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Someone can setup "watchdog" services that you can give your revocation transactions to and they can watch the blockchain for any attempts to "steal" your money

Someone can setup "watchdog" services that you can give your revocation transactions to and they can watch the blockchain for any attempts to "steal" your money and if any are found they can instantly broadcast the revocation. Doing it this way you don't give the "watchdog" service any control of your BTC, just the ability to broadcast countersignatures, which means there is still no counterparty risk here. You could even give your revocation transactions to multiple 3rd parties that can all watch the blockchain for you if you don't trust any one of them to not backstab you.

foepys 9y ago
But what happens if a watchdog has an outage? I need multiple backup watchdogs then, and no watchdog will work for free. So I'm now paying multiple entities to securely transact money to other people that themselves also need watchdogs to watch their channels. This sounds not like it will result in low fees. Transaction fees, maybe, but overall fees including middlemen will be quite a bit higher.
- xur17 9y ago
  I'm curious if anyone has found a good writeup on how watchtowers work. My understanding is that with the normal lightning network, there is a reward built in that you receive if your counterparty tries to fraudulently close the transaction. You receive your money + some of what they owned. From what I remember, watchtowers can be incentivized by receiving a portion of this money. This way you only pay something if your counterparty tries to screw you, and the amount you pay doesn't come out of your money. tldr; I think the watchtower fees are only paid if a problem occurs, and even then your counterparty is the one that effectively pays the fee.
- Klathmon 9y ago
  >But what happens if a watchdog has an outage? Locktimes are currently on the order of days (roughly 3 days IIRC), which means you have days to react to a fraudulent transaction. A dedicated watchdog service being out for days at a time is pretty shitty uptime. Not to mention that this isn't the ONLY way you can watch out for this. Your laptop, phone, or any other internet connected device can also watch for these transactions, as long as you connect to the network once every 3 days, you can handle it yourself. >...and no watchdog will work for free. I'm sure you are correct, but we will need to see the exact costs here. I'm guessing (and it is a complete guess) that the costs here won't be that bad at all. You could write a service that scans the blockchain for these transactions that would easily run on a very small server with a VERY large number of revocation transactions, so it's not like it's a large cost to run a service like this. Not to mention that the "fee" for these services could be paid by "penalty" forced onto the person that tried to cheat you when the revocation transaction is broadcast, incentivizing the watchdog service to catch the fraudulent transactions (since that's the only way they get paid). Plus I have a feeling this can easily be a value-added service to many exchanges and custodial wallets.
  - umanwizard 9y ago
    3 days? In contrast, your liability is capped at $500 if you inform your bank of debit card fraud within 60 days.
    - Klathmon 9y ago
      That time is completely configurable between you and the person you are opening a channel with, 3 days just seems to be the number everyone is gravitating toward using as a good default since it's long enough that short times offline won't cause you to be vulnerable to fraudulent transactions, but not long enough to cause issue if the channel you are working with decides to close up suddenly (because after the locktime is up you can broadcast a transaction which gives you all the money in the channel). And yes, your bank can reimburse your for fraudulent charges (the amount and timing depends on your location), but that also depends on your bank not deciding that your fraud isn't actually fraud, it depends on you (as in your person) constantly checking your accounts for fraud and manually reporting it to the proper channels when it happens, you are still out the money while they investigate and reimburse in some cases, they will lock and reissue your card which often takes days to arrive leaving you without a card in the meantime, they can deny your account entirely for any number of reasons, they can control what you are able to buy with your card for any number of reasons, the cost of a bank account is far from free, they can and will charge you to get access to your own money quite often, and they can deny you from withdrawing your own money at any time for just about any reason (including "you are withdrawing too much money"). Neither option is perfect, nobody says they are, but I really believe that a system like Bitcoin and LN are a significant improvement over the traditional banking system in many ways. It is worse in some ways for sure, but I feel the benefits far outweigh the down sides.
    - hahainternet 9y ago
      > 3 days? In contrast, your liability is capped at $500 if you inform your bank of debit card fraud within 60 days. Unless your bank considers the fraud to have been caused by a lack of care on your behalf, in which case you will not be refunded and have virtually no means of appeal (note: Obviously depends on your country and local laws)

foepys 9y ago

But what happens if a watchdog has an outage? I need multiple backup watchdogs then, and no watchdog will work for free. So I'm now paying multiple entities to securely transact money to other people that themselves also need watchdogs to watch their channels. This sounds not like it will result in low fees. Transaction fees, maybe, but overall fees including middlemen will be quite a bit higher.

xur17 9y ago
I'm curious if anyone has found a good writeup on how watchtowers work. My understanding is that with the normal lightning network, there is a reward built in that you receive if your counterparty tries to fraudulently close the transaction. You receive your money + some of what they owned. From what I remember, watchtowers can be incentivized by receiving a portion of this money. This way you only pay something if your counterparty tries to screw you, and the amount you pay doesn't come out of your money. tldr; I think the watchtower fees are only paid if a problem occurs, and even then your counterparty is the one that effectively pays the fee.
Klathmon 9y ago
>But what happens if a watchdog has an outage? Locktimes are currently on the order of days (roughly 3 days IIRC), which means you have days to react to a fraudulent transaction. A dedicated watchdog service being out for days at a time is pretty shitty uptime. Not to mention that this isn't the ONLY way you can watch out for this. Your laptop, phone, or any other internet connected device can also watch for these transactions, as long as you connect to the network once every 3 days, you can handle it yourself. >...and no watchdog will work for free. I'm sure you are correct, but we will need to see the exact costs here. I'm guessing (and it is a complete guess) that the costs here won't be that bad at all. You could write a service that scans the blockchain for these transactions that would easily run on a very small server with a VERY large number of revocation transactions, so it's not like it's a large cost to run a service like this. Not to mention that the "fee" for these services could be paid by "penalty" forced onto the person that tried to cheat you when the revocation transaction is broadcast, incentivizing the watchdog service to catch the fraudulent transactions (since that's the only way they get paid). Plus I have a feeling this can easily be a value-added service to many exchanges and custodial wallets.
- umanwizard 9y ago
  3 days? In contrast, your liability is capped at $500 if you inform your bank of debit card fraud within 60 days.
  - Klathmon 9y ago
    That time is completely configurable between you and the person you are opening a channel with, 3 days just seems to be the number everyone is gravitating toward using as a good default since it's long enough that short times offline won't cause you to be vulnerable to fraudulent transactions, but not long enough to cause issue if the channel you are working with decides to close up suddenly (because after the locktime is up you can broadcast a transaction which gives you all the money in the channel). And yes, your bank can reimburse your for fraudulent charges (the amount and timing depends on your location), but that also depends on your bank not deciding that your fraud isn't actually fraud, it depends on you (as in your person) constantly checking your accounts for fraud and manually reporting it to the proper channels when it happens, you are still out the money while they investigate and reimburse in some cases, they will lock and reissue your card which often takes days to arrive leaving you without a card in the meantime, they can deny your account entirely for any number of reasons, they can control what you are able to buy with your card for any number of reasons, the cost of a bank account is far from free, they can and will charge you to get access to your own money quite often, and they can deny you from withdrawing your own money at any time for just about any reason (including "you are withdrawing too much money"). Neither option is perfect, nobody says they are, but I really believe that a system like Bitcoin and LN are a significant improvement over the traditional banking system in many ways. It is worse in some ways for sure, but I feel the benefits far outweigh the down sides.
  - hahainternet 9y ago
    > 3 days? In contrast, your liability is capped at $500 if you inform your bank of debit card fraud within 60 days. Unless your bank considers the fraud to have been caused by a lack of care on your behalf, in which case you will not be refunded and have virtually no means of appeal (note: Obviously depends on your country and local laws)