After laying the foundation for smart contract accounts and managed identity via the Pillar Smart Wallet, Pillar is focusing on facilitating frictionless asset exchange across all users of the platform. By acting as a hub, Pillar will enable all users and service providers to open private payment channels with each other. The Pillar Payment Network will provide a way for users to transact assets with connections instantly, privately and for free. The channels are collateralized by an escrow account shared by all parties. With Pillar acting as the heart of the network, it can also allow for cross-channel transfers in any asset supported by the platform. A relayer network enables the use of meta-transactions to handle on chain transaction fees further reducing user friction. Combined together, these features greatly decrease complexity and enhance the overall user experience of the Pillar platform.
As mentioned above, payment channels allow users to exchange funds for free (no gas), instantly (no confirmation wait) and privately (off chain). All individual transactions between two parties are free, instant and private as long as the payment channel between them stays open and collateralized. The only on chain events are opening and closing a channel. And only the end balance is made public when the final transaction record is submitted on chain. Once a party requests to close a channel, they send a message to print the final balance to the blockchain. Traditionally, any dispute that may arise is handled by a challenge period allowing each party to submit their most recent transaction record. The most recent record would be seen as correct and have the final say in the dispute.
In order to open a payment channel, each party in the channel agrees to stake a certain token amount to secure the off chain transactions between them. The stake of each party is held in escrow allowing them to freely transact with each other up to the value of the total balance. In the case that one party runs the risk of undercollateralization, they are forced to add additional funds to the shared escrow contract or close the channel.
The primary usability challenge for payment channels is the need to enter into escrow and stake assets up front for every channel opened. This is a significant barrier to entry and one that often outweighs the benefits. However, as Pillar builds a network of interrelated contacts, it is able to act as hub between each and generalize this escrow process so that it applies to all parties simultaneously. By staking an amount of PLR, users will be able to open payment channels with any other user or service provider on the Pillar Network. Additionally, since Pillar serves as the hub, monitoring all open balances, any potential dispute will be easily resolved without concern or complexity. Welcome to the Pillar Payment Network!
Traditionally, each payment channel and the involved transactions are limited to the staked asset, so both parties must agree on the asset up front. However, Dan Robinson recently published a working draft for The Rainbow Network: An Off-Chain Decentralized Synthetics Exchange which describes
“an extension of payment channels in which the participants can hold synthetic balances in any asset, rather than just the asset that is used as the collateral for the channel. When the channel is closed, the amount sent to each participant is computed based on the current prices of the synthetic assets in the channel.”
In other words, by staking one token, a user is able to transfer any other token or asset supported by the platform. In the case of Pillar, the initial stake of PLR tokens used to open the payment channel will also allow users to exchange any asset supported by the wallet (even cross chain!).
PLR will act as a meta-token allowing users of the Pillar Payment Network to instantly, privately and securely transact with others in any supported crypto asset even if its not directly owned.
Because users can exchange a variety of assets, rainbow channels require high liquidity in order to operate efficiently. In order to increase general PLR token liquidity, Pillar is opening a liquidity pool on Uniswap for token swaps and integrating Shapeshift and Changelly exchange platforms. We are also in discussion with other potential partners and will be adding additional protocol and exchange support. Detailed information on Pillar’s upcoming exchange functionality, known as our Offers Engine, will be announced shortly.
Efficient operation and settlement of channels requires reliance on a single trusted price oracle. As needed, Pillar and other core market makers can hedge exposure by executing offsetting trades on centralized exchanges. As a way to reduce risk, Pillar may ask Payment Network users to regularly settle their balance.
Pillar also wants to make on-chain transactions intuitive and easy. Pillar has joined the Gas Station Network Alliance and is collaborating with other industry projects and open source developers on the creation of a decentralized, trustless relayer network. For Pillar users, this means that all network fees (or gas) will be payable in PLR token via meta-transaction. Relayers will accept network fees in PLR then wrap the user’s signed message in ETH and submit it on chain. There is no need for users to directly own ETH in order to operate the wallet.
Through the adoption of layer 2 solutions like payment channels and meta transactions, Pillar is able to simplify the blockchain experience providing a path for mass adoption. The PLR token provides access to and use of the platform’s enhanced functionality and acts as the primary unit of account allowing it to be used as payment for services.
The Pillar Payment Network provides for the seamless transfer of any asset supported on the platform entirely via the use of PLR tokens. With the addition of a trusted relayer network, users are able to pay on chain network fees in PLR via meta-transaction. These features tie together to provide a frictionless crypto experience for all users, completely powered by a single token.
Follow our Medium publication and stay tuned in the coming days as we unveil Part III of the ‘Understanding PLR Utility’ article series outlining the future of the Pillar platform.