Developer Francisco Calderón explained that these nodes monitor the states of the payment channels. Currently, only Lightning Labs’ LND implementation has incorporated this functionality.
Among the proposals to solve Bitcoin’s scaling problems, one that generates more interest and optimism among ecosystem enthusiasts is the Lightning Network (LN) second-layer solution. However, there is consensus that it is a fast-growing protocol with some aspects still to be developed, such as watchtowers.
The connoisseurs define the Lightning Network as a protocol, integrated by other protocols and technologies, which allows Bitcoin micropayments outside the blockchain. Its design allows peer-to-peer (P2P) non-custodial payments, securely and privately as in Bitcoin, but instantaneous and with minimal fees.
Among the technologies proposed to make Lightning transactions more efficient and secure, there are watchtowers, a concept outlined in the original technical document of the network, launched in early 2016. It can be said that it is a security layer for avoiding fraud by malicious actors.
Watchtowers in the Lightning Network
According to Venezuelan developer Francisco Calderón, an expert in Lightning Network, watchtowers are essentially nodes of the Lightning network whose function is to “monitor the status of transactions associated with a payment channel.” This allows them to identify and penalize malicious participants who attempt to transmit outdated network states to claim funds that do not belong to them.
The Lightning Network contemplates a security mechanism that delays the sending of funds by a certain number of blocks, when one of the actors closes the payment channel forcibly, anticipating hostile or non-cooperative behaviors. For example, if “Bob” closes the channel in a non-cooperative way, the network does not return the money that he claims to have instantly. Therefore, “Bob” must wait until that decrementing timelock is complete so that the funds are delivered.
In that period of time, “Alice” must be opening her wallet. Then, she would notice the closure of the channel and send the actual current status, which would prove that “Bob” has acted in bad faith and all his money would go to “Alice.” In case “Alice” did not open her wallet again, the watchtowers would be responsible for solving the problem.
To avoid permanent monitoring transactions and prevent possible fraud, the user could authorize a watchtower node to monitor the operations on his or her channel 24 hours, 7 days a week. According to official Lightning Network documentation, watchtowers may receive a fee as an incentive to provide this service.
The watchtower has the ability to transmit the current [valid] state of the channel without the need for the two actors to be online. The watchtower would be responsible for penalizing the malicious actor and transfer all his funds to his counterpart, as in the case described above, according to Calderón.
If “Bob” were to control the watchtower used by “Alicia,” he would manage to defraud her, since the watchtower would say that the correct state is the one sent by “Bob.” However, it would be risky as the affected party could reconnect and leave evidence of the fraud attempt. In that case, “Bob would lose all his funds,” as Calderón noted.
For extra protection, Lightning wallets will tend to offer the user the option of using several watchtowers simultaneously. Since its beta release in March 2018, the Lightning Network has grown significantly. Its development is expected to result in fewer congestion events, faster confirmation of transactions and lower network fees in Bitcoin.
By Willmen Blanco
