Hashcashed Reputation with Application in Designing Watchtowers
This work addresses the challenge of incentivizing trustworthy behavior and competition among watchtowers in blockchain-based payment networks, benefiting clients who rely on these services.
The authors propose a novel reputation system designed for online markets where misbehavior can be publicly verified, such as blockchain service providers. This system aims to incentivize good behavior and foster competition among service providers, specifically demonstrated in an open market for watchtowers to encourage reliable service and reduced fees.
We propose a novel reputation system to stimulate well-behaviour, and competition in online markets. Our reputation system is suited for markets where a publicly-verifiable "proof-of-misbehaviour" can be generated when one party misbehaves. Such markets include those that provide blockchain services, such as monitoring services by watchtowers. Watchtowers are entities that watch the blockchain on behalf of their offline clients to protect the clients' interests in applications such as payment networks (e.g., the Lightning network). In practice, there is no trust between clients and watchtowers, and it is challenging to incentivize watchtowers to well-behave (e.g., to refuse bribery). To showcase our reputation system, in this work, we create an open market of watchtowers, where watchtowers are motivated to not only deliver their promised service but also reduce their service fees in competition with each other.