High onchain fee environment

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Notes on using the Lightning Network when miner fees are high.
Preparation
Recommendations to get ready for a high fee environment beforehand.
Channel management
Open channels during low fee times strategically (weekends)
Close inactive and unreliable channels early during low fee times
Minimise downtime and instability if running a routing node
Use private (unannounced) channels as a spending node so downtimes won't make the peer force-close
Wallet management
Funding from a single sig wallet is cheaper
Prepare a selection of good size UTXOs for minimal cost channel opens
consolidate (beware of privacy implications)
a well funded and long running JoinMarket Maker wallet will have different sizes of coinjoined outputs available
Configuration
Activate Anchor Commitments
affects only the new channels opened when both peers support anchors
protocol.anchors=true in the lnd.conf​
available since LND v0.12.0​
aimed to be active by default from LND v0.13
will need one UTXO per channel in the onchain wallet of LND to pay the closing fee with CPFP - these are not reserved in the wallet yet
Set the minchansize in lnd.conf (eg. avoid <500k channels on a routing node)
Routing fees and balances
All nodes:
the channel balance will appear to be smaller as the commitment reserve will be higher
offchain transaction fees will also increase (remains to be proportional to the payment amount)
payment failures might appear more often as liquidity dries up
​Routing nodes:
​Routing fees need to be increased to make up for the increased onchain fees and rebalancing costs
Auto-rebalancing should be allowed to use higher fees
Offchain traffic will increase
During high fee periods less channels will be opened
Less capital will be reallocated
Submarine Swaps get more expensive (requires on-chain transactions)
Overall channels will get out of balance quicker
Opening channels
Include a change output to be able to use CPFP to bump the fee of the channel open transaction
Batch opens
the biggest saving is when using 1 input to open multiple channels
aim for next block with the opening transaction fee to prevent the fees running away
can use PSBT-s (even from ean external wallet) with the command line tools available:
LND: Balance of Satoshis​
bos open and bos fund
​C-lightning CLI​
lightningcli fundchannel_start id amount [feerate announce close_to push_msat]
avoid opening public and private (unannounced) channels in the same batch - defeats the purpose of not announcing channels in the gossip
Do not leave a channel open pending for more than 2016 blocks (~2 weeks)
A pending channel will become "stale" after 2016 blocks - the peer will forget about the funding transaction, so the channel will never become online.
the only option left to unlock the funds from the multisig will be an (expensive) force close.
Use CPFP (never RBF)
CPFP can be only used if there is a change output from the opening transaction: https://api.lightning.community/?shell#bumpfee):
lncli wallet bumpfee --sat_per_byte 110 TXID:INDEX
Lightningwiki.net article: https://lightningwiki.net/index.php/Bumping_fee_for_lightning_channel_open​
Can cancel the transaction by spending it to a change address in Electrum​
Closing channels
Aim for a cooperative close if must
can use CPFP from the receiving wallet if a pending ccooperative close is stuck in the mempool with a low fee
Run the channel close command again if the transaction has been removed from the mempool
lncli closechannel FUNDING_TXID INDEX
Force closes are ~5x more expensive than the next block fee at the last update
LND updates every 10 min on an online channel
Long inactive channels are a liability - especially if was online last at low miner fee period
Avoid and prevent force closes by minimizing downtime and instability as a routing node
Watchtowers
If using watchtowers need to set the
wtclient.sweep-fee-rate= in the lnd.conf​
to a sat/byte level where it can confirm within the CSV delay in case a breach transaction is broadcasted by the peer while the node is offline.
The CSV delay can be set to be longer with:
lncli updatechanpolicy
Future improvements
Anchor commitments by default (affects only new channels and both peers need to support the feature)
Splicing and dual funding - extend the channel capacity in a single transaction
Taproot - can save on sending to the multisig (~26 byte from the min 140 bytes)
Taproot - funding from multisig wallets will be the same cost as from single sig wallets
ELTOO - multiparty channels and channel factories
References
​What is CPFP?​
​Can a channel be closed while the funding tx is still stuck in the mempool?​
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Set up a Watchtower and a Client on the Lightning Network
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Compact the LND database (channel.db)
Last modified 28d ago
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Contents
Routing fees and balances
Opening channels
Do not leave a channel open pending for more than 2016 blocks (~2 weeks)