Payments

“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.

Crypto payment startup Moon has announced an online web browser extension that allows crypto users to make purchases on e-commerce sites like Amazon.com with Lightning Network payments, CoinDesk reported.

Once the extension has been added to a user’s browser, they will be prompted to register and integrate it with a Lightning-enabled wallet.

It should be pointed out that Amazon itself doesn’t accept bitcoin. Rather, the process begins with the user paying with crypto assets followed by a payment processor converting the assets into fiat currency and settling with the merchant.

At checkout, the Moon extension provides a typical QR code with the invoice for payments. Once payment is completed, the user should be redirected to Amazon’s Success Page. Moon is available in the Chrome Web Store but its Lightning Network feature is under review.

Major U.S.-based crypto platform Coinbase has launched the Coinbase Card, a debit card that lets U.K. customers make purchases online and in-store using cryptocurrency.

The new card will link the customers’ crypto balances held on the Coinbase platform with their debit cards — converting crypto holdings into fiat currencies to complete each transaction.

The Coinbase card gives users the ability to make payments via “contactless, Chip and PIN, as well as cash withdrawals from ATMs,” an official press release from the exchange states.

The debit cards will be issued by Paysafe Financial Services Limited, a U.K.-based financial services firm regulated by the Financial Conduct Authority (FCA).

Per the release, the Coinbase Card can be used by users irrespective of the token in their portfolio.

“Coinbase Card supports all crypto assets available to buy and sell on the Coinbase platform, meaning they can pay for a meal with bitcoin, or use ethereum to fund their train ticket home,” the company notes.

In an interview with The Next Web, CEO of Coinbase U.K. Zeeshan Feroz said the debit card would have a maximum daily spend of £10,000 (~$13,000 USD) and withdrawal limit of £500 (~$650). Each transaction will be subject to a 2.49 percent fee. Local ATM withdrawals of up to £200 ($260) per month will be free; while higher amounts would be subject to a 1 percent charge.

Coinbase also announced the launch of the Coinbase Card App in the release. The Card App is an expense management app for iOS and Android-based devices. The app allows customers to choose the specific crypto wallet to fund purchases made with the Coinbase Card.

It will also provide U.K. users access to transaction records and summaries, receipts on purchases, spending categories and more.

For now, the Coinbase Debit Card is only available to clients in the United Kingdom. However, the exchange confirmed in the blog post that they would be supporting other European countries “within the coming months.”

The crypto payment platform Bitrefill has announced an upgrade to its Thor service.

The upgrade is dubbed “Thor Turbo,” and its expected to speed up the process of connecting to Bitrefill’s Lightning node, according to a press release sent to Bitcoin Magazine.

Bitrefill launched the Thor service in January 2019 as an on-demand Lightning channel service that allows users to receive payments whether they have bitcoin loaded into their Lightning wallets or not.

Speaking with Bitcoin Magazine via email, Bitrefill COO John Carvalho said that, since Thor launched, the startup has opened hundreds of Lightning channels with customers and hopes to soon reach the thousands.

But, with the original version of Thor, it takes roughly “six confirmations before a new Lightning channel is usable” and roughly 60 minutes of waiting time, according to the release. With Thor Turbo, Bitrefill expects the process to go much faster. The startup claimed that users can “instantly hop onto the network and make purchases from anywhere in the world without delay.”

Beyond the time savings, Thor Turbo users can also choose to have their channel pre-loaded with a spendable bitcoin balance. For those who don’t have Bitcoin in their wallets, Thor Turbo has a feature that converts other cryptocurrencies into spendable bitcoin on the Lightning Network. Currently, it supports ether, dash, litecoin and dogecoin conversions.

Per the release, Thor Turbo will be an optional upgrade to users and Bitrefill will continue to provide support for non-Turbo Thor channels. Carvalho said Turbo channels would cost as much as non-Turbo channels but that the fees for the original Thor service have been reduced.

Adoption of the Lightning Network has grown tremendously since it was first introduced. As of press time, the network supports a total of 7,816 nodes with a collective network capacity of 1,076.03 BTC (worth about $5.35 million).

“We’re aiming to release several more Lightning-based services this year, demonstrating how businesses can make money and support Bitcoin infrastructure at the same time,” Carvalho concluded.

Malta-based cryptocurrency exchange Zebpay now supports Lightning payments. The exchange announced the news via a blog post, where it claims to be the “first major exchange” to enable Lightning payments for its users.

Per the report, Zebpay users can now login into their wallet and use their bitcoin balances to make micro-purchases for free.

“Making Bitcoin technology widely accessible is a key component of our roadmap. Today, with the integration of the Lightning Network, we have taken yet another step in this direction,” Zebpay’s CEO Ajeet Khurana explained in the release.

Wider Adoption of Crypto

Zebpay believes Lightning payments can drive widespread adoption of bitcoin across the globe by making it easier to make payments for goods and services without fees.

The post reads:

“Zebpay would bear the transaction cost for all lightning transactions done from its wallet and continue to evangelize this technology.”

To start using Lightning, Zebpay users have to sign into their wallets and enable the Lightning tab. Lightning payments on Zebpay will work in quick, easy steps that involve either scanning or pasting the product’s invoice into the wallet to effect payment.

Lightning payments through Zebpay are currently limited to 10 transactions a day for a total value of 0.002 Bitcoin (roughly $8 at current price). Khurana, however, believes the amount gets the job done for most purchases. In an email interview with Bitcoin Magazine, he said the exchange “found that most Lightning stores can be served with this limit. There is no reason why Zebpay won’t keep revising and improving this based on how the ecosystem/tech grows. In fact, right after the first day of going live, we (Zebpay) doubled their limits.”

Lightning payments are available for users on both the Android and iOs app. Earlier this year, Zebpay expanded its presence in Europe, opening offices in Spain, Slovakia, Romania, Lithuania and Liechtenstein.

Blockstream has launched its satellite messaging application programming interface (API) on mainnet. Essentially, this means users can now broadcast data via the company’s satellite network and pay with Lightning payments.

No Internet? No Problem

Blockstream’s satellite service was established with the aim of replacing the Bitcoin network’s dependence on land-based internet connections with actual satellites, thereby putting the network within reach of the world’s population.

According to the blockchain-based startup, the satellite network makes 24-hour broadcasts of the Bitcoin network all over the world, ensuring that the blockchain is protected from interruptions, providing users around the world with the ability to access Bitcoin with the use of a satellite receiver instead of an internet connection.

Transmitting Data via Blockstream

Developers can use Blockstream’s RESTful API or can submit their messages through the website. Using the website to send messages is quite straightforward. The user has to select the “Broadcast a Transmission” option and upload the file (which could be encrypted, if it’s intended to go to a specific user).

The next step is to bid for a price for transmission. The auction process determines the priority given to your transfer. Per the details on the site, the “minimum bid is 50 mSat/byte. Use the minimum bid price or bid more to give your transmission higher priority in the queue.”

Once a bid is chosen, the system will generate an authentication code and transmission ID, which can be used to “delete or re-prioritize (bump) your transmission in the queue.” Once these details are saved in a secure location, then payment is made via Lightning. Once the Lightning payment is made, the transmission will be queued.

Blockstream’s satellite service was launched back in 2017 with the aim of connecting Bitcoin users, particularly in areas where they struggle with low internet penetration and online freedom.

Upon its launch, the satellite’s focus was on transmitting messages to receivers in Europe, Africa and the Americas. The company further expanded to the Asia-Pacific region in December 2018, while adding support for Lightning network payments.

At the time, Blockstream CEO Adam Back said, “We see the increased robustness of the Bitcoin network and the lower cost of participation contributing to helping businesses rely on the service for backup and for emerging markets to use as their primary access to the Bitcoin network at a lower cost.”

With the Lightning network service, the satellite messaging API will now allow users to send encrypted messages to each other from anywhere on Earth and make payments for receiving those messages.

As the new Lightning network (LN) protocol continues to take the Crypto-Twitterverse by storm, it’s taking at least one new app with it, as the tipping and micropayment app Tippin.me catches on like wildfire. Founder Sergio Abril told Bitcoin Magazine he is “overwhelmed” by the interest and support he is receiving from around the world.

Struck by the potential success of the new Lightning network protocol, Abril created Tippin.me three months ago as a way to enable Lightning micropayments without a user having to set up an LN node.

Abril told us he is getting more than 200 new users a day, 14,100 new users as of March 6, 2019.

The goal of Tippin.me is to make the Lightning network easier to use, by giving users a simple, custodial web wallet to receive and manage small amounts of bitcoin for tips and micropayments.

To use it on Twitter, users need only download an application extension to Chrome or Firefox, register, and sign in with their Twitter account. From there, they can share a QR code with fellow tippin.me users to receive tips through the Lightning network.

“I realized that micro payments could be huge with Lightning Network, but there were still some obstacles that made tipping hard. You needed to be online to get a tip, you needed to generate an invoice every time. It needed to be easier, it needed to be way simpler, and certainly something more appealing. And that’s how Tippin started,” Abril told Bitcoin Magazine.

Since its launch, Tippin.me has sent out 16,500 tips and generated 195,000 invoices. Abril told us that when Twitter CEO Jack Dorsey tweeted about Tippin.me recently, 35,000 people visited his site in one day.

How Does It Work?

To set up Tippin.me, you can use the extensions on Google Chrome or Firefox. Some users have installed the Chrome version in Brave and that seems to work as well.

You will also need to install a mobile Lightning wallet, such as an eclair wallet for androids or the bluewallet for IOS and androids from the App or Play stores.

When you sign up at Tippin.me, a small web custodial wallet is created there, linked to your Twitter username.

With the browser extension installed, a Lightning icon will show up in your tweets along the bottom, appearing after the reply, retweet, like and message symbols.

When the Lightning icon is clicked, a QR-code will appear and you can scan it with your new bitcoin wallet. (The process of retrieving a proper QR code for that user is handled automatically by the extension itself.)

Cashing out tips is done from the Tippin.me dashboard.

Security Is “Top of Mind “

As the Bitcoin space weathers another storm, security is again top of mind. we asked Amber D. Scott, CEO of Outlier Canada, whether she would feel comfortable with a Tippin.me wallet.

“The risk, as I see it, isn’t because the Tippin.me wallets require certain information to be revealed publicly. It’s in part due to the custodial nature of the tool, and in part due to its novelty. Tippin.me is still in Beta mode, so there are some risks to users as the system has not yet been battle-tested and there is a greater chance of bugs.”

Abril told Bitcoin Magazine that the amounts involved are small so this takes some pressure off, but he is still very mindful of security concerns.

Abril said:

“I decided to show a disclaimer at the sign up screen on Tippin since day one, to make sure that nobody was holding a big amount. I know that this sign could hold people back, but Tippin was just a side project, a fun experiment, and I didn’t want people to risk too much.”

“The truth is that anything could happen, but as long as you don’t keep your bitcoins in there, and do cashouts regularly, you will be OK. Also, let’s not forget that we are talking about small tips, usually just cents.”

Promoting Lightning and Bitcoin

Asked if the recent bear market had shaken his faith in Bitcoin, Abril said:

“Despite the current market situation, I think that nothing has changed. Bitcoin is the natural evolution of money, and it will happen sooner or later. It’ll keep on growing no matter what.

“But we need to make it easier to use if we want to speed up the process. We need to simplify everything to push adoption. A lot. And that’s why I decided to build Tippin.me.”

“It’s a fun way to play with lightning,” said Coin Center Communications Director Neeraj Agrawal. “Small applications like these are good for onboarding. It got me to finally install a mobile lightning wallet.”

Asked about the timeline for taking Tippin.me out of beta, Abril noted:

“I hope to have a viable gold product within weeks … The truth is that the Lightning Network is still in Beta as well, and that’s one of the reasons I decided to hold on and stay in this phase (If Lightning Network can fail, so [can] Tippin, which is built on top of Lightning Network… So I didn’t want to risk). Luckily, LN (Lightning Network) is maturing very fast, and the system I’m building is really solid already, so things could change soon!”

Want to experiment with Lightning payments on Tippin.me? Join in on Tuesdays for Bitcoin Magazine’s #LightningTrivia events to win some sats and tickets to the Bitcoin 2019 Conference in San Francisco. Follow @bitcoinmagazine.

Crypto payment platform Bitrefill has launched Thor, a service that allows customers to open Lightning channels on demand. Thor will connect to Bitrefill’s node on the Lightning Network, allowing users to receive Lightning payments whether they have bitcoin loaded into their Lightning wallets or not.

“This service will let the customer get an empty lightning channel opened to them from Bitrefill’s node, on the Lightning Network. Now anyone can now pay for, or gift, the ability to have a channel opened to a Lightning wallet in order to receive payments over Lightning at any time,” according to a company announcement.

The Lightning Network is a protocol built on Bitcoin that allows for instant and cheap payments between users, without compromising the security and decentralization of the cryptocurrency. With Lightning payments, you can make multiple payments at a small fraction of the cost of a regular bitcoin transaction, as you don’t have to settle each transaction on the blockchain. Transactions are only settled when the channel is closed.

However, in order to receive Lightning payments, users must have a payment channel open with at least one other Lightning user that has funds on their end of the channel. Without that, there is no way to have funds routed to you. And while it’s possible that a payer opens a brand new Lightning channel to a payee when making the initial Lightning payment, this does require time (a blockchain confirmation) and money (on-chain fees), thus diminishing the advantage of Lightning in that instance.

With Thor, users can purchase an empty channel (potentially also for their friends or business partners) with crypto. Users don’t need to put up any money in the payment channel themselves, while Bitrefill maintains the channel, funded on their end for 30 days. As such, you can immediately start accepting payments through Bitrefill’s channel to you.

The channel opening service from Bitrefill currently works with command-line client LND wallet and the Bitcoin Lightning Wallet for Android. Payments for Thor can be made with custom capacities of 300,000 satoshis to 16,000,000 satoshis using Bitcoin, Lightning payments and a number of other payment options. an empty lightning channel with custom capacities of 300,000 satoshis to 16,000,000 satoshis, and payments for the service can be made through a number of options including bitcoin, Lightning payments and existing Coinbase balances.

The Lightning Network has continued to grow since its first implementation was announced in March 2018 by Lightning Labs.

As of November 2018, the network was supported about 4,070 nodes, with a collective capacity of 223.65 BTC. At press time, the Lightning Network supports 5,241 nodes with a collective network capacity of 563.17 BTC.