3

How does a Lightning Network channel initiator set a limit on the fee rate they are willing to accept for the channel close?

And a second question is how can the close fee be negotiated during a collaborative close?

3

As pointed out the funder of the channel is currently responsible for paying the fees and deciding them. BOLT 02 specifies the update_fee message to be used to signal the fee rate. There it says:

The node responsible for paying the Bitcoin fee SHOULD send update_fee to ensure the current fee rate is sufficient (by a significant margin) for timely processing of the commitment transaction. The node not responsible for paying the Bitcoin fee: MUST NOT send update_fee. A receiving node: if the update_fee is too low for timely processing, OR is unreasonably large: SHOULD fail the channel.

In the case of a collaborative close there is a an algorithm that is part of the closing negotiations:

The closing_signed message contains the follwoing fields

type: 39 (closing_signed)
data:
[channel_id:channel_id]
[u64:fee_satoshis]
[signature:signature]

I quote again:

The sending node: MUST set fee_satoshis less than or equal to the base fee of the final commitment transaction, as calculated in BOLT #3. [...] if the receiver agrees with the fee: SHOULD reply with a closing_signed with the same fee_satoshis value. otherwise: MUST propose a value "strictly between" the received fee_satoshis and its previously-sent fee_satoshis. [...] The "strictly between" requirement ensures that forward progress is made, even if only by a single satoshi at a time.

2
  • After a bit more digging on this it seems that, at least in lnd's case, the update_fee messages are sent in response to fee estimates from the underlying bitcoin daemon. That would then seem to mean that the close fee cannot be controlled by the user and is pretty much a direct function of fee estimates? – sipsorcery May 22 at 21:49
  • The users can choose which software they use to communicate with the Bitcoin network and where they get fee estimates from. But I think it is not only lnd that uses automated fee estimation in the protocol – Rene Pickhardt May 22 at 23:27

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