Overview

This document serves as an introductory point for users interested in reducing their hot-wallet risks, allowing them to maintain on-chain funds outside of lnd but still be able to manage them within lnd. As of v0.13.0-beta, lnd is able to import BIP-0049 and BIP-0084 extended public keys either at the account path (m/purpose'/coin_type'/account') or at the address index path (m/purpose'/coin_type'/account'/change/address_index) as watch-only through the WalletKit APIs.

Note that in order to follow the rest of this document and/or use the WalletKit APIs, users will need to obtain a lnd build compiled with the walletrpc tag. Our release builds already include this tag by default, so this would only be necessary when compiling from source.

`lnd`'s Default Wallet Accounts

Upon initializing lnd, a wallet is created with four default accounts:

A custom BIP-0049 account (more on this later) to generate NP2WKH external addresses.
A BIP-0084 account to generate P2WKH external and change addresses.
A catch-all BIP-0049 account where all imported BIP-0049 address keys (NP2WKH addresses) exist within.
A catch-all BIP-0084 account where all imported BIP-0049 address keys (P2WKH addresses) exist within.

Prior to v0.13.0-beta, these accounts were abstracted away from users. As part of the key import feature, they are now exposed through the new WalletKit RPCs (ListAccounts, ImportAccount, ImportPublicKey) and the lncli wallet accounts command.

$ lncli wallet accounts
NAME:
   lncli wallet accounts - Interact with wallet accounts.

USAGE:
   lncli wallet accounts command [command options] [arguments...]

COMMANDS:
     list           Retrieve information of existing on-chain wallet accounts.
     import         Import an on-chain account into the wallet through its extended public key.
     import-pubkey  Import a public key as watch-only into the wallet.

OPTIONS:
   --help, -h  show help

Account Details

Before interacting with the new set of APIs, users will want to become familiar with how wallet accounts are represented within lnd. The WalletKit.ListAccounts RPC or lncli wallet accounts list command can be used to retrieve the details of accounts.

$ lncli wallet accounts list
{
    "accounts": [
        {
            "name": "default",
            "address_type": "HYBRID_NESTED_WITNESS_PUBKEY_HASH",
            "extended_public_key": "upub5EbJZz2tYCpPFgDAMDnXpTeLs5EMNJAfyzRKQuUiTugSaJDjnDdk9vNcENzpw1FnxkerNW7jLuBeoxmcGMtopGExmaWqrMB7wRgU8tExTMz",
            "master_key_fingerprint": null,
            "derivation_path": "m/49'/0'/0'",
            "external_key_count": 0,
            "internal_key_count": 0,
            "watch_only": false
        },
        {
            "name": "default",
            "address_type": "WITNESS_PUBKEY_HASH",
            "extended_public_key": "vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn",
            "master_key_fingerprint": null,
            "derivation_path": "m/84'/0'/0'",
            "external_key_count": 0,
            "internal_key_count": 0,
            "watch_only": false
        }
    ]
}

There's a lot to unpack in the response above, so let's cover each account field in detail. As mentioned above, four default accounts should exist, though only two are shown in the output. The catch-all imported accounts are hidden by default until a key has been imported into them.

name: Each account has a name it can be identified by. lnd's default spendable accounts have the name "default". The default catch-all imported accounts have the name "imported".
extended_public_key: The BIP-0044 extended public key for the account. Any addresses generated for the account are derived from this key. Each key has a version prefix that identifies the chain and derivation scheme being used. At the time of writing, lnd supports the following versions:
- xpub/tpub: The commonly used version prefix originally intended for BIP-0032 mainnet/testnet extended keys. Since lnd does not support BIP-0032 extended keys, this version serves as a catch-all for the other versions.
- ypub/upub: The version prefix for BIP-0049 mainnet/testnet extended keys.
- zpub/vpub: The version prefix for BIP-0084 mainnet/testnet extended keys.
address_type: The type of addresses the account can derive. There are three supported address types:
- WITNESS_PUBKEY_HASH: The standard derivation scheme for BIP-0084 with P2WKH for external and change addresses.
- NESTED_WITNESS_PUBKEY_HASH: The standard derivation scheme for BIP-0049 with P2WKH for external and change addresses.
- HYBRID_NESTED_WITNESS_PUBKEY_HASH A custom derivation scheme for BIP-0049 used by lnd where NP2WKH is used for external addresses and P2WKH for change addresses.
master_key_fingerprint: The 4 byte fingerprint of the master key corresponding to the account. This is usually required by hardware wallet/external signers to identify the proper signing key.
derivation_path: The BIP-0044 derivation path used on the master key to obtain the account key.
external_key_count: The number of external addresses generated.
internal_key_count: The number of change addresses generated.
watch_only: Whether the wallet has private key information for the account. This is always true for lnd's default wallet accounts.

Key Import

An existing limitation to the key import APIs is that events (deposits/spends) for imported keys, including those derived from an imported account, will only be detected by lnd if they happen after the import. Rescans to detect past events are currently not supported, but will come at a later time.

Account Key Import

The WalletKit.ImportAccount RPC and lncli wallet accounts import command can be used to import an account. At the time of writing, importing an account has the following request parameters:

name (required): A name to identify the imported account with.
extended_public_key (required): A public key that corresponds to a wallet account represented as an extended key. It must conform to a derivation path of the form m/purpose'/coin_type'/account'.
master_key_fingerprint (optional): The fingerprint of the root key (also known as the key with derivation path m/) from which the account public key was derived from. This may be required by some hardware wallets for proper identification and signing.
address_type (optional): An address type is only required when the extended account public key has a legacy version (xpub, tpub, etc.), such that the wallet cannot detect what address scheme it belongs to.
dry_run (optional): Whether a dry run should be attempted when importing the account. This serves as a way to confirm whether the account is being imported correctly by returning the first N addresses for the external and internal branches of the account. If these addresses match as expected, then it should be safe to import the account as is.

For the sake of simplicity, we'll present an example with two lnd nodes Alice and Bob, where Alice acts as a signer only, and Bob manages Alice's on-chain BIP-0084 account by crafting transactions and watching/spending addresses. Since Alice will only act as a signer, we'll want to import her BIP-0084 account into Bob's node, which will require knowledge of Alice's extended public key.

Alice's BIP-0084 extended public key can be obtained as follows.

$ lncli-alice wallet accounts list --name=default --address_type=p2wkh
{
    "accounts": [
        {
            "name": "default",
            "address_type": "WITNESS_PUBKEY_HASH",
            "extended_public_key": "vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn",
            "master_key_fingerprint": null,
            "derivation_path": "m/84'/0'/0'",
            "external_key_count": 0,
            "internal_key_count": 0,
            "watch_only": false
        }
    ]
}

Bob can then import the account with the following command:

$ lncli-bob wallet accounts import vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn alice

Before Bob imports the account, they may want to confirm the account is being imported using the correct derivation scheme. This can be done with the dry run request parameter. When a dry run is done, the response will include the usual account details, as well as the first 5 external and change addresses, which can be used to confirm they match with what the account owner expects.

$ lncli-bob wallet accounts import vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn alice --dry_run
{
    "account": {
        "name": "alice",
        "address_type": "WITNESS_PUBKEY_HASH",
        "extended_public_key": "vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn",
        "master_key_fingerprint": null,
        "derivation_path": "m/84'/0'/0'",
        "external_key_count": 0,
        "internal_key_count": 0,
        "watch_only": true
    },
    "dry_run_external_addrs": [
        "bcrt1q8zdjz2q92eh7jw9ah3upf2u9553226gq79el5l",
        "bcrt1qmx2m4ngd2el0rmmcu0mz453yzzl3aq9mag0l79",
        "bcrt1q904yve7yvt2t3v0s5r7rueweh4jjr3enfgam8w",
        "bcrt1qa7k20jwfvsep8x0dx4jfu9xm0tlwaa8wrrgl77",
        "bcrt1qzypxx35cfsl24mslqextetuc5m8vvadlqp20d8"
    ],
    "dry_run_internal_addrs": [
        "bcrt1qlstwh8ecy7szfw7k6rllc4ajkg6922xjwj6a23",
        "bcrt1qdrz9glz4ld7uyxwv3jz2anx4k9pe3zm86hpy9g",
        "bcrt1qfdu6tfhs85q20tf48nhtx0kjgr0t2j25apm90t",
        "bcrt1qkmysm9wlnhyyc4uhfaxyafj6q3e3ujcnh97cqc",
        "bcrt1qw8hhmdg3atfp7dcwjtysq4kcmnh07kjy2rd2ay"
    ]
}

Once Bob has confirmed the correct account derivation scheme is being used, the account can be imported without the dry run parameter.

$ lncli-bob wallet accounts import vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn alice
{
    "account": {
        "name": "alice",
        "address_type": "WITNESS_PUBKEY_HASH",
        "extended_public_key": "vpub5Z9beF6NYCrHeDmKC38tM3xXMDFFSARa9sdHRPChEMGqtxiELfZB8hm6FwBpBvfPpX2HGG8edYVV9Wupe43PEJJhhfnz1egtQNNaDXyYExn",
        "master_key_fingerprint": null,
        "derivation_path": "m/84'/0'/0'",
        "external_key_count": 0,
        "internal_key_count": 0,
        "watch_only": true
    }
}

Generating Addresses from an Imported Account

External addresses from an imported account can be generated through the existing Lightning.NewAddress RPC and lncli newaddress command, as they now take an additional optional parameter to specify which account the address should be derived from.

Following the example above, Bob is able to generate an external address for an incoming deposit as follows:

$ lncli-bob newaddress p2wkh --account=alice
{
    "address": "bcrt1q8zdjz2q92eh7jw9ah3upf2u9553226gq79el5l"
}

Change addresses cannot be generated on demand, they are generated automatically when a transaction is crafted that requires a change output.

Crafting Transactions through PSBTs from an Imported Account

Assuming a deposit of 1 tBTC was made to the address above (bcrt1q8zdjz2q92eh7jw9ah3upf2u9553226gq79el5l), Bob should be able to craft a transaction spending their new UTXO. Since Bob is unable to sign the transaction themselves, they'll use PSBTs to craft the transaction, and provide it to Alice to sign.

$ lncli-bob wallet psbt fund --account=alice --outputs="{\"bcrt1qpjqr663tylcksysa4u76xvremee9k8af3pqd5h\": 500000}" --sat_per_vbyte=1
{
        "psbt": "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",
        "change_output_index": 1,
        "locks": [
                {
                        "id": "ede19a92ed321a4705f8a1cccc1d4f6182545d4bb4fae08bd5937831b7e38f98",
                        "outpoint": "c979fd1a72ffa441c577a6e91825558f6da416886c15e87f106e0d9c41ccc780:0",
                        "expiration": 1621632493
                }
        ]
}

The PSBT can then be provided to Alice to sign:

$ lncli-alice wallet psbt finalize --funded_psbt="cHNidP8BAHECAAAAAYDHzEGcDW4Qf+gVbIgWpG2PVSUY6aZ3xUGk/3Ia/XnJAAAAAAD/////AiChBwAAAAAAFgAUDIA9aisn8WgSHa89ozB53nJbH6lWNf4pAQAAABYAFPwW6584J6Aku9bQ//xXsrI0VSjSAAAAAAABAKgCAAAAAAEBAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAD/////A1oBAf////8CAPIFKgEAAAAWABQ4myEoBVZv6Ti9vHgUq4WlIqVpAAAAAAAAAAAAJmokqiGp7eL2HD9x0d79P6mZ36NpU3VcaQaJeZlitIvr2DaXToz5ASAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAABAR8A8gUqAQAAABYAFDibISgFVm/pOL28eBSrhaUipWkAAQMEAQAAACIGArbCQ3C0eTrSeuEokWjN7ty25lSzNxiClZL3tnbmlDG6GAAAAABUAACAAAAAgAAAAIAAAAAAAAAAAAAAAA=="
{
        "psbt": "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",
        "final_tx": "0200000000010180c7cc419c0d6e107fe8156c8816a46d8f552518e9a677c541a4ff721afd79c90000000000ffffffff0220a10700000000001600140c803d6a2b27f168121daf3da33079de725b1fa95635fe2901000000160014fc16eb9f3827a024bbd6d0fffc57b2b2345528d202483045022100b64e4a1181f004e9b4d64543f47687eda1699568c8117b716f86169d3b65b50d0220735d8358779a92f012d0243844cd6dd583116183db9161e77284710ad4156cb7012102b6c24370b4793ad27ae1289168cdeedcb6e654b33718829592f7b676e69431ba00000000"
}

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