Crypto Guides

How Beneficial Are ‘Watchtowers’ In Diminishing Malicious Activity on Bitcoin LN?


The concept of watchtowers was originated from the Lightning Network (LN) and has improved drastically since its launch as Bitcoin’s Lightning Network seems to be growing at a large scale in the P2P payments system.

What are Watchtowers?

Watchtowers are fundamentally an ecosystem of third parties employed by the users to outsource monitoring the on-chain transactions of their lighting channels.

Watchtowers can be related to “watchdogs” of the Bitcoin blockchain that play the role of identifying and penalizing malicious users for cheating other users within the channel. Precisely, they verify whether a participant in a channel has properly broadcasted a prior channel state. If they find it malicious, they can claim back the funds after closing the LN channel with an invalid state.

Since it is a third-party service, they receive funds from their clients. The clients sometimes outsource the channel monitoring to multiple watchtowers, in case of failure from one. The LN channel users must check the status of correlation between off-chain channels and on-chain activity occasionally. Watchtowers 24/7 keep an eye on the security risk posed by any invalid LN channel, however.

How Exactly do Watchtowers Work? 

In simple terms, watchtowers are third parties that monitor their clients’ Bitcoin blockchain all day long. They check for any ambiguity between on-chain and off-chain channels with invalid states.

Here is a basic flow of how watchtower mechanism functions between two users in a common payment channel.

  • Joe sends a few Bitcoins to Jeff and updates the state channel within their channel.
  • Additionally, Joe sends a hint of the transaction to a watchtower to keep an eye on the transaction without disclosing its contents.
  • Moreover, Joe sends her signature to the watchtower to pre-authorize the channel funds, allowing it to be sent back in case of a channel breach.
  • The watchtower then cross-verifies the hints received from the client (Joe) and the Bitcoin blockchain.
  • If the watchtower identifies a channel breach by Jeff through an invalid state broadcast, a penalty transaction is created using Joe’s signature and finally reverses the channel funds back to him.

Hence, Joe is protected from a channel breach without having to be online as it was taken care of by the watchtowers.

Development and Challenges

The watchtower market is still in the development stage and is yet to be accepted in the mainstream as the lighting network is gradually inching into a more extensive P2P payment system using Bitcoin.

That said, researchers and enthusiasts believe that this field will provide a compelling future for LN watchtowers. We are uncertain how much-biased will users be towards using the watchtower services, but for the security assurances they provide, it is worth to be considered.

The service enabled by watchtowers would undoubtedly take away the abstract of complexity in components from the users, but considerable progress in both time and developments is vital when aiming for high-end features in the lighting network.

In conclusion, the fact that watchtowers present a prospective thinking approach to security risks imposed by the evolving Bitcoin indicates a sustainable ecosystem in the future.

Crypto Guides

How Do ‘Ring Signatures’ Increase The Privacy Of A Crypto Network


Cryptocurrencies are the primary application of blockchain. Transparency and Privacy are two terms that go side by side concerning cryptocurrencies. Users of cryptocurrencies are looking for more and more Privacy with more adaptability of cryptocurrencies. Anyone can open the bitcoin ledger and check the ongoing transactions and find out the users who are transacting and the amounts of the transactions as well. Hence to increase the Privacy of the cryptocurrency network, Ring Signatures have been introduced to cryptocurrencies.

What are Ring Signatures?

Ring signatures are nothing but digital signatures performed by anyone from a group of members but not possible to know who has done the signature. We can add any group of members without any additional setup. The concept was initially developed to leak the information, especially from high ranking individuals. This way, we will not know who leaked the news, but one can ascertain the information is authentic. The concept is developed by Ron Rivest, Adi Shamir, and Yael Tauman and announced at Asiacrypt in 2001.

Since then, there have been certain developments made in the ring signatures called traceable ring signatures to overcome vulnerabilities raised due to malicious or irresponsible people. The modification or further development of this is what is used in crypto note coins developed to overcome the weaknesses of bitcoin. By this development, the ring signatures were effective enough to obscure the sender’s information in the peer to peer transactions.

Now the concept is further developed called Ringed Confidential Transactions (Ring CT’s), which obscures the transaction amount as well instead of obscuring only the sender’s information. Monero Labs formally announced this in 2015. We all know that Privacy is strictly entitled when it comes to the transactions in the Monero platform, and now we know why, i.e., because of the concept of ring signatures.

How Do They Work?

Cryptocurrencies work on the principle of digital signatures. Ring signatures are digital signatures, which are group signatures. Ring signatures require multiple partial digital signatures of different users who may be part of the network already to form a single digital signature, which is used to sign the transaction. Thus, to validate the signature, multiple private keys are required, which wouldn’t be possible to obtain. The name ring came up because of the use of various users’ output to generate a single digital signature.

Let us see an example of a transaction in Monero blockchain and see how the concept of ring signature works.

⭕ A intends to send 50 coins to B in the Monero network basically to B’s Monero crypto wallet and initiates a transaction.

⭕ In general, this transaction would be signed using A’s private/public key combination, but in this case, a unique one time spend key is generated that starts with the output from the sender’s wallet.

⭕ The other signatures are picked up randomly from the users in the ring from the past outputs in the network to create a unique digital signature, which wouldn’t be possible to determine the original signer.

⭕ Even though the public key of the original sender is used, since the signature is created using different users’ previous outputs, it is not possible to determine the sender’s identity.

Ring signatures have started to become vital, especially where Privacy is a matter of concern in cryptocurrency networks. CryptoNote coins are the most well-known coins for Privacy. Monero and Bytecoins are excellent examples which use ring signatures and Ring CT’s.