Abstract
Bitcoin and similar blockchain systems have a limited transaction throughput because each transaction must be processed by all parties, on-chain. Payment channels relieve the blockchain by allowing parties to execute transactions off-chain while maintaining the on-chain security guarantees, i.e., no party can be cheated out of their funds. However, to maintain these guarantees all parties must follow blockchain updates ardently. To alleviate this issue, a channel party can hire a “watchtower” to periodically check the blockchain for fraud on its behalf.
However, watchtowers will only do their job properly if there are financial incentives, fees, and punishments. There are known solutions, but these need complex smart contracts, and as such are not applicable to Bitcoin’s simple script language. This raises the natural question of whether incentivized watchtowers are at all possible in a system like Bitcoin.
In this work, we answer this question affirmatively, by introducing Cerberus channels, an extension of Lightning channels. Cerberus channels reward watchtowers while remaining secure against bribing and collusion; thus participants can safely go offline for an extended period of time. We show that Cerberus channels are correct, and provide a proof-of-concept implementation in the Bitcoin script language.
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Notes
- 1.
State channels generalize payment channels to support smart contracts [17].
- 2.
Note that Cerberus channels can be made secure for any confirmation time k, but we choose \(k=1\) to simplify the protocol and security analysis.
- 3.
Ideally, this payment should be integrated with Cerberus for efficiency.
- 4.
We assume that a rational watchtower will publish the reclaim transaction at the latest when the channel is closed.
- 5.
To be precise, Abort could have initiated but less than \(T-t\) time has elapsed between the reclaim transaction was published on-chain and the time Close initiated.
- 6.
- 7.
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Avarikioti, Z., Thyfronitis Litos, O.S., Wattenhofer, R. (2020). Cerberus Channels: Incentivizing Watchtowers for Bitcoin. In: Bonneau, J., Heninger, N. (eds) Financial Cryptography and Data Security. FC 2020. Lecture Notes in Computer Science(), vol 12059. Springer, Cham. https://doi.org/10.1007/978-3-030-51280-4_19
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