What is a Bitcoin Lightning Network Channel Backup and How To Use It?

Posted 2 months ago by LN+

Executive Summary

A Bitcoin Lightning Network channel backup, also known as a Static Channel Backup (SCB), is a feature that allows for the on-chain recovery of Lightning channel balances in the case of data loss or hardware failure. It is a failsafe to record the state of a Lightning channel, enabling the recovery of off-chain balances. The SCB contains all necessary peer and channel information, allowing the Lightning node to send a request to force-close the channel on their end to all previous online peers.

However, it's important to note that the channel backup does not allow the recovery of Lightning Network channels, but it increases the chance of recovering off-chain balances. The backup is created and managed through the Lightning Network node, and it is essential to download a copy of the SCB file when opening or closing any channels. The backup is a critical security measure, and it is advisable to have a proper backup strategy in place to ensure the safety of Lightning channel funds.

What is a Bitcoin Lightning Network Channel Backup?

The Purpose: On the Lightning Network, payment channels exist between two individuals, allowing for lightning-fast Bitcoin transactions. A channel backup ensures you don't lose your share of the Bitcoin locked in a channel if something happens to your Lightning Network node.

What it Contains: Static (unchanging) channel information:

The channel's funding transaction
Channel capacity
Public key of the other node in the channel
Other relevant channel configuration details

What it Doesn't Contain: The current channel balance or its associated commitment transactions. This information changes often.

Types of Channel Backups

Static Channel Backup (SCB): The core backup stored as a file (often channel.backup) or multiple entries within a file. You'll need your Lightning wallet seed phrase to use an SCB effectively.
Database Backups: Lightning Network implementations save important channel information to a database. If you have a full database backup, you can restart your node without the need to use a SCB which would close channels.

How to Use a Bitcoin Lightning Network Channel Backup

The recovery process in the event of data loss is called Data Loss Protection (DLP), and its steps can vary between Lightning Network implementations. Generally:

Node Failure: Your Lightning Network node experiences a major problem (e.g., corrupted hard drive, software failure).
New Node Setup: You install a fresh Lightning Network node.
Restore Wallet Seed: Restore your 24-word wallet seed phrase. This recreates your on-chain Bitcoin wallet.
Restore SCB: You transfer the SCB file to your new node or re-enter individual SCBs. Different wallets and LN tools provide the recover option in different places. In Thunderhub for example you can find it under Tools / Backups / Recover Funds from Channels / Recover.
DLP Process:

Your new node uses the SCB file(s) to discover the public keys of nodes you had channels with.
Your node contacts your former channel partners, alerting them to your issue.
Cooperative nodes will initiate force-closing the channels, returning your on-chain balance according to the last agreed-upon state in the backup.

Important Considerations

Always Update Backups: Backup your SCB(s) whenever you open or close a Lightning channel. Outdated backups won't reflect the correct channel state.
Secure Your Backups: Treat your SCB and wallet seed with extreme care. Anyone with access to both can steal your funds, because they can close the channels and then send out the on-chain funds to their own wallet. Store them securely, with copies in safe locations.
Uncooperative Peers: In the worst-case scenario, where a channel partner becomes uncooperative, you risk losing some funds since the SCB doesn't hold the most recent channel state. This is rare, but highlights the importance of choosing reputable nodes as channel partners.
Watchtowers: In order to ensure that your peers can't cheat you consider entering a Watchtower Swap.

Thunderhub's Backup and Recovery options

Backup Strategies

Automated Cloud Backups: Popular Lightning Network wallets often have built-in features to automatically back up your SCB to cloud storage (encrypted, of course). For example, if you are running an Umbrel node, they have your channel backup and you can contact them if needed.
Manual Backups: You can periodically copy your SCB file to external drives or another computer. Different wallets and LN tools provide the link to download in different places. In Thunderhub for example you can find it under Tools / Backups / Backup All Channels / Download.
Database Backups: If your implementation uses a database, include regular backups of it as part of your strategy.