Cerberus Channels: Incentivizing Watchtowers for Bitcoin
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Author / Producer
Date
2020
Publication Type
Conference Paper
ETH Bibliography
yes
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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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Publication status
published
External links
Book title
Financial Cryptography and Data Security
Journal / series
Volume
12059
Pages / Article No.
346 - 366
Publisher
Springer
Event
24th International Conference on Financial Cryptography and Data Security (FC 2020)
Edition / version
Methods
Software
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Date collected
Date created
Subject
Bitcoin; Collateral; Incentives; Lightning network; Payment channels; Payment network; Security; Watchtowers
Organisational unit
03604 - Wattenhofer, Roger / Wattenhofer, Roger