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Would a dual-funded channel be a single tx? The peers would cooperatively create a single tx with at least 1 input each. Is this correctly understood?

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Yes, this is correct: a dual funded lightning channel is still represented by a single UTXO.

Generally, we would expect each participant to contribute at least one input to the transaction that creates the dual-funded channel (each participant may also thus end up with a newly created change UTXO as well). This method allows two participants to interact trustlessly to create a dual funded channel.

Perhaps worth mentioning: with a slightly broader definition of ‘dual-funded’, we can imagine ways to create a dual-funded channel, without requiring inputs from both parties. These methods may require more trust between parties than the trustless setup mentioned above, but they may be of interest anyways. Examples:

  • two parties share ownership of the BTC stored in a certain UTXO, and decide to open a channel using it as the only input
  • one party contributes a UTXO, while the other party makes an external payment to them. The initial channel balance is then split accordingly, to reflect this payment.
  • one party contributes a UTXO, while the other party makes an on-chain payment to them. As above, the initial channel balance is then split accordingly. This could be done atomically, which means participants will not need to trust each other. See: splicing in / out of channels.

Those are just a few examples off the top of my head. I’m sure there are other ways to accomplish dual-funding as well.

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