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Bitcoin’s Lightning Network to Introduce Fraud-Busting “Watchtowers”

Bitcoin's Lightning Network to Introduce Fraud-Busting _Watchtowers_

“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.”

 

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100 Merchants Able to Trial Lightning Network Thanks to CoinGate

CoinGate has announced a new pilot program, allowing 100 merchants to test a Lightning Network-enabled version of their service, making Bitcoin transactions faster and cheaper.

Since the Lightning Network is only now becoming a reality and is still very untested, CoinGate will cover any funds that are lost due to glitches or bugs in the software that may occur.

Other caveats apply too, such as the BTC 0.042 per transaction limit (around USD 270 at time of writing). Transactions larger than this limit will have to be made on the original layer, but USD 270 still covers the majority of everyday transactions.

Coffee, groceries, gas, and even small electronic purchases could all be done on the blockchain. With transaction fees becoming more expensive than a Western Union transfer during times of traffic congestion, the Lightning Network will greatly alleviate the number of transactions the blockchain has to handle.

Despite the unfinished nature of the network, CoinGate still believes there is much benefit in testing out its capabilities anyways, as it will provide valuable feedback for not only CoinGate but those working on the Lightning Network.

CoinGate’s CTO, Rytis Bielauskas, told CoinDesk:

“It’s a very new technology. Inevitably there will be some bugs, either in our implementation or in the Lightning Network. It will help, not just us, but the whole community because the bugs we find might help the whole protocol.”

Coingate is a payment processor that already accepts over 50 different cryptocurrencies and is partnered with companies like ShapeShift, Simplex, and PrestaShop.

With more purchases being made online, and a growing percentage of those online transactions being made with cryptocurrency, long-term scaling solutions like the Lightning Network are a necessary step in order to remain a viable payment method against credit and debit cards.

Lightning also opens up a new set of possibilities, such as micropayments or in situations where transactions are made repeatedly to the same recipient.

 

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