  The recent development of payment channels and their extensions (e.g., state
channels) provides a promising scalability solution for blockchains which
allows untrusting parties to transact off-chain and resolve potential disputes
via on-chain smart contracts. To protect participants who have no constant
access to the blockchain, a watching service named as watchtower is proposed --
a third-party entity obligated to monitor channel states (on behalf of the
participants) and correct them on-chain if necessary. Unfortunately, currently
proposed watchtower schemes suffer from multiple security and efficiency
drawbacks. In this paper, we explore the design space behind watchtowers. We
propose a novel watching service named as fail-safe watchtowers. In contrast to
prior proposed watching services, our fail-safe watchtower does not watch
on-chain smart contracts constantly. Instead, it only sends a single on-chain
message periodically confirming or denying the final states of channels being
closed. Our watchtowers can easily handle a large number of channels, are
privacy-preserving, and fail-safe tolerating multiple attack vectors.
Furthermore, we show that watchtowers (in general) may be an option
economically unjustified for multiple payment scenarios and we introduce a
simple, yet powerful concept of short-lived assertions which can mitigate
misbehaving parties in these scenarios.
