chain deposits (i.e. opening the payment channel), and there can be practically unlimited transfers through the payment channels so long as the net sum of the transfers is less than the amount of the original on-chain deposit.
When one or both of the participants in a payment channel wish to access their funds on-chain, they will present the Raiden balance proof which is digitally signed and hash-locked, and the final balance from the payment channel is then enforced directly on-chain with a transaction that closes the channel.
The Raiden network protocol can be used to route payments between two parties that aren't directly connected so long as there exists at least one route through the network of channels that connects the two parties and has a high enough balance to facilitate the transaction.
For example, the image above shows how a payment of 1 ETH from Alice to Bob can be routed through Raiden network even if the Alice and Bob do not have a payment channel connecting them directly.
