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The BOLTs frequently mentioned "fail the channel" when something unexpected is received or happens. For instance, when receiving an update_fulfill_htlc message, you should fail the channel if the received channel ID isn't known.

At this point, you would have money stuck in a channel, so does this mean you should try to close unilaterally, cooperatively, either? Is "fail the channel" defined in the bolts somewhere?

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The meaning is defined in BOLT #5 Failing a Channel.

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