Watchtowers

Watchtowers are specialized network participants that monitor off-chain channels on behalf of users who are offline. In state channel architectures, if a participant attempts to broadcast an outdated state to steal funds, the watchtower detects this malicious activity and submits a fraud proof to the main chain to prevent the theft.

This allows users to engage in off-chain trading without needing to monitor the network 24/7. Watchtowers are essential for the security and usability of state channel-based derivatives platforms.

They introduce a service-based model where users pay for security, fostering a competitive market for monitoring services. However, they also introduce a dependency on third parties, which requires trust or cryptographic incentives to mitigate.

By offloading the burden of monitoring, watchtowers make off-chain scaling more accessible to the average trader. They are a key component in the ecosystem of Layer 2 solutions.

Their design must be robust to ensure that the security they provide is reliable and censorship-resistant.