Watchtowers Are Coming to Lightning

Lightning Watchtowers

“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 on a remote island in the Gulf of Mexico and not at her computer, she can’t check Angela’s bad behavior and verify the actual state of the channel, so she loses 5,000 sats.

Not the end of the world but still a bummer.

A Check on Bad Behavior

Watchtowers effectively neutralize this threat by monitoring payment channels and the blockchain to make sure acts of fraud don’t slip through unnoticed. They work like this:

Every time a channel’s state is updated, the payment produces an encrypted “blob” for each channel user, which is basically a secret signature that corresponds to the user’s public key, and sends it to the watchtower. At the same time, the watchtower receives half of the transaction ID of the channel’s previous state, and this acts as a decryption key for the blob. The watchtower stores all of these blobs and decryption keys within its database, so if an impish actor tries to broadcast an older state to the mempool, the watchtower will see that the transaction ID matches up with the other transaction ID half it holds. Now that it has both halves of this transaction ID, the watchtower can decrypt the corresponding blob and punish the bad actor by sending the funds to the honest channel user’s wallet.

All of this can be done without the watchtower knowing who the channel users are and how much is being transacted in the channel beforehand (obviously, once the transaction is broadcasted on-chain, the public key and the fund amount is revealed).

“They don’t know anything about a client’s payment history; instead, the client sends them an encrypted blob that can only be decrypted if a breach actually happens,” Osuntokun told Bitcoin Magazine.

Technical innovators have floated the concept for a while, but Lightning Labs’ Lightning Network Daemon (LND) implementation of the technology is the first production-ready iteration available, though Osuntokun said that it is still very much in its infancy.

“It can be used on mainnet as is today, but it’s still at an early phase. We’ve been running the set of changes on our nodes for a few months now, but only until this week did we put out the public pull request,” he told Bitcoin Magazine.

In the initial rollout, the default version features so-called “altruistic” watchtowers, meaning that they operate without promise of payment for their services. Osuntokun said that it also features an operational “basic reward watchtower,” which would allow the watchtower to charge a fee if it acts on a breach, but this has to be activated manually.

The service, Osuntokun continued, is opt-in for both clients and the watchtower operators themselves, and clients have to manually search for towers if they want to make use of them. In the future, the team plans to implement an “automatic discovery system” to streamline this process.

While the initial version will rely on the good graces of watchers to keep users honest, free of charge, Lightning Labs has a three-stage plan for letting watchers monetize their service. The first is the altruistic phase, followed by a reward system, which will be variable depending on market factors like how much watchtowers charge and how much clients are willing to pay. Lastly, Lightning Labs is devising an e-cash token that lets users pay for space for a series of uploads which can be exchanged for bitcoin through the Lightning Network.

“When it is integrated, it will probably resemble a Chaumian scheme where you pay via Lightning to acquire blinded tokens redeemable at the tower,” Conner Fromknecht, head of cryptographic engineering at Lightning Labs, told Bitcoin Magazine.

This token scheme, continued, also has some nifty uses for whitelisting participants while maintaining privacy. If a watchtower operator only wanted to serve their friends, for instance, they could “authenticate users up front but from then on it wouldn’t be able to pinpoint which users are renewing or backing up to the tower” because the tokens are “blinded” and payments can’t be traced to a particular user.

Osuntokun said that the primary cost for running a watchtower is storage, though the 1 TB hard drives users would need to run a Lightning node are fairly cheap at $40 and the blobs watchtowers need to store are “only a few hundred bytes.” Now, depending on how many channels a watchtower decides to monitor, this data burden becomes heavier; one channel obviously requires less space than 100 or 1,000 channels would.

Storage space is also a bit of a trade-off, Osuntokun continued, one that sacrifices storage for privacy since “the tower doesn’t know which channel it’s watching, so it ends up using more storage space.” Another tricky piece of building the technology, he said, is finalizing the automatic discovery protocol for finding towers and devising the e-cash token so towers can be paid for each state update. Right now, they can only be paid if they catch a user cheating.

Another hurdle is hash time locked contracts (HTLC), Fromknecht expressed. For the first release, only manually closed channels can be monitored for the sake of privacy and efficiency. Lightning Labs plans to add support for HTLC monitoring in the future, though, which will “prevent an attacker from claiming them after the relative timelock elapses,” Fromknecht said.

Still, even with this room for improvement, the implementation is a big step toward making Lightning safer and trustless.

“With what’s implemented in the to-be-merged pull request, any routing node, application or business on the network can start to run their own private tower to back up their public node. This can be a standalone instance or a more advanced deployment on dedicated hardware,” Osuntokun said.

So the best-case scenario with this technology, actually, is that every user has their own Eye of Sauron watching over their Lightning channels in the future — and that’s actually a very good thing.

This article originally appeared on Bitcoin Magazine.

This Gallery Is Selling Indigenous Australian Art for Bitcoin

Art Gallery

Things you can buy with bitcoin: AT&T’s services, airfare, pretty much anything using gift cards through Bitrefill, pizza, drugs (duh) and now, Indigenous Australian art.

Yes, you read that right. The Indigenous Fine Art Gallery (IFAG) in Australia now accepts bitcoin for its “museum-quality art from Australia’s most collectible Indigenous artists.” This puts the IFAG in the company of a growing list of art galleries that accept bitcoin for their wares, but it’s the first ever to accept the cryptocurrency for art created by Indigenous Australians.

Sounds pretty niche, right? Accepting payment in the world’s first cryptographic currency for indigenous art, while it still remains difficult to purchase everyday items with bitcoin, may sound a bit too novel to be true. But, in the eyes of the IFAG, the method of payment is more novel than interest in the objects of purchase.

“This form of indigenous art is not necessarily a novelty as such,” IFAG partner David Meese wrote in an email to Bitcoin Magazine. “In fact, it has been traded as a precious commodity for the past 200 odd years, since the very first European settlements in Australia.”

For two commodities that may not appear to share much, bitcoin and Australian Aboriginal art have more in common than meets the eye. Specifically, both have seen a surge of interest in recent years and an accompanying jump in value. Figures shared with Bitcoin Magazine indicate that, over the past three decades, certain rarer pieces of Indigenous Australian art have appreciated over 600 percent per annum, an absolute moonshot in the realm of fine art.

Clifford Possum Tjapaltjarri’s Warlugulong, for instance, sold for a measly $140 AUD ($96 USD) in 1977. Thirty years later, this same artwork went for $2.4 million AUD ($1.66 million USD) at international art auction house Sotheby’s in Melbourne. Another, Emily Kame Kngwarreye’s Earth’s Creation 1, sold at the Cooee Art Auction in Sydney for $2.1 million AUD ($2.45 million USD) in 2017; 10 years earlier, in the same city, the work was auctioned for just over $1 million AUD ($690,000 USD).

According to a 2004 report for the Government of Australia Senate Committee, indigenous art sales in Australia were valued at $100 to $300 million AUD in 2002. Current figures estimate this value is now “well into the billions of dollars,” Meese states, a clear illustration of the genre’s “astonishing appreciation as an art movement.”

Meese believes that the “enthusiastic passion” infused in each piece of art, which invokes an ancestral connection to the ethereal and the physical worlds, makes them “highly infectious” as collectors’ items and so drives demand. The same motifs infused in each piece of art, though, make them more than a hot commodity; they’re also sociocultural artifacts which embody generations of Aboriginal heritage.

“Australian Indigenous art is steeped in a proud and wonderful history,” Meese said. “Each magnificent painting depicts a story or ‘dreaming’ inspired by a rich tapestry of cultures and customs … As a race of people, the Aborigines’ affinity with the earth, and respect for its elements, leaves a lot for us ‘more educated’ to ponder. They truly are at one with the land and have a definite ‘sixth sense’ or ‘additional dimension’ when it comes to the environment, the sky and the telling of dreamings through their art.”

So the art is about more than just fetching a pretty penny, Meese emphasized, and while it provides “very significant economic” benefits, it provides a wealth of “social and cultural benefits” as well.

Part of the gallery’s decision to accept bitcoin was a desire “to offer individuals all around the world a tangible and concrete investment opportunity using their bitcoin,” Meese explained, giving bitcoiners the chance to tap into a unique genre of art.

“[We wanted] to bring this beautiful, yet raw, powerful and expressive product to as many people around the world as possible,” he said. “We are big fans of Australian Aboriginal art and are very proud of this art movement and its originality and endurance. It is the oldest continuous art movement in the world and in the history of art itself.”

Meese continued to stress that each piece of art comes with “impeccable provenance” and certification to prove its authenticity. But, in the future, smart contracts and blockchains could offer even more reassurance with immutable attestations to each piece’s validity. The IFAG sees great promise in blockchain technology for the future of authentication, Meese said, though it has its limits. Namely, it works better as a proactive instead of retroactive solution; case in point, you can’t rewrite authentication errors for pieces like Salvator Mundi, a $450 million painting which experts now say was likely painted by Leonardo da Vinci’s assistant and not the Renaissance man himself.

But blockchains can keep the record straight for pieces like this going forward, and Meese mentioned novel applications like allowing collectors to own a share in a piece of artwork like they might in land, stocks or other assets. Or, more probably, something like bitcoin could open up direct payment to artists, potentially rendering Meese’s job and galleries themselves obsolete, he wisecracked.

For now, though, Meese and the IFAG will focus on what they do best: selling art. He’s confident that the art’s atavistic lineage will make it an attractive investment for no-coiners and bitcoiners alike, and he’s also sure that IFAG’s pairing of cryptocurrency and art is the beginning of a sure-to-last symbiotic relationship.

“This art form has been with us for the past 60 to 80 thousand years; it has and will continue to have a longer ‘investing shelf life’ than most things,” he said. “We are confident that the art and Bitcoin can continue to grow side by side to have a very long and prosperous life together.”

This article originally appeared on Bitcoin Magazine.

The Man Behind Bitcoin Pizza Day Is More Than A Meme: He’s a Mining Pioneer

The Man Behind Bitcoin Pizza Day Is More Than A Meme: He’s a Mining Pioneer

Bitcoin was barely a year old and trading for less than a penny. Excitement for the world’s first cryptocurrency was still largely bottled up in the infant hobbyist forum Bitcointalk, itself barely half a year old. Here, OGs effervescent with enthusiasm compared notes on economic philosophy, technical knowledge and the new cryptographic beast that Satoshi Nakamoto created. Satoshi himself was still active on the forum, too, as the earliest adopters shared their visions for the future of money.

Though, if that future was going to be realized, something was still missing: No one had ever spent bitcoin on anything. Darknet markets wouldn’t exist for a few years and the only transactions users facilitated (besides peer-to-peer ones on the network) were done in cash.

Perhaps this is why Laszlo Hanyecz decided it was time to make history. On May 18, 2010, the Bitcoin Core contributor asked fellow enthusiasts on Bitcointalk if someone would “make [two large] pizzas yourself and bring it to my house or order it for me from a delivery place.” He offered 10,000 BTC for the service and, though it took four days, he got his wish.

One prescient user cautioned that 10,000 bitcoin was “quite a bit” — around $41 at the time. And, of course, “quite a bit” sounds like an absurd understatement today; seven years later, at bitcoin’s all-time high, that sum would be worth $200,000,000.

To Hanyecz, who told Bitcoin Magazine that he spent something near 100,000 BTC on pizza that year, the purchase was just another drop in the bucket.

“We would just give people bitcoin on the forum,” he said — sometimes 100, sometimes 1,000 BTC at a time.

“I wanted to do the pizza thing because to me it was free pizza,” Hanyecz explained. “I mean, I coded this thing and mined bitcoin and I felt like I was winning the internet that day. I got pizza for contributing to an open-source project. Usually hobbies are a time sink and money sink, and in this case, my hobby bought me dinner.”

Not Just “That Pizza Guy”

The May 22, 2010, transaction would be etched in stone, as much for the symbolic significance of the purchase as the gaffe in Hanyecz spending the future-equivalent of Kanye West’s net worth on two large Papa John’s pizzas.

But there’s more to Hanyecz’s story than this transaction, even though the legendary pizza purchase has overshadowed his other achievements in the Bitcoin space. The developer is doing just fine despite the purchase, actually, mainly because of his other (and vastly more important) contribution to Bitcoin’s development: GPU mining.

Before revolutionizing mining, the software engineer, who was introduced to Bitcoin in late 2009, was a member of its first class of contributors. As he humbly put it, Hanyecz “had been working on [bitcoin], fixing bugs and things like that.” His “minor” contributions include building and deploying the first macOS Bitcoin Core release.

They also include revamping the landscape of mining. Hanyecz first introduced the community to GPU mining in May 2010, which he saw as simply contributing to something that was very much still an experiment and not yet a movement.

“On [Bitcointalk] at the time, there weren’t really any users,” he recalled. “There were 50 people, maybe 100. It was a lot different then. It was like, ‘Hey, do you want to contribute to an open source project?’ It wasn’t ‘Hey, do you want money to change the world?’”

At that time, the only bitcoin mining was done on the backs of CPUs — the processors that make personal computers tick. No one had contrived of a more efficient way to produce hashes. As he set out to improve this efficiency, Hanyecz admitted that he didn’t fully comprehend “how fast the [mining] difficulty adjusted” (because no one had created a miner powerful enough to truly test this mechanism). Still, he stewed over a way to produce more hashes more quickly in the hope of extracting more value from the network.

This is what led him to devise a mining code using GPUs. Graphics cards, as they are commonly called, animate our computer screens with color and, well, graphics. Hanyecz deduced that these pieces of hardware could do more computation at once than a CPU and so “fit well with trying to brute force hashes” to mine blocks.

“GPUs, what they’re good at, is they can do a lot of things in parallel, but they have to be very simple things and it has to be the same thing,” he explained. “So, you can add 10 to a thousand different numbers at the same time. Whereas a general, regular CPU is much more flexible. It can do a lot of things, but it has to do these one at a time. The mining problem lent itself perfectly to GPUs.”

His discovery was lucrative. It gave him a tenfold increase in hashpower — and this using a 2010 Macbook!

But his discovery didn’t go over so well with crypto’s progenitor. Satoshi was always a bit “at arm’s length” in those days, Hanyecz said, but after he shared the GPU mining code with the creator, Satoshi made his opinion known that he thought it was too advanced for Bitcoin’s development.

“A big attraction to new users is that anyone with a computer can generate some free coins,” Satoshi wrote in an email to Hanyecz. “GPUs would prematurely limit the incentive to only those with high-end GPU hardware. It’s inevitable that GPU compute clusters will eventually hog all the generated coins, but I don’t want to hasten that day.”

“That’s when I was like, ‘Man, I feel like I crapped up your project. Sorry, dude,’” Hanyecz told Bitcoin Magazine with a laugh. “He was concerned that come people might be discouraged because they can’t mine a block with a CPU. So, I stopped advertising it after that.”

Even though he tried to pull the plug, Hanyecz’s invention began to propagate, opening up a Pandora’s box of hashrate on the network. Soon after he debuted the code on Bitcointalk, other users repurposed it to create standalone versions for Windows, Mac and Linux. Hanyecz released the seminal code as a patch into Bitcoin Core’s source code “because that was the easiest way to hack it in,” he said. These new versions, though, were separated from Bitcoin Core entirely and existed as their own clients.

The cat was out of the bag, and Hanyecz no longer had the competitive edge he was looking for when he coded the new mining method.

“I thought that having more processing power would secure the network. But I didn’t understand that I should have kept it to myself. It would have made more sense to be greedy,” he joked.

Life After Pizza

Despite misconceptions that Hanyecz eschewed Bitcoin following the pizza transaction, he’s still around. He just isn’t active in Bitcoin’s development anymore.

“I’m just another bitcoiner,” says the man who changed the mining landscape indelibly.

Bewilderingly, nearly 10 years later, that same man is hardly recognized for this contribution. Instead, most people know Laszlo Hanyecz for the historic pizza transaction, an industry meme that dwarfs the more groundbreaking work he delivered in Bitcoin’s stumbling infancy. This might be a consequence of his invention coming at a time when Bitcoin’s following was no more than a few hundred enthusiasts. Or perhaps it’s that the shock value of his purchase, in the age of clickbait, outweighs the technical achievements on his cypherpunk résumé.

Hanyecz, when asked if he ever tires of people asking him about the purchase, says that he sees it differently.

“I think it’s funny when people look at it that way,” he explained. “I think it’s one of those things where it’s a good catchy thing to get people’s attention. But I think anyone who gets genuinely interested [in Bitcoin] understands. It’s the same thing as, oh, let me go back in the past and buy Apple stock.

“At the time it was Monopoly money. Nobody cared — people would just give you some, so I didn’t figure I needed to be greedy with it.”

The father of GPU mining seems to approach the infamous pizza purchase, and questions surrounding it, the same way he approaches Bitcoin: with good-humored aplomb, rather than bitter regret. In fact, he doesn’t see it as a loss at all; he sees it as a win.

“A trade happens because both parties think they’re getting a good deal,” he said. “I felt like I was beating the internet, getting free food. I was like, ‘Man, I got these GPUs linked together, now I’m going to mine twice as fast. I’m just going to be eating free food; I’ll never have to buy food again.’”

Hanyecz has maintained this upbeat outlook even as bitcoin has catapulted past all-time high after all-time high throughout the years. This is probably because his treatment of Bitcoin hasn’t changed since he first joined the open-source community in 2010. To him, it’s still a hobby, not a career.

“Honestly, I just kinda stay out of it because there’s so much buzz,” he said. “I don’t want that kind of attention, and I certainly don’t want people thinking I’m Satoshi … I just figure it’s better to keep it as a hobby. I have a regular job. I don’t do Bitcoin full time. I don’t want it to be a professional thing that I’m on the hook for. I’m glad that I was involved to the extent that I was.”

We’re glad he was, as well. After all, he gave us Bitcoin Core for MacOS and GPU mining — oh, and all the pizza memes, too. They may not be as significant or impressive as Hanyecz’s other contributions, but they do make every May 22 for this community memorable (and delicious).

This article originally appeared on Bitcoin Magazine.