In preparations for an interview with a bitcoin company i decided to spin up another node using their software to demonstrate a solid understanding on their service. Chain fees were high so i decided to use @alexbosworth’s BoS to open a batch of 5 channels to start. Each with 20m sats. Opening a batch of channels was something i have done many times using BoS. As they say, easy peasy.
Except this time i didnt have funds on the node. I needed to fund the 5 bc1q channels with an external wallet. Ok no problema, right? Well, without realizing, I created a PSBT, signed it, and broadcasted it all from the external wallet.
After broadcasting the tx the command was just hanging. i asked some people why it was taking so long to fund. The response was: "not good".
The result? To my knowledge, I funded 5 bc1q channels for 20 million sats without the knowledge or signature of the channel peers, resulting in the locking of the funds in a 2-of-2 multi-sig address with no corresponding peer. Well, without them signing the funding tx
You see, you can never truly lose your #bitcoin. You might lose your hardware, but not the bitcoin itself. Your bitcoin simply exists as an unspent output (UTXO) stored in a human-readable address, waiting to be spent. What you lose is your ability to unlock and spend the UTXOs, i.e., the bitcoin.
The Recovery: This involved both channel peers listing all their public segwit addresses and finding the matching ones. Once a match was found, both parties could sign an offer for the recovery of funds. This needs to be done 5 times
With guidance from @lightninglabs devs and @olivergugger, i downloaded Chantools and started the process of recovery using the Zombie Recovery Method. Collaborating with channel peers, one by one we identified matching public segwit addresses and initiated the recovery process. With the first peer, despite checking every segwit address for all 5 channels channel point, a match couldn't be found. Oliver figured out that he had to create a new flag for the repository (Chantools) to expand the number of public keys for larger nodes.
What i've learned: The lighting network is full of nuances where a small deviation from the process, a typo, or a miscalculation can result in the loss of funds.
Yet, amidst the complexities, lies a community of users, developers, and enthusiasts that are willing to help. So, stay calm. Take a deep breath, for any new challenge you encounter likely has a solution already, with people willing to assist.
Now that i have recovered 4/5 channel points with the last one coming soon, learned more about PSTB and how to use Chantools its time to be “reckless” again!
Its never lost :)