High onchain fee environment

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

General

• maximise uptime

• configure a hybrid connection if possible - note that skipping to always use a proxy will expose your IP address (use a VPN like Tunnelsats)

LND

• check the options in the sample lnd.conf

• Use Anchor Commitments

  • on by default on LND when both peers support anchors

  • will have 100000 sats reserved in the onchain wallet of LND to pay the closing fee with CPFP

  • raise the max-commit-fee-rate-anchors to a comfortably high level to avoid purging the transactions from the mempools.

• Set the minchansize (eg. avoid <500k channels on a routing node)

• set a long payments-expiration-grace-period

• increase the CLTV delta: bitcoin.timelockdelta from the default 80

• increase the smallest HTLC the node is willing to send out (in millisatoshi)

• increase routing fees (applies to new channels only)

  [Application Options]
  minchansize=500000
  max-commit-fee-rate-anchors=100
  payments-expiration-grace-period=10000h
  
  [Bitcoin]
  bitcoin.timelockdelta=144
  bitcoin.minhtlcout=100000
  bitcoin.basefee=1000
  bitcoin.feerate=2500
  
  [tor]
  tor.skip-proxy-for-clearnet-targets=true

• consider increasing the fees towards peers not using anchor commitments:

  lncli listchannels | jq '.channels[] | {remote_pubkey: .remote_pubkey, commitment_type: .commitment_type}'

• set the base_fee_msat, fee_rate_ppm, min_htlc_msat and time_lock_delta on existing channels

  lncli updatechanpolicy --base_fee_msat=1000 --fee_rate_ppm=2500 --min_htlc_msat=100000 --time_lock_delta=144

CLN

• see the possible config options: https://github.com/raspiblitz/raspiblitz/blob/dev/FAQ.cl.md#all-possible-config-options

• cln config settings for new channels:

  min-capacity-sat=500000
  cltv-final=144
  fee-base=1000
  fee-per-satoshi=2500
  htlc-minimum-msat=100000
  
  always-use-proxy=true

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 from the multisig (~26 byte from the min 140 bytes)

• Taproot - funding from multisig wallets will be the same cost as from single sig wallets (slightly more expensive for single-sig)

• 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?