“Watchtowers” will soon appear on Bitcoin’s second layer Lightning Network implementation and are the much awaited next step in improved security against fraud.
The experimental network seeking to make Bitcoin payments faster and cheaper have long been missing a crucial piece of fraud-preventing measures, and a network of watchtowers aims to solve just this when the next update, version 0.7 of the LND software is released some time this month.
The issue stems from the need to constantly remain online when using Lightning to ensure the counterparty in a channel won’t steal the funds inside a Lightning channel. Most normal users would never be expected to do this, however, so a watchtower could potentially do this by watching for previous “states” being broadcast.
In essence, if a malicious actor broadcasts an old transaction to try and give themselves extra funds, the watchtower catches this and punishes the actor, hence outsourcing its anti-fraud functionality so users don’t have to.
Lightning Labs head of cryptographic engineering Conner Fromknecht, who is the cryptographic engineering head at Lightning Labs and the driver behind watchtower implementation discussed the implementation designs comprehensively at a conference last April. Lightning Labs CTO Olaoluwa Osuntokun explained to CoinDesk:
A BIG FACTOR ALSO [IN MY OPINION] IS THAT NOW WE HAVE A DIRECT DETERRENCE IN PLACE AGAINST ANY POSSIBLE BREACH ATTEMPTS, NOW THAT THE TOWER CODE IS OUT THERE IN THE OPEN, AN ATTACKER NOW HAS A VERY STRONG DISINCENTIVE AGAINST ATTEMPTING AN ATTACK SINCE IT’S VERY POSSIBLE THAT THE POTENTIAL VICTIM HAS A TOWER WATCHING THEIR BACK.”
Osuntokun also says that their watchtower code can be run by anyone: “The importance of this release is that once deployed, any routing node can run their own tower to protect their infrastructure, also any business using [lightning network] today can also start to run towers to protect their nodes.”