Eltoo Trustless Watchtowers for Stabilizing Lightning Payments

On the Lightning Network, cheating is punishable by a total loss of funds. But how is cheating defined? In order for a LN user to cheat, they have to broadcast and incorrect balance. In some cases, the user could be attempting to hoodwink the user on the other end of the payment channel. In other cases, it could be a software bug or a network delay.

This is where Eltoo channels come into play. Eltoo essentially functions as a buffer, which uses “timelocked transactions” to maintain synchronization on a payment channel.

Currently, developers are designing trustless, blinded WatchTower for eltoo channels as described by ZmnSCPxj via Lightning-dev:

So let me propose my half-baked idea for encrypted-blob, slightly-blinded Decker-Russell-Osuntokun WatchTowers:

We observe that for each update transaction, the signatures are malleable (sign malleability, also one signature is from the attacker and the attacker can pick a new R), but the message they are signing (a copy of the transaction that has been modified in particular ways) is not… When the WatchTower finds the last channel update for the channel, and it is different from the message that triggered us, then it knows that the current published update transaction is not the latest, it knows the latest update, and it can now publish the latest update transaction and eventually its corresponding settlement transaction, in order to provide justice.

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