L2 protocols

All off-chain protocols assume the user remains online and synchronised with the network

Lightning nodes need to be online for

• Opening channels
• Sending payments
• Receiving payments

Channel closes

• Cooperative closes when both nodes are online
• Counterparty may publish commitment tx!
  • at all times
  • unilaterally
  • maliciously!

Time to react

• Node needs to scan blockchain for commitment tx
• Node gets a time window to react if required
• Configurable
• Usually about 144 blocks (1 day)
• Upper limit mostly 2 weeks

User burden

Does that mean a user needs to open his LN wallet at least daily?

YES! ... but

Watchtowers!

3rd party that can watch the blockchain for a user

Unofficial BOLT: BOLT13

Process

User must provide WT with:

• A transaction that spends the commitment tx of the latest channel state
• And sends these funds to the user
• Including the penalty part
• For every LN transaction

Privacy

• Tx is encrypted
• The key is: hash(commitment-tx-id)
• WT can only decrypt when there is an actual breach

Watchtowers help every user

• Every user can use (multiple) WTs
• Counterparty never knows whether a WT is being used
• Uncertainty incentivizes honest behavior

Lipa wallet (currently)

• Lipa is the only channel counterparty
• User needs protection against Lipa
• It is in Lipa's control to be honest or not
  • Internal attackers possible
• Issue is not immediately pressing

Who runs a WT for Lipa users?

• Lipa ❌
• 3rd party ❌
• Watchtower chosen by user ✔

Current WT implementations

• Eye of Satoshi
• LND's WT
• Electrum's WT