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"All Along the Watchtower": How the Chord Progression Works
In "All Along the Watchtower," the G major chord (assuming the key of C major/A minor) plays a vital role because, although only transient, its presence turns what would otherwise be a relatively weak third progression (Am – F) into a pair of strong second progressions (Am – G and G – F).
FIGURE 88: Chord Map of “All Along The Watchtower” (Words and Music by Bob Dylan, 1967)
As for harmonic contrast, because the G major chord is transient, the song spends about half its time in the minor mode, the other half in major. But the tonality is minor.
With no fifths in sight, the song does not use any form of conventional cadence. It goes on and on restlessly, shifting back and forth, back and forth, major to minor to major to minor, until it ends on the tonic minor chord.