Also covering Simplified commitments

Anchor outputs are special outputs in LN commitment transactions that are designed to allow the transaction to be fee bumped. An earlier name for the proposal was simplified commitments.

Each time the balance changes in an LN channel, a commitment transaction is created and signed by the participating parties. The transaction is only broadcast if one party decides to unilaterally close the channel (e.g. because the other party has become unresponsive). Because the broadcast of the commitment transaction may occur a long time after it was created, the commitment transaction may pay too much or too little in transaction fees. Paying a too-low feerate may prevent the commitment transaction from confirming before any timelocks contained within it expire, allowing funds to be stolen.

The solution to this is for the commitment transaction to pay a minimal amount of fees and then to allow either channel participant to fee bump the transaction. Early designs to accomplish this using Replace-by-Fee (RBF) fee bumping ran into problems with transaction pinning. Later designs used Child Pays For Parent (CPFP) fee bumping and came to depend on CPFP carve-out to circumvent the pinning problem.

As of this writing, the most recent versions of the design add two outputs to the commitment transaction—one for each LN party—and require all other outputs in the commitment transaction to have their scripts encumbered by a 1 OP_CHECKSEQUENCEVERIFY (CSV) condition that prevents them from being spent for at least one block.

To be fully effective, the protocol also depends on Bitcoin full nodes implementing package relay so that there’s a way to CPFP fee bump commitment transactions even if their feerates are below a node’s minimum relay fee. But until package relay is available, it’s possible for LN nodes to just pay a somewhat higher feerate on their commitment transactions to ensure that they’ll be accepted by nodes.

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