Decentralizing Watchtowers for Payment Channels using IPFS

Abstract

Payment channels have been proposed as a way to improve the scalability of blockchains such as Bitcoin. However, payment channel protocols require that participating parties watch the blockchain regularly for new transactions. If a party observes, in a given period of time, a fraudulent transaction that closes the payment channel in an outdated state, the fraudulent transaction can be revoked. Previous work has proposed to outsource this task to a third party, a so called watchtower. A user of a payment channel employs a dedicated watchtower and sends the data to the watchtower that the watchtower requires to revoke fraudulent transactions. In this paper, we replace the strict binding of a user to a watchtower by a decentralized approach for watchtowers that requires no direct interaction between a party of a payment channel and the watchtower. This decentralized approach uses IPFS to publicly store the information required by a watchtower. With this approach, anyone can detect and revoke a fraud by watching the blockchain and reading a file from IPFS that contains information for each outdated commitment transaction. A reward for successful revocations can be used as incentive.