Fail-safe Watchtowers and Short-lived Assertions for Payment Channels

TL;DR

This paper introduces fail-safe watchtowers for payment channels that reduce on-chain monitoring, enhance privacy, and tolerate failures, while also proposing short-lived assertions to prevent misbehavior in specific payment scenarios.

Contribution

It presents a novel fail-safe watchtower design that minimizes on-chain activity and introduces short-lived assertions to improve security and efficiency in payment channels.

Findings

Fail-safe watchtowers require only periodic on-chain messages.

They are privacy-preserving and scalable for many channels.

Short-lived assertions help prevent misbehavior in certain payment scenarios.

Abstract

The recent development of payment channels and their extensions (e.g., state channels) provides a promising scalability solution for blockchains which allows untrusting parties to transact off-chain and resolve potential disputes via on-chain smart contracts. To protect participants who have no constant access to the blockchain, a watching service named as watchtower is proposed -- a third-party entity obligated to monitor channel states (on behalf of the participants) and correct them on-chain if necessary. Unfortunately, currently proposed watchtower schemes suffer from multiple security and efficiency drawbacks. In this paper, we explore the design space behind watchtowers. We propose a novel watching service named as fail-safe watchtowers. In contrast to prior proposed watching services, our fail-safe watchtower does not watch on-chain smart contracts constantly. Instead, it only sends a single on-chain message periodically confirming or denying the final states of channels being closed. Our watchtowers can easily handle a large number of channels, are privacy-preserving, and fail-safe tolerating multiple attack vectors. Furthermore, we show that watchtowers (in general) may be an option economically unjustified for multiple payment scenarios and we introduce a simple, yet powerful concept of short-lived assertions which can mitigate misbehaving parties in these scenarios.