Watchtowers Are Coming to Lightning

“The Eye of Sauron casts its gaze upon the Lightning Network.”This is how Lightning Labs CTO Olaoluwa Osuntokun (aka, roasbeef) has heralded the coming of Watchtowers to the Lightning Network. Though comparing the technical feature to the demonic gaze of Tolkien’s primary antagonist sounds disconcerting, the analogy holds up on the surface: Watchtowers, as the name implies, will keep an eye on Lightning Network channels and potential bad actors.Why the need for them? Well, if you’re using a custodial Lightning wallet, there isn’t one. But if you’re running your own channels with your own node, then there’s the slim but conceivable chance that the party on the other side of your channel could cheat you when the channel is closing.For instance, say Molly has a channel with Angela and they each deposit 10,000 sats into it, for a total of 20,000 sats. During the channel’s lifetime, Angela pays Molly 5,000 sats, bringing the total to 15,000 sats for Molly and 5,000 for Angela.But suddenly, for whatever reason, Molly is unable to access her Lightning wallet (maybe her node is offline, her computer has a malfunction or she’s on vacation), so Angela decides to be a bit mischievous — when it comes time to broadcast the final state of the channel to the blockchain, she decides to broadcast the first state of the channel (the original 10,000 sat balances that they both deposited) to cheat Molly out of what she was paid.Since Molly is o...