Nitewatch

Nitewatch is a specialized watchtower microservice designed to provide a secure, secondary authorization layer for cryptocurrency withdrawals from smart-contract custody. Its primary use case is to facilitate secure withdrawals from Centralized Exchange (CEX) or Decentralized Exchange (DEX) trading accounts by acting as an independent arbiter.

Purpose

Nitewatch acts as a gatekeeper. It validates withdrawal requests against a strict security policy before applying a secondary signature. This signature is required by the custody smart contract to release funds.

Critical Security Requirement: Nitewatch must be deployed in an isolated and highly secure environment. The private key used for the secondary signature MUST be stored in a Key Management Service (KMS) for production deployments. The service is designed to be agnostic of other platform components, interacting solely via a simple REST API.

Security Policy

Before countersigning any withdrawal request, Nitewatch enforces the following logic:

1. Payload Validation: Verifies the integrity and authenticity of the withdrawal payload, including:
   • Signatures: Validates the User's signature and the Broker/Exchange's signature.
   • Data: Checks user_address, email (if provided), token, amount, chainId, and nonce.
2. Rate Limiting & Quotas: Checks withdrawal limits to prevent draining attacks:
   • User Hourly Limit
   • User Daily Limit
   • Global Hourly Limit
   • Global Daily Limit
3. (Planned) Two-Factor Authentication: Email OTP (One-Time Password) flow.
4. (Planned) Trade Verification: Future support for verifying signed orders and counter-signed trades to ensure withdrawals match trading activity.

User Flow

The withdrawal process involves coordination between the User, the Exchange (Broker), Nitewatch, and the Smart Contract.

sequenceDiagram
    autonumber
    actor User
    participant Frontend
    participant Exchange
    participant Nitewatch
    participant SmartContract

    Note over User, Exchange: Initial Request & Broker Authorization
    User->>Frontend: Initiate Withdrawal
    Frontend->>Frontend: Create Withdrawal Payload
    User->>Frontend: Sign(Payload)
    Frontend->>Exchange: Submit Signed Request
    Exchange->>Exchange: Verify Balance & Risk Checks
    Exchange->>Frontend: Return BrokerSignature

    Note over Frontend, Nitewatch: Secondary Authorization (Nitewatch)
    Frontend->>Nitewatch: POST /v1/withdrawals (Payload, UserSig, BrokerSig)
    Nitewatch->>Nitewatch: Validate Signatures & Payload
    Nitewatch->>Nitewatch: Verify Limits (Hourly/Daily)
    Nitewatch->>Nitewatch: Sign(Payload) with KMS Key
    Nitewatch-->>Frontend: 200 OK (NitewatchSignature)

    Note over Frontend, SmartContract: Blockchain Execution
    Frontend->>SmartContract: withdraw(Payload, UserSig, BrokerSig, NitewatchSig)
    SmartContract->>SmartContract: Verify All 3 Signatures
    SmartContract->>User: Transfer Funds

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REST API (Draft)

The following is a draft of the core REST API endpoints provided by Nitewatch.

1. Initiate Withdrawal

Submit a pre-signed withdrawal request to Nitewatch. This triggers the validation process and, if successful, returns the Nitewatch signature.

• Endpoint: POST /v1/withdrawals

• Request Body:

  {
    "user_address": "0x123...",
    "token_address": "0xabc...",
    "amount": "1000000000000000000",
    "chain_id": 1,
    "nonce": 42,
    "email": "user@example.com",
    "signatures": {
      "user": "0xuser_sig...",
      "broker": "0xbroker_sig..."
    }
  }

• Response (200 OK):

  {
    "withdrawal_id": "550e8400-e29b-41d4-a716-446655440000",
    "status": "approved",
    "nitewatch_signature": "0xnitewatch_secure_sig..."
  }

2. Get Withdrawal Status

Check the status of an existing withdrawal request.

• Endpoint: GET /v1/withdrawals/{withdrawal_id}

• Response:

  {
    "id": "550e8400-e29b-41d4-a716-446655440000",
    "status": "approved",
    "created_at": "2023-10-27T10:00:00Z"
  }