Watchtower

A watchtower is a service that monitors the bitcoin blockchain on behalf of a Lightning Network user, watching for a counterparty broadcasting an outdated channel state while the user is offline. If it detects a breach, it broadcasts a pre-signed penalty transaction that claims the cheater's entire channel balance for the victim.

Why it matters

Lightning's security model assumes each party can respond to cheating within a dispute window, commonly on the order of 144 blocks, about one day. That is a reasonable assumption for an always-on routing node and an unreasonable one for a phone that spends nights in airplane mode. Watchtowers close the gap, letting ordinary users hold Lightning funds without personally standing guard over the blockchain.

Crucially, a watchtower never holds funds or keys. The worst a lazy or failed tower can do is fail to act, which leaves the user exactly where they would have been without it.

How it works

After each channel update, the client sends the tower an encrypted penalty package indexed by a fragment of the revoked commitment's transaction id. The tower scans new blocks for matching transactions; a hit gives it the decryption key, and it can then assemble and broadcast the justice transaction. Until a breach actually appears, the tower learns essentially nothing about the user's channels or balances.