From e5db0d63148b10e1ff9da4b2fd5c0e4bcdf7a167 Mon Sep 17 00:00:00 2001
From: Elle Mouton <elle.mouton@gmail.com>
Date: Wed, 12 Feb 2025 15:00:46 +0200
Subject: [PATCH] graph+discovery: move funding tx validation to gossiper

This commit is a pure refactor. We move the transaction validation
(existence, spentness, correctness) from the `graph.Builder` to the
gossiper since this is where all protocol level checks should happen.
All tests involved are also updated/moved.
---
 discovery/gossiper.go                      | 306 ++++++++++++++++-----
 discovery/gossiper_test.go                 | 188 +++++++++++--
 docs/release-notes/release-notes-0.19.0.md |   4 +-
 graph/builder.go                           | 138 ++--------
 graph/builder_test.go                      | 176 +++---------
 graph/errors.go                            |  19 --
 graph/notifications_test.go                |  86 +++---
 7 files changed, 499 insertions(+), 418 deletions(-)

diff --git a/discovery/gossiper.go b/discovery/gossiper.go
index 4e79e1daa..d00ee8d52 100644
--- a/discovery/gossiper.go
+++ b/discovery/gossiper.go
@@ -4,6 +4,7 @@ import (
 	"bytes"
 	"errors"
 	"fmt"
+	"strings"
 	"sync"
 	"sync/atomic"
 	"time"
@@ -28,6 +29,8 @@ import (
 	"github.com/lightningnetwork/lnd/lnpeer"
 	"github.com/lightningnetwork/lnd/lnutils"
 	"github.com/lightningnetwork/lnd/lnwallet"
+	"github.com/lightningnetwork/lnd/lnwallet/btcwallet"
+	"github.com/lightningnetwork/lnd/lnwallet/chanvalidate"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/multimutex"
 	"github.com/lightningnetwork/lnd/netann"
@@ -80,6 +83,23 @@ var (
 	// the remote peer.
 	ErrGossipSyncerNotFound = errors.New("gossip syncer not found")
 
+	// ErrNoFundingTransaction is returned when we are unable to find the
+	// funding transaction described by the short channel ID on chain.
+	ErrNoFundingTransaction = errors.New(
+		"unable to find the funding transaction",
+	)
+
+	// ErrInvalidFundingOutput is returned if the channel funding output
+	// fails validation.
+	ErrInvalidFundingOutput = errors.New(
+		"channel funding output validation failed",
+	)
+
+	// ErrChannelSpent is returned when we go to validate a channel, but
+	// the purported funding output has actually already been spent on
+	// chain.
+	ErrChannelSpent = errors.New("channel output has been spent")
+
 	// emptyPubkey is used to compare compressed pubkeys against an empty
 	// byte array.
 	emptyPubkey [33]byte
@@ -2078,7 +2098,7 @@ func (d *AuthenticatedGossiper) processNetworkAnnouncement(
 	// the existence of a channel and not yet the routing policies in
 	// either direction of the channel.
 	case *lnwire.ChannelAnnouncement1:
-		return d.handleChanAnnouncement(nMsg, msg, schedulerOp)
+		return d.handleChanAnnouncement(nMsg, msg, schedulerOp...)
 
 	// A new authenticated channel edge update has arrived. This indicates
 	// that the directional information for an already known channel has
@@ -2459,7 +2479,7 @@ func (d *AuthenticatedGossiper) handleNodeAnnouncement(nMsg *networkMsg,
 // handleChanAnnouncement processes a new channel announcement.
 func (d *AuthenticatedGossiper) handleChanAnnouncement(nMsg *networkMsg,
 	ann *lnwire.ChannelAnnouncement1,
-	ops []batch.SchedulerOption) ([]networkMsg, bool) {
+	ops ...batch.SchedulerOption) ([]networkMsg, bool) {
 
 	scid := ann.ShortChannelID
 
@@ -2642,23 +2662,116 @@ func (d *AuthenticatedGossiper) handleChanAnnouncement(nMsg *networkMsg,
 	// announcement at the same time.
 	d.channelMtx.Lock(scid.ToUint64())
 
-	// We only make use of the funding script later on during funding
-	// transaction validation if AssumeChannelValid is not true.
-	if !(d.cfg.AssumeChannelValid || d.cfg.IsAlias(scid)) {
-		fundingPkScript, err := makeFundingScript(
-			ann.BitcoinKey1[:], ann.BitcoinKey2[:], ann.Features,
-			tapscriptRoot,
+	// If AssumeChannelValid is present, then we are unable to perform any
+	// of the expensive checks below, so we'll short-circuit our path
+	// straight to adding the edge to our graph. If the passed
+	// ShortChannelID is an alias, then we'll skip validation as it will
+	// not map to a legitimate tx. This is not a DoS vector as only we can
+	// add an alias ChannelAnnouncement from the gossiper.
+	if !(d.cfg.AssumeChannelValid || d.cfg.IsAlias(scid)) { //nolint:nestif
+		op, capacity, script, err := d.validateFundingTransaction(
+			ann, tapscriptRoot,
 		)
 		if err != nil {
 			defer d.channelMtx.Unlock(scid.ToUint64())
 
-			log.Errorf("Unable to make funding script %v", err)
+			switch {
+			case errors.Is(err, ErrNoFundingTransaction),
+				errors.Is(err, ErrInvalidFundingOutput):
+
+				key := newRejectCacheKey(
+					scid.ToUint64(),
+					sourceToPub(nMsg.source),
+				)
+				_, _ = d.recentRejects.Put(
+					key, &cachedReject{},
+				)
+
+				// Increment the peer's ban score. We check
+				// isRemote so we don't actually ban the peer in
+				// case of a local bug.
+				if nMsg.isRemote {
+					d.banman.incrementBanScore(
+						nMsg.peer.PubKey(),
+					)
+				}
+
+			case errors.Is(err, ErrChannelSpent):
+				key := newRejectCacheKey(
+					scid.ToUint64(),
+					sourceToPub(nMsg.source),
+				)
+				_, _ = d.recentRejects.Put(key, &cachedReject{})
+
+				// Since this channel has already been closed,
+				// we'll add it to the graph's closed channel
+				// index such that we won't attempt to do
+				// expensive validation checks on it again.
+				// TODO: Populate the ScidCloser by using closed
+				// channel notifications.
+				dbErr := d.cfg.ScidCloser.PutClosedScid(scid)
+				if dbErr != nil {
+					log.Errorf("failed to mark scid(%v) "+
+						"as closed: %v", scid, dbErr)
+
+					nMsg.err <- dbErr
+
+					return nil, false
+				}
+
+				// Increment the peer's ban score. We check
+				// isRemote so we don't accidentally ban
+				// ourselves in case of a bug.
+				if nMsg.isRemote {
+					d.banman.incrementBanScore(
+						nMsg.peer.PubKey(),
+					)
+				}
+
+			default:
+				// Otherwise, this is just a regular rejected
+				// edge.
+				key := newRejectCacheKey(
+					scid.ToUint64(),
+					sourceToPub(nMsg.source),
+				)
+				_, _ = d.recentRejects.Put(key, &cachedReject{})
+			}
+
+			if !nMsg.isRemote {
+				log.Errorf("failed to add edge for local "+
+					"channel: %v", err)
+				nMsg.err <- err
+
+				return nil, false
+			}
+
+			shouldDc, dcErr := d.ShouldDisconnect(
+				nMsg.peer.IdentityKey(),
+			)
+			if dcErr != nil {
+				log.Errorf("failed to check if we should "+
+					"disconnect peer: %v", dcErr)
+				nMsg.err <- dcErr
+
+				return nil, false
+			}
+
+			if shouldDc {
+				nMsg.peer.Disconnect(ErrPeerBanned)
+			}
+
 			nMsg.err <- err
 
 			return nil, false
 		}
 
-		edge.FundingScript = fn.Some(fundingPkScript)
+		edge.FundingScript = fn.Some(script)
+
+		// TODO(roasbeef): this is a hack, needs to be removed after
+		//  commitment fees are dynamic.
+		edge.Capacity = capacity
+		edge.ChannelPoint = op
 	}
 
 	log.Debugf("Adding edge for short_chan_id: %v", scid.ToUint64())
@@ -2676,8 +2789,7 @@ func (d *AuthenticatedGossiper) handleChanAnnouncement(nMsg *networkMsg,
 		// If the edge was rejected due to already being known, then it
 		// may be the case that this new message has a fresh channel
 		// proof, so we'll check.
-		switch {
-		case graph.IsError(err, graph.ErrIgnored):
+		if graph.IsError(err, graph.ErrIgnored) {
 			// Attempt to process the rejected message to see if we
 			// get any new announcements.
 			anns, rErr := d.processRejectedEdge(ann, proof)
@@ -2690,6 +2802,7 @@ func (d *AuthenticatedGossiper) handleChanAnnouncement(nMsg *networkMsg,
 				_, _ = d.recentRejects.Put(key, cr)
 
 				nMsg.err <- rErr
+
 				return nil, false
 			}
 
@@ -2705,62 +2818,15 @@ func (d *AuthenticatedGossiper) handleChanAnnouncement(nMsg *networkMsg,
 			nMsg.err <- nil
 
 			return anns, true
-
-		case errors.Is(err, graph.ErrNoFundingTransaction),
-			errors.Is(err, graph.ErrInvalidFundingOutput):
-
-			key := newRejectCacheKey(
-				scid.ToUint64(),
-				sourceToPub(nMsg.source),
-			)
-			_, _ = d.recentRejects.Put(key, &cachedReject{})
-
-			// Increment the peer's ban score. We check isRemote
-			// so we don't actually ban the peer in case of a local
-			// bug.
-			if nMsg.isRemote {
-				d.banman.incrementBanScore(nMsg.peer.PubKey())
-			}
-
-		case errors.Is(err, graph.ErrChannelSpent):
-			key := newRejectCacheKey(
-				scid.ToUint64(),
-				sourceToPub(nMsg.source),
-			)
-			_, _ = d.recentRejects.Put(key, &cachedReject{})
-
-			// Since this channel has already been closed, we'll
-			// add it to the graph's closed channel index such that
-			// we won't attempt to do expensive validation checks
-			// on it again.
-			// TODO: Populate the ScidCloser by using closed
-			// channel notifications.
-			dbErr := d.cfg.ScidCloser.PutClosedScid(scid)
-			if dbErr != nil {
-				log.Errorf("failed to mark scid(%v) as "+
-					"closed: %v", scid, dbErr)
-
-				nMsg.err <- dbErr
-
-				return nil, false
-			}
-
-			// Increment the peer's ban score. We check isRemote
-			// so we don't accidentally ban ourselves in case of a
-			// bug.
-			if nMsg.isRemote {
-				d.banman.incrementBanScore(nMsg.peer.PubKey())
-			}
-
-		default:
-			// Otherwise, this is just a regular rejected edge.
-			key := newRejectCacheKey(
-				scid.ToUint64(),
-				sourceToPub(nMsg.source),
-			)
-			_, _ = d.recentRejects.Put(key, &cachedReject{})
 		}
 
+		// Otherwise, this is just a regular rejected edge.
+		key := newRejectCacheKey(
+			scid.ToUint64(),
+			sourceToPub(nMsg.source),
+		)
+		_, _ = d.recentRejects.Put(key, &cachedReject{})
+
 		if !nMsg.isRemote {
 			log.Errorf("failed to add edge for local channel: %v",
 				err)
@@ -3622,6 +3688,114 @@ func (d *AuthenticatedGossiper) ShouldDisconnect(pubkey *btcec.PublicKey) (
 	return false, nil
 }
 
+// validateFundingTransaction fetches the channel announcements claimed funding
+// transaction from chain to ensure that it exists, is not spent and matches
+// the channel announcement proof. The transaction's outpoint and value are
+// returned if we can glean them from the work done in this method.
+func (d *AuthenticatedGossiper) validateFundingTransaction(
+	ann *lnwire.ChannelAnnouncement1,
+	tapscriptRoot fn.Option[chainhash.Hash]) (wire.OutPoint, btcutil.Amount,
+	[]byte, error) {
+
+	scid := ann.ShortChannelID
+
+	// Before we can add the channel to the channel graph, we need to obtain
+	// the full funding outpoint that's encoded within the channel ID.
+	fundingTx, err := lnwallet.FetchFundingTxWrapper(
+		d.cfg.ChainIO, &scid, d.quit,
+	)
+	if err != nil {
+		//nolint:ll
+		//
+		// In order to ensure we don't erroneously mark a channel as a
+		// zombie due to an RPC failure, we'll attempt to string match
+		// for the relevant errors.
+		//
+		// * btcd:
+		//    * https://github.com/btcsuite/btcd/blob/master/rpcserver.go#L1316
+		//    * https://github.com/btcsuite/btcd/blob/master/rpcserver.go#L1086
+		// * bitcoind:
+		//    * https://github.com/bitcoin/bitcoin/blob/7fcf53f7b4524572d1d0c9a5fdc388e87eb02416/src/rpc/blockchain.cpp#L770
+		//     * https://github.com/bitcoin/bitcoin/blob/7fcf53f7b4524572d1d0c9a5fdc388e87eb02416/src/rpc/blockchain.cpp#L954
+		switch {
+		case strings.Contains(err.Error(), "not found"):
+			fallthrough
+
+		case strings.Contains(err.Error(), "out of range"):
+			// If the funding transaction isn't found at all, then
+			// we'll mark the edge itself as a zombie so we don't
+			// continue to request it. We use the "zero key" for
+			// both node pubkeys so this edge can't be resurrected.
+			zErr := d.cfg.Graph.MarkZombieEdge(scid.ToUint64())
+			if zErr != nil {
+				return wire.OutPoint{}, 0, nil, zErr
+			}
+
+		default:
+		}
+
+		return wire.OutPoint{}, 0, nil, fmt.Errorf("%w: %w",
+			ErrNoFundingTransaction, err)
+	}
+
+	// Recreate witness output to be sure that declared in channel edge
+	// bitcoin keys and channel value corresponds to the reality.
+	fundingPkScript, err := makeFundingScript(
+		ann.BitcoinKey1[:], ann.BitcoinKey2[:], ann.Features,
+		tapscriptRoot,
+	)
+	if err != nil {
+		return wire.OutPoint{}, 0, nil, err
+	}
+
+	// Next we'll validate that this channel is actually well formed. If
+	// this check fails, then this channel either doesn't exist, or isn't
+	// the one that was meant to be created according to the passed channel
+	// proofs.
+	fundingPoint, err := chanvalidate.Validate(
+		&chanvalidate.Context{
+			Locator: &chanvalidate.ShortChanIDChanLocator{
+				ID: scid,
+			},
+			MultiSigPkScript: fundingPkScript,
+			FundingTx:        fundingTx,
+		},
+	)
+	if err != nil {
+		// Mark the edge as a zombie so we won't try to re-validate it
+		// on start up.
+		zErr := d.cfg.Graph.MarkZombieEdge(scid.ToUint64())
+		if zErr != nil {
+			return wire.OutPoint{}, 0, nil, zErr
+		}
+
+		return wire.OutPoint{}, 0, nil, fmt.Errorf("%w: %w",
+			ErrInvalidFundingOutput, err)
+	}
+
+	// Now that we have the funding outpoint of the channel, ensure
+	// that it hasn't yet been spent. If so, then this channel has
+	// been closed so we'll ignore it.
+	chanUtxo, err := d.cfg.ChainIO.GetUtxo(
+		fundingPoint, fundingPkScript, scid.BlockHeight, d.quit,
+	)
+	if err != nil {
+		if errors.Is(err, btcwallet.ErrOutputSpent) {
+			zErr := d.cfg.Graph.MarkZombieEdge(scid.ToUint64())
+			if zErr != nil {
+				return wire.OutPoint{}, 0, nil, zErr
+			}
+		}
+
+		return wire.OutPoint{}, 0, nil, fmt.Errorf("%w: unable to "+
+			"fetch utxo for chan_id=%v, chan_point=%v: %w",
+			ErrChannelSpent, scid.ToUint64(), fundingPoint, err)
+	}
+
+	return *fundingPoint, btcutil.Amount(chanUtxo.Value), fundingPkScript,
+		nil
+}
+
 // makeFundingScript is used to make the funding script for both segwit v0 and
 // segwit v1 (taproot) channels.
 func makeFundingScript(bitcoinKey1, bitcoinKey2 []byte,
diff --git a/discovery/gossiper_test.go b/discovery/gossiper_test.go
index dd9eaffd2..cdcd6d249 100644
--- a/discovery/gossiper_test.go
+++ b/discovery/gossiper_test.go
@@ -27,15 +27,18 @@ import (
 	"github.com/lightningnetwork/lnd/graph"
 	graphdb "github.com/lightningnetwork/lnd/graph/db"
 	"github.com/lightningnetwork/lnd/graph/db/models"
+	"github.com/lightningnetwork/lnd/input"
 	"github.com/lightningnetwork/lnd/keychain"
 	"github.com/lightningnetwork/lnd/lnmock"
 	"github.com/lightningnetwork/lnd/lnpeer"
 	"github.com/lightningnetwork/lnd/lntest/mock"
 	"github.com/lightningnetwork/lnd/lntest/wait"
+	"github.com/lightningnetwork/lnd/lnwallet/btcwallet"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/netann"
 	"github.com/lightningnetwork/lnd/routing/route"
 	"github.com/lightningnetwork/lnd/ticker"
+	tmock "github.com/stretchr/testify/mock"
 	"github.com/stretchr/testify/require"
 )
 
@@ -82,7 +85,6 @@ type mockGraphSource struct {
 	edges         map[uint64][]models.ChannelEdgePolicy
 	zombies       map[uint64][][33]byte
 	chansToReject map[uint64]struct{}
-	addEdgeErr    error
 }
 
 func newMockRouter(height uint32) *mockGraphSource {
@@ -130,10 +132,6 @@ func (r *mockGraphSource) AddEdge(info *models.ChannelEdgeInfo,
 	r.mu.Lock()
 	defer r.mu.Unlock()
 
-	if r.addEdgeErr != nil {
-		return r.addEdgeErr
-	}
-
 	if _, ok := r.infos[info.ChannelID]; ok {
 		return errors.New("info already exist")
 	}
@@ -146,14 +144,6 @@ func (r *mockGraphSource) AddEdge(info *models.ChannelEdgeInfo,
 	return nil
 }
 
-func (r *mockGraphSource) resetAddEdgeErr() {
-	r.addEdgeErr = nil
-}
-
-func (r *mockGraphSource) setAddEdgeErr(err error) {
-	r.addEdgeErr = err
-}
-
 func (r *mockGraphSource) queueValidationFail(chanID uint64) {
 	r.mu.Lock()
 	defer r.mu.Unlock()
@@ -600,7 +590,7 @@ func createUpdateAnnouncement(blockHeight uint32,
 
 	var err error
 
-	htlcMinMsat := lnwire.MilliSatoshi(prand.Int63())
+	htlcMinMsat := lnwire.MilliSatoshi(100)
 	a := &lnwire.ChannelUpdate1{
 		ShortChannelID: lnwire.ShortChannelID{
 			BlockHeight: blockHeight,
@@ -700,15 +690,55 @@ func (ctx *testCtx) createAnnouncementWithoutProof(blockHeight uint32,
 		opt(&opts)
 	}
 
-	// TODO(elle): prepare the mock chain calls accordingly.
 	switch opts.fundingTxPrep {
 	case fundingTxPrepTypeGood:
+		info := makeFundingTxInBlock(ctx.t)
+
+		ctx.chain.On("GetBlockHash", int64(blockHeight)).
+			Return(&chainhash.Hash{}, nil).Once()
+
+		ctx.chain.On("GetBlock", tmock.Anything).
+			Return(info.fundingBlock, nil).Once()
+
+		ctx.chain.On(
+			"GetUtxo", tmock.Anything, tmock.Anything,
+			tmock.Anything, tmock.Anything,
+		).Return(info.fundingTx, nil).Once()
 
 	case fundingTxPrepTypeInvalidOutput:
+		ctx.chain.On(
+			"GetBlockHash", int64(blockHeight),
+		).Return(&chainhash.Hash{}, nil).Once()
+
+		ctx.chain.On(
+			"GetBlock", tmock.Anything,
+		).Return(
+			&wire.MsgBlock{Transactions: []*wire.MsgTx{{}}}, nil,
+		).Once()
 
 	case fundingTxPrepTypeSpent:
+		info := makeFundingTxInBlock(ctx.t)
+
+		ctx.chain.On(
+			"GetBlockHash", int64(blockHeight),
+		).Return(&chainhash.Hash{}, nil).Once()
+
+		ctx.chain.On(
+			"GetBlock", tmock.Anything,
+		).Return(info.fundingBlock, nil).Once()
+
+		ctx.chain.On(
+			"GetUtxo", tmock.Anything, tmock.Anything,
+			tmock.Anything, tmock.Anything,
+		).Return(nil, btcwallet.ErrOutputSpent).Once()
 
 	case fundingTxPrepTypeNoTx:
+		ctx.chain.On("GetBlockHash", int64(blockHeight)).Return(
+			&chainhash.Hash{}, nil,
+		).Once()
+		ctx.chain.On("GetBlock", tmock.Anything).Return(
+			nil, fmt.Errorf("block not found"),
+		).Once()
 
 	case fundingTxPrepTypeNone:
 	}
@@ -730,6 +760,38 @@ func (ctx *testCtx) createAnnouncementWithoutProof(blockHeight uint32,
 	return a
 }
 
+type fundingTxInfo struct {
+	chanUtxo     *wire.OutPoint
+	fundingBlock *wire.MsgBlock
+	fundingTx    *wire.TxOut
+}
+
+func makeFundingTxInBlock(t *testing.T) *fundingTxInfo {
+	fundingTx := wire.NewMsgTx(2)
+	_, tx, err := input.GenFundingPkScript(
+		bitcoinKeyPub1.SerializeCompressed(),
+		bitcoinKeyPub2.SerializeCompressed(),
+		int64(1000),
+	)
+	require.NoError(t, err)
+
+	fundingTx.TxOut = append(fundingTx.TxOut, tx)
+	chanUtxo := &wire.OutPoint{
+		Hash:  fundingTx.TxHash(),
+		Index: 0,
+	}
+
+	block := &wire.MsgBlock{
+		Transactions: []*wire.MsgTx{fundingTx},
+	}
+
+	return &fundingTxInfo{
+		chanUtxo:     chanUtxo,
+		fundingBlock: block,
+		fundingTx:    tx,
+	}
+}
+
 func (ctx *testCtx) createRemoteChannelAnnouncement(blockHeight uint32,
 	opts ...fundingTxOption) (*lnwire.ChannelAnnouncement1, error) {
 
@@ -4306,8 +4368,6 @@ func TestChanAnnBanningNonChanPeer(t *testing.T) {
 		remoteKeyPriv2.PubKey(), nil, nil, atomic.Bool{},
 	}
 
-	ctx.router.setAddEdgeErr(graph.ErrInvalidFundingOutput)
-
 	// Loop 100 times to get nodePeer banned.
 	for i := 0; i < 100; i++ {
 		// Craft a valid channel announcement for a channel we don't
@@ -4323,7 +4383,7 @@ func TestChanAnnBanningNonChanPeer(t *testing.T) {
 		case err = <-ctx.gossiper.ProcessRemoteAnnouncement(
 			ca, nodePeer1,
 		):
-			require.ErrorIs(t, err, graph.ErrInvalidFundingOutput)
+			require.ErrorIs(t, err, ErrInvalidFundingOutput)
 
 		case <-time.After(2 * time.Second):
 			t.Fatalf("remote announcement not processed")
@@ -4343,13 +4403,9 @@ func TestChanAnnBanningNonChanPeer(t *testing.T) {
 	)
 	require.NoError(t, err, "can't create channel announcement")
 
-	// Set the error to ErrChannelSpent so that we can test that the
-	// gossiper ignores closed channels.
-	ctx.router.setAddEdgeErr(graph.ErrChannelSpent)
-
 	select {
 	case err = <-ctx.gossiper.ProcessRemoteAnnouncement(ca, nodePeer2):
-		require.ErrorIs(t, err, graph.ErrChannelSpent)
+		require.ErrorIs(t, err, ErrChannelSpent)
 
 	case <-time.After(2 * time.Second):
 		t.Fatalf("remote announcement not processed")
@@ -4370,13 +4426,15 @@ func TestChanAnnBanningNonChanPeer(t *testing.T) {
 
 	ctx.gossiper.recentRejects.Delete(key)
 
-	// Reset the AddEdge error and pass the same announcement again. An
-	// error should be returned even though AddEdge won't fail.
-	ctx.router.resetAddEdgeErr()
+	// The validateFundingTransaction method will mark this channel
+	// as a zombie if any error occurs in the chanvalidate.Validate call.
+	// For the sake of the rest of the test, however, we mark it as live
+	// here.
+	_ = ctx.router.MarkEdgeLive(ca.ShortChannelID)
 
 	select {
 	case err = <-ctx.gossiper.ProcessRemoteAnnouncement(ca, nodePeer2):
-		require.NotNil(t, err)
+		require.ErrorContains(t, err, "ignoring closed channel")
 
 	case <-time.After(2 * time.Second):
 		t.Fatalf("remote announcement not processed")
@@ -4393,8 +4451,6 @@ func TestChanAnnBanningChanPeer(t *testing.T) {
 
 	nodePeer := &mockPeer{remoteKeyPriv1.PubKey(), nil, nil, atomic.Bool{}}
 
-	ctx.router.setAddEdgeErr(graph.ErrInvalidFundingOutput)
-
 	// Loop 100 times to get nodePeer banned.
 	for i := 0; i < 100; i++ {
 		// Craft a valid channel announcement for a channel we don't
@@ -4410,7 +4466,7 @@ func TestChanAnnBanningChanPeer(t *testing.T) {
 		case err = <-ctx.gossiper.ProcessRemoteAnnouncement(
 			ca, nodePeer,
 		):
-			require.ErrorIs(t, err, graph.ErrInvalidFundingOutput)
+			require.ErrorIs(t, err, ErrInvalidFundingOutput)
 
 		case <-time.After(2 * time.Second):
 			t.Fatalf("remote announcement not processed")
@@ -4423,3 +4479,75 @@ func TestChanAnnBanningChanPeer(t *testing.T) {
 	// Assert that the peer wasn't disconnected.
 	require.False(t, nodePeer.disconnected.Load())
 }
+
+// TestChannelOnChainRejectionZombie tests that if we fail validating a channel
+// due to some sort of on-chain rejection (no funding transaction, or invalid
+// UTXO), then we'll mark the channel as a zombie.
+func TestChannelOnChainRejectionZombie(t *testing.T) {
+	t.Parallel()
+
+	ctx, err := createTestCtx(t, 1000, true)
+	require.NoError(t, err)
+
+	// To start,  we'll make an edge for the channel, but we won't add the
+	// funding transaction to the mock blockchain, which should cause the
+	// validation to fail below.
+	chanAnn, err := ctx.createRemoteChannelAnnouncement(
+		1, withFundingTxPrep(fundingTxPrepTypeNoTx),
+	)
+	require.NoError(t, err)
+
+	// We expect this to fail as the transaction isn't present in the
+	// chain (nor the block).
+	assertChanChainRejection(t, ctx, chanAnn, ErrNoFundingTransaction)
+
+	// Next, we'll make another channel edge, but actually add it to the
+	// graph this time.
+	chanAnn, err = ctx.createRemoteChannelAnnouncement(
+		2, withFundingTxPrep(fundingTxPrepTypeSpent),
+	)
+	require.NoError(t, err)
+
+	// Instead now, we'll remove it from the set of UTXOs which should
+	// cause the spentness validation to fail.
+	assertChanChainRejection(t, ctx, chanAnn, ErrChannelSpent)
+
+	// If we cause the funding transaction the chain to fail validation, we
+	// should see similar behavior.
+	chanAnn, err = ctx.createRemoteChannelAnnouncement(
+		3, withFundingTxPrep(fundingTxPrepTypeInvalidOutput),
+	)
+	require.NoError(t, err)
+	assertChanChainRejection(t, ctx, chanAnn, ErrInvalidFundingOutput)
+}
+
+func assertChanChainRejection(t *testing.T, ctx *testCtx,
+	edge *lnwire.ChannelAnnouncement1, expectedErr error) {
+
+	t.Helper()
+
+	nodePeer := &mockPeer{bitcoinKeyPub2, nil, nil, atomic.Bool{}}
+	errChan := make(chan error, 1)
+	nMsg := &networkMsg{
+		msg:      edge,
+		isRemote: true,
+		peer:     nodePeer,
+		source:   nodePeer.IdentityKey(),
+		err:      errChan,
+	}
+
+	_, added := ctx.gossiper.handleChanAnnouncement(nMsg, edge)
+	require.False(t, added)
+
+	select {
+	case err := <-errChan:
+		require.ErrorIs(t, err, expectedErr)
+	case <-time.After(2 * time.Second):
+		t.Fatal("channel announcement not processed")
+	}
+
+	// This channel should now be present in the zombie channel index.
+	isZombie, err := ctx.router.IsZombieEdge(edge.ShortChannelID)
+	require.NoError(t, err)
+	require.True(t, isZombie, "edge should be marked as zombie")
+}
diff --git a/docs/release-notes/release-notes-0.19.0.md b/docs/release-notes/release-notes-0.19.0.md
index 315176272..f5dadbe57 100644
--- a/docs/release-notes/release-notes-0.19.0.md
+++ b/docs/release-notes/release-notes-0.19.0.md
@@ -251,10 +251,10 @@ The underlying functionality between those two options remain the same.
 * [Golang was updated to
   `v1.22.11`](https://github.com/lightningnetwork/lnd/pull/9462). 
 
-* Various refactors and preparations to simplify the 
-  `graph.Builder` and to move the funding tx validation to the gossiper.
+* Move funding transaction validation to the gossiper
    [1](https://github.com/lightningnetwork/lnd/pull/9476)
    [2](https://github.com/lightningnetwork/lnd/pull/9477)
+   [3](https://github.com/lightningnetwork/lnd/pull/9478).
 
 
 ## Breaking Changes
diff --git a/graph/builder.go b/graph/builder.go
index 94eccf6d0..572bcd5d8 100644
--- a/graph/builder.go
+++ b/graph/builder.go
@@ -2,13 +2,11 @@ package graph
 
 import (
 	"fmt"
-	"strings"
 	"sync"
 	"sync/atomic"
 	"time"
 
 	"github.com/btcsuite/btcd/btcec/v2"
-	"github.com/btcsuite/btcd/btcutil"
 	"github.com/btcsuite/btcd/wire"
 	"github.com/go-errors/errors"
 	"github.com/lightningnetwork/lnd/batch"
@@ -18,8 +16,6 @@ import (
 	"github.com/lightningnetwork/lnd/kvdb"
 	"github.com/lightningnetwork/lnd/lnutils"
 	"github.com/lightningnetwork/lnd/lnwallet"
-	"github.com/lightningnetwork/lnd/lnwallet/btcwallet"
-	"github.com/lightningnetwork/lnd/lnwallet/chanvalidate"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/multimutex"
 	"github.com/lightningnetwork/lnd/netann"
@@ -91,9 +87,9 @@ type Config struct {
 	// blocked by this job.
 	FirstTimePruneDelay time.Duration
 
-	// AssumeChannelValid toggles whether the router will check for
-	// spentness of channel outpoints. For neutrino, this saves long rescans
-	// from blocking initial usage of the daemon.
+	// AssumeChannelValid toggles whether the builder will prune channels
+	// based on their spentness vs using the fact that they are considered
+	// zombies.
 	AssumeChannelValid bool
 
 	// StrictZombiePruning determines if we attempt to prune zombie
@@ -1188,29 +1184,33 @@ func (b *Builder) addEdge(edge *models.ChannelEdgeInfo,
 			edge.ChannelID)
 	}
 
-	// If AssumeChannelValid is present, then we are unable to perform any
-	// of the expensive checks below, so we'll short-circuit our path
-	// straight to adding the edge to our graph. If the passed
-	// ShortChannelID is an alias, then we'll skip validation as it will
-	// not map to a legitimate tx. This is not a DoS vector as only we can
-	// add an alias ChannelAnnouncement from the gossiper.
+	if err := b.cfg.Graph.AddChannelEdge(edge, op...); err != nil {
+		return fmt.Errorf("unable to add edge: %w", err)
+	}
+
+	b.stats.incNumEdgesDiscovered()
+
+	// If AssumeChannelValid is present, of if the SCID is an alias, then
+	// the gossiper would not have done the expensive work of fetching
+	// a funding transaction and validating it. So we won't have the channel
+	// capacity nor the funding script. So we just log and return here.
 	scid := lnwire.NewShortChanIDFromInt(edge.ChannelID)
 	if b.cfg.AssumeChannelValid || b.cfg.IsAlias(scid) {
-		err := b.cfg.Graph.AddChannelEdge(edge, op...)
-		if err != nil {
-			return fmt.Errorf("unable to add edge: %w", err)
-		}
 		log.Tracef("New channel discovered! Link connects %x and %x "+
 			"with ChannelID(%v)", edge.NodeKey1Bytes,
 			edge.NodeKey2Bytes, edge.ChannelID)
-		b.stats.incNumEdgesDiscovered()
 
 		return nil
 	}
 
-	// If AssumeChannelValid is false, then we expect the funding script to
-	// be present on the edge since it would have been fetched when the
-	// gossiper validated the announcement.
+	log.Debugf("New channel discovered! Link connects %x and %x with "+
+		"ChannelPoint(%v): chan_id=%v, capacity=%v", edge.NodeKey1Bytes,
+		edge.NodeKey2Bytes, edge.ChannelPoint, edge.ChannelID,
+		edge.Capacity)
+
+	// Otherwise, then we expect the funding script to be present on the
+	// edge since it would have been fetched when the gossiper validated the
+	// announcement.
 	fundingPkScript, err := edge.FundingScript.UnwrapOrErr(fmt.Errorf(
 		"expected the funding transaction script to be set",
 	))
@@ -1218,107 +1218,13 @@ func (b *Builder) addEdge(edge *models.ChannelEdgeInfo,
 		return err
 	}
 
-	// Before we can add the channel to the channel graph, we need to obtain
-	// the full funding outpoint that's encoded within the channel ID.
-	channelID := lnwire.NewShortChanIDFromInt(edge.ChannelID)
-	fundingTx, err := lnwallet.FetchFundingTxWrapper(
-		b.cfg.Chain, &channelID, b.quit,
-	)
-	if err != nil {
-		//nolint:ll
-		//
-		// In order to ensure we don't erroneously mark a channel as a
-		// zombie due to an RPC failure, we'll attempt to string match
-		// for the relevant errors.
-		//
-		// * btcd:
-		//    * https://github.com/btcsuite/btcd/blob/master/rpcserver.go#L1316
-		//    * https://github.com/btcsuite/btcd/blob/master/rpcserver.go#L1086
-		// * bitcoind:
-		//    * https://github.com/bitcoin/bitcoin/blob/7fcf53f7b4524572d1d0c9a5fdc388e87eb02416/src/rpc/blockchain.cpp#L770
-		//     * https://github.com/bitcoin/bitcoin/blob/7fcf53f7b4524572d1d0c9a5fdc388e87eb02416/src/rpc/blockchain.cpp#L954
-		switch {
-		case strings.Contains(err.Error(), "not found"):
-			fallthrough
-
-		case strings.Contains(err.Error(), "out of range"):
-			// If the funding transaction isn't found at all, then
-			// we'll mark the edge itself as a zombie so we don't
-			// continue to request it. We use the "zero key" for
-			// both node pubkeys so this edge can't be resurrected.
-			zErr := b.MarkZombieEdge(edge.ChannelID)
-			if zErr != nil {
-				return zErr
-			}
-
-		default:
-		}
-
-		return fmt.Errorf("%w: %w", ErrNoFundingTransaction, err)
-	}
-
-	// Next we'll validate that this channel is actually well formed. If
-	// this check fails, then this channel either doesn't exist, or isn't
-	// the one that was meant to be created according to the passed channel
-	// proofs.
-	fundingPoint, err := chanvalidate.Validate(
-		&chanvalidate.Context{
-			Locator: &chanvalidate.ShortChanIDChanLocator{
-				ID: channelID,
-			},
-			MultiSigPkScript: fundingPkScript,
-			FundingTx:        fundingTx,
-		},
-	)
-	if err != nil {
-		// Mark the edge as a zombie so we won't try to re-validate it
-		// on start up.
-		if err := b.MarkZombieEdge(edge.ChannelID); err != nil {
-			return err
-		}
-
-		return fmt.Errorf("%w: %w", ErrInvalidFundingOutput, err)
-	}
-
-	// Now that we have the funding outpoint of the channel, ensure
-	// that it hasn't yet been spent. If so, then this channel has
-	// been closed so we'll ignore it.
-	chanUtxo, err := b.cfg.Chain.GetUtxo(
-		fundingPoint, fundingPkScript, channelID.BlockHeight, b.quit,
-	)
-	if err != nil {
-		if errors.Is(err, btcwallet.ErrOutputSpent) {
-			zErr := b.MarkZombieEdge(edge.ChannelID)
-			if zErr != nil {
-				return zErr
-			}
-		}
-
-		return fmt.Errorf("%w: unable to fetch utxo for chan_id=%v, "+
-			"chan_point=%v: %w", ErrChannelSpent, scid.ToUint64(),
-			fundingPoint, err)
-	}
-
-	// TODO(roasbeef): this is a hack, needs to be removed after commitment
-	// fees are dynamic.
-	edge.Capacity = btcutil.Amount(chanUtxo.Value)
-	edge.ChannelPoint = *fundingPoint
-	if err := b.cfg.Graph.AddChannelEdge(edge, op...); err != nil {
-		return errors.Errorf("unable to add edge: %v", err)
-	}
-
-	log.Debugf("New channel discovered! Link connects %x and %x with "+
-		"ChannelPoint(%v): chan_id=%v, capacity=%v", edge.NodeKey1Bytes,
-		edge.NodeKey2Bytes, fundingPoint, edge.ChannelID, edge.Capacity)
-	b.stats.incNumEdgesDiscovered()
-
 	// As a new edge has been added to the channel graph, we'll update the
 	// current UTXO filter within our active FilteredChainView so we are
 	// notified if/when this channel is closed.
 	filterUpdate := []graphdb.EdgePoint{
 		{
 			FundingPkScript: fundingPkScript,
-			OutPoint:        *fundingPoint,
+			OutPoint:        edge.ChannelPoint,
 		},
 	}
 
diff --git a/graph/builder_test.go b/graph/builder_test.go
index 1818d495b..b813c17e2 100644
--- a/graph/builder_test.go
+++ b/graph/builder_test.go
@@ -20,6 +20,7 @@ import (
 	"github.com/btcsuite/btcd/wire"
 	"github.com/go-errors/errors"
 	"github.com/lightningnetwork/lnd/chainntnfs"
+	"github.com/lightningnetwork/lnd/fn/v2"
 	graphdb "github.com/lightningnetwork/lnd/graph/db"
 	"github.com/lightningnetwork/lnd/graph/db/models"
 	"github.com/lightningnetwork/lnd/htlcswitch"
@@ -52,8 +53,8 @@ func TestAddProof(t *testing.T) {
 
 	// In order to be able to add the edge we should have a valid funding
 	// UTXO within the blockchain.
-	fundingTx, _, chanID, err := createChannelEdge(
-		ctx, bitcoinKey1.SerializeCompressed(),
+	script, fundingTx, _, chanID, err := createChannelEdge(
+		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(), 100, 0,
 	)
 	require.NoError(t, err, "unable create channel edge")
@@ -68,6 +69,7 @@ func TestAddProof(t *testing.T) {
 		NodeKey1Bytes: node1.PubKeyBytes,
 		NodeKey2Bytes: node2.PubKeyBytes,
 		AuthProof:     nil,
+		FundingScript: fn.Some(script),
 	}
 	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -136,8 +138,8 @@ func TestIgnoreChannelEdgePolicyForUnknownChannel(t *testing.T) {
 
 	// Add the edge between the two unknown nodes to the graph, and check
 	// that the nodes are found after the fact.
-	fundingTx, _, chanID, err := createChannelEdge(
-		ctx, bitcoinKey1.SerializeCompressed(),
+	script, fundingTx, _, chanID, err := createChannelEdge(
+		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(), 10000, 500,
 	)
 	require.NoError(t, err, "unable to create channel edge")
@@ -153,6 +155,7 @@ func TestIgnoreChannelEdgePolicyForUnknownChannel(t *testing.T) {
 		BitcoinKey1Bytes: pub1,
 		BitcoinKey2Bytes: pub2,
 		AuthProof:        nil,
+		FundingScript:    fn.Some(script),
 	}
 	edgePolicy := &models.ChannelEdgePolicy{
 		SigBytes:                  testSig.Serialize(),
@@ -199,22 +202,25 @@ func TestWakeUpOnStaleBranch(t *testing.T) {
 	var chanID2 uint64
 
 	// Create 10 common blocks, confirming chanID1.
+	var fundingScript1 []byte
 	for i := uint32(1); i <= 10; i++ {
 		block := &wire.MsgBlock{
 			Transactions: []*wire.MsgTx{},
 		}
 		height := startingBlockHeight + i
 		if i == 5 {
-			fundingTx, _, chanID, err := createChannelEdge(ctx,
+			script, fundingTx, _, chanID, err := createChannelEdge(
 				bitcoinKey1.SerializeCompressed(),
 				bitcoinKey2.SerializeCompressed(),
-				chanValue, height)
+				chanValue, height,
+			)
 			if err != nil {
 				t.Fatalf("unable create channel edge: %v", err)
 			}
 			block.Transactions = append(block.Transactions,
 				fundingTx)
 			chanID1 = chanID.ToUint64()
+			fundingScript1 = script
 		}
 		ctx.chain.addBlock(block, height, rand.Uint32())
 		ctx.chain.setBestBlock(int32(height))
@@ -229,13 +235,14 @@ func TestWakeUpOnStaleBranch(t *testing.T) {
 	require.NoError(t, err, "unable to ge best block")
 
 	// Create 10 blocks on the minority chain, confirming chanID2.
+	var fundingScript2 []byte
 	for i := uint32(1); i <= 10; i++ {
 		block := &wire.MsgBlock{
 			Transactions: []*wire.MsgTx{},
 		}
 		height := uint32(forkHeight) + i
 		if i == 5 {
-			fundingTx, _, chanID, err := createChannelEdge(ctx,
+			script, fundingTx, _, chanID, err := createChannelEdge(
 				bitcoinKey1.SerializeCompressed(),
 				bitcoinKey2.SerializeCompressed(),
 				chanValue, height)
@@ -245,6 +252,7 @@ func TestWakeUpOnStaleBranch(t *testing.T) {
 			block.Transactions = append(block.Transactions,
 				fundingTx)
 			chanID2 = chanID.ToUint64()
+			fundingScript2 = script
 		}
 		ctx.chain.addBlock(block, height, rand.Uint32())
 		ctx.chain.setBestBlock(int32(height))
@@ -269,6 +277,7 @@ func TestWakeUpOnStaleBranch(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		FundingScript: fn.Some(fundingScript1),
 	}
 	copy(edge1.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge1.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -287,6 +296,7 @@ func TestWakeUpOnStaleBranch(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		FundingScript: fn.Some(fundingScript2),
 	}
 	copy(edge2.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge2.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -406,10 +416,11 @@ func TestDisconnectedBlocks(t *testing.T) {
 		}
 		height := startingBlockHeight + i
 		if i == 5 {
-			fundingTx, _, chanID, err := createChannelEdge(ctx,
+			_, fundingTx, _, chanID, err := createChannelEdge(
 				bitcoinKey1.SerializeCompressed(),
 				bitcoinKey2.SerializeCompressed(),
-				chanValue, height)
+				chanValue, height,
+			)
 			if err != nil {
 				t.Fatalf("unable create channel edge: %v", err)
 			}
@@ -437,10 +448,11 @@ func TestDisconnectedBlocks(t *testing.T) {
 		}
 		height := uint32(forkHeight) + i
 		if i == 5 {
-			fundingTx, _, chanID, err := createChannelEdge(ctx,
+			_, fundingTx, _, chanID, err := createChannelEdge(
 				bitcoinKey1.SerializeCompressed(),
 				bitcoinKey2.SerializeCompressed(),
-				chanValue, height)
+				chanValue, height,
+			)
 			if err != nil {
 				t.Fatalf("unable create channel edge: %v", err)
 			}
@@ -474,6 +486,7 @@ func TestDisconnectedBlocks(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		FundingScript: fn.Some([]byte{}),
 	}
 	copy(edge1.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge1.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -494,6 +507,7 @@ func TestDisconnectedBlocks(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		FundingScript: fn.Some([]byte{}),
 	}
 	copy(edge2.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge2.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -595,10 +609,11 @@ func TestChansClosedOfflinePruneGraph(t *testing.T) {
 		Transactions: []*wire.MsgTx{},
 	}
 	nextHeight := startingBlockHeight + 1
-	fundingTx1, chanUTXO, chanID1, err := createChannelEdge(ctx,
+	script, fundingTx1, chanUTXO, chanID1, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		chanValue, uint32(nextHeight))
+		chanValue, uint32(nextHeight),
+	)
 	require.NoError(t, err, "unable create channel edge")
 	block102.Transactions = append(block102.Transactions, fundingTx1)
 	ctx.chain.addBlock(block102, uint32(nextHeight), rand.Uint32())
@@ -622,6 +637,9 @@ func TestChansClosedOfflinePruneGraph(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		ChannelPoint:  *chanUTXO,
+		Capacity:      chanValue,
+		FundingScript: fn.Some(script),
 	}
 	copy(edge1.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge1.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -1007,10 +1025,11 @@ func TestIsStaleNode(t *testing.T) {
 	copy(pub1[:], priv1.PubKey().SerializeCompressed())
 	copy(pub2[:], priv2.PubKey().SerializeCompressed())
 
-	fundingTx, _, chanID, err := createChannelEdge(ctx,
+	script, fundingTx, _, chanID, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		10000, 500)
+		10000, 500,
+	)
 	require.NoError(t, err, "unable to create channel edge")
 	fundingBlock := &wire.MsgBlock{
 		Transactions: []*wire.MsgTx{fundingTx},
@@ -1024,6 +1043,7 @@ func TestIsStaleNode(t *testing.T) {
 		BitcoinKey1Bytes: pub1,
 		BitcoinKey2Bytes: pub2,
 		AuthProof:        nil,
+		FundingScript:    fn.Some(script),
 	}
 	if err := ctx.builder.AddEdge(edge); err != nil {
 		t.Fatalf("unable to add edge: %v", err)
@@ -1083,10 +1103,11 @@ func TestIsKnownEdge(t *testing.T) {
 	copy(pub1[:], priv1.PubKey().SerializeCompressed())
 	copy(pub2[:], priv2.PubKey().SerializeCompressed())
 
-	fundingTx, _, chanID, err := createChannelEdge(ctx,
+	script, fundingTx, _, chanID, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		10000, 500)
+		10000, 500,
+	)
 	require.NoError(t, err, "unable to create channel edge")
 	fundingBlock := &wire.MsgBlock{
 		Transactions: []*wire.MsgTx{fundingTx},
@@ -1100,6 +1121,7 @@ func TestIsKnownEdge(t *testing.T) {
 		BitcoinKey1Bytes: pub1,
 		BitcoinKey2Bytes: pub2,
 		AuthProof:        nil,
+		FundingScript:    fn.Some(script),
 	}
 	if err := ctx.builder.AddEdge(edge); err != nil {
 		t.Fatalf("unable to add edge: %v", err)
@@ -1129,10 +1151,11 @@ func TestIsStaleEdgePolicy(t *testing.T) {
 	copy(pub1[:], priv1.PubKey().SerializeCompressed())
 	copy(pub2[:], priv2.PubKey().SerializeCompressed())
 
-	fundingTx, _, chanID, err := createChannelEdge(ctx,
+	script, fundingTx, _, chanID, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		10000, 500)
+		10000, 500,
+	)
 	require.NoError(t, err, "unable to create channel edge")
 	fundingBlock := &wire.MsgBlock{
 		Transactions: []*wire.MsgTx{fundingTx},
@@ -1156,6 +1179,7 @@ func TestIsStaleEdgePolicy(t *testing.T) {
 		BitcoinKey1Bytes: pub1,
 		BitcoinKey2Bytes: pub2,
 		AuthProof:        nil,
+		FundingScript:    fn.Some(script),
 	}
 	if err := ctx.builder.AddEdge(edge); err != nil {
 		t.Fatalf("unable to add edge: %v", err)
@@ -1210,120 +1234,6 @@ func TestIsStaleEdgePolicy(t *testing.T) {
 	}
 }
 
-// edgeCreationModifier is an enum-like type used to modify steps that are
-// skipped when creating a channel in the test context.
-type edgeCreationModifier uint8
-
-const (
-	// edgeCreationNoFundingTx is used to skip adding the funding
-	// transaction of an edge to the chain.
-	edgeCreationNoFundingTx edgeCreationModifier = iota
-
-	// edgeCreationNoUTXO is used to skip adding the UTXO of a channel to
-	// the UTXO set.
-	edgeCreationNoUTXO
-
-	// edgeCreationBadScript is used to create the edge, but use the wrong
-	// scrip which should cause it to fail output validation.
-	edgeCreationBadScript
-)
-
-// newChannelEdgeInfo is a helper function used to create a new channel edge,
-// possibly skipping adding it to parts of the chain/state as well.
-func newChannelEdgeInfo(t *testing.T, ctx *testCtx, fundingHeight uint32,
-	ecm edgeCreationModifier) (*models.ChannelEdgeInfo, error) {
-
-	node1 := createTestNode(t)
-	node2 := createTestNode(t)
-
-	fundingTx, _, chanID, err := createChannelEdge(
-		ctx, bitcoinKey1.SerializeCompressed(),
-		bitcoinKey2.SerializeCompressed(), 100, fundingHeight,
-	)
-	if err != nil {
-		return nil, fmt.Errorf("unable to create edge: %w", err)
-	}
-
-	edge := &models.ChannelEdgeInfo{
-		ChannelID:     chanID.ToUint64(),
-		NodeKey1Bytes: node1.PubKeyBytes,
-		NodeKey2Bytes: node2.PubKeyBytes,
-	}
-	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
-	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
-
-	if ecm == edgeCreationNoFundingTx {
-		return edge, nil
-	}
-
-	fundingBlock := &wire.MsgBlock{
-		Transactions: []*wire.MsgTx{fundingTx},
-	}
-	ctx.chain.addBlock(fundingBlock, chanID.BlockHeight, chanID.BlockHeight)
-
-	if ecm == edgeCreationNoUTXO {
-		ctx.chain.delUtxo(wire.OutPoint{
-			Hash: fundingTx.TxHash(),
-		})
-	}
-
-	if ecm == edgeCreationBadScript {
-		fundingTx.TxOut[0].PkScript[0] ^= 1
-	}
-
-	return edge, nil
-}
-
-func assertChanChainRejection(t *testing.T, ctx *testCtx,
-	edge *models.ChannelEdgeInfo, expectedErr error) {
-
-	t.Helper()
-
-	err := ctx.builder.AddEdge(edge)
-	require.ErrorIs(t, err, expectedErr)
-
-	// This channel should now be present in the zombie channel index.
-	_, _, _, isZombie, err := ctx.graph.HasChannelEdge(
-		edge.ChannelID,
-	)
-	require.Nil(t, err)
-	require.True(t, isZombie, "edge should be marked as zombie")
-}
-
-// TestChannelOnChainRejectionZombie tests that if we fail validating a channel
-// due to some sort of on-chain rejection (no funding transaction, or invalid
-// UTXO), then we'll mark the channel as a zombie.
-func TestChannelOnChainRejectionZombie(t *testing.T) {
-	t.Parallel()
-
-	ctx := createTestCtxSingleNode(t, 0)
-
-	// To start,  we'll make an edge for the channel, but we won't add the
-	// funding transaction to the mock blockchain, which should cause the
-	// validation to fail below.
-	edge, err := newChannelEdgeInfo(t, ctx, 1, edgeCreationNoFundingTx)
-	require.Nil(t, err)
-
-	// We expect this to fail as the transaction isn't present in the
-	// chain (nor the block).
-	assertChanChainRejection(t, ctx, edge, ErrNoFundingTransaction)
-
-	// Next, we'll make another channel edge, but actually add it to the
-	// graph this time.
-	edge, err = newChannelEdgeInfo(t, ctx, 2, edgeCreationNoUTXO)
-	require.Nil(t, err)
-
-	// Instead now, we'll remove it from the set of UTXOs which should
-	// cause the spentness validation to fail.
-	assertChanChainRejection(t, ctx, edge, ErrChannelSpent)
-
-	// If we cause the funding transaction the chain to fail validation, we
-	// should see similar behavior.
-	edge, err = newChannelEdgeInfo(t, ctx, 3, edgeCreationBadScript)
-	require.Nil(t, err)
-	assertChanChainRejection(t, ctx, edge, ErrInvalidFundingOutput)
-}
-
 // TestBlockDifferenceFix tests if when the router is behind on blocks, the
 // router catches up to the best block head.
 func TestBlockDifferenceFix(t *testing.T) {
diff --git a/graph/errors.go b/graph/errors.go
index 4192a26aa..729107419 100644
--- a/graph/errors.go
+++ b/graph/errors.go
@@ -2,25 +2,6 @@ package graph
 
 import "github.com/go-errors/errors"
 
-var (
-	// ErrNoFundingTransaction is returned when we are unable to find the
-	// funding transaction described by the short channel ID on chain.
-	ErrNoFundingTransaction = errors.New(
-		"unable to find the funding transaction",
-	)
-
-	// ErrInvalidFundingOutput is returned if the channel funding output
-	// fails validation.
-	ErrInvalidFundingOutput = errors.New(
-		"channel funding output validation failed",
-	)
-
-	// ErrChannelSpent is returned when we go to validate a channel, but
-	// the purported funding output has actually already been spent on
-	// chain.
-	ErrChannelSpent = errors.New("channel output has been spent")
-)
-
 // ErrorCode is used to represent the various errors that can occur within this
 // package.
 type ErrorCode uint8
diff --git a/graph/notifications_test.go b/graph/notifications_test.go
index fdbed68b0..4049c9f81 100644
--- a/graph/notifications_test.go
+++ b/graph/notifications_test.go
@@ -17,6 +17,7 @@ import (
 	"github.com/btcsuite/btcd/chaincfg/chainhash"
 	"github.com/btcsuite/btcd/wire"
 	"github.com/lightningnetwork/lnd/chainntnfs"
+	"github.com/lightningnetwork/lnd/fn/v2"
 	graphdb "github.com/lightningnetwork/lnd/graph/db"
 	"github.com/lightningnetwork/lnd/graph/db/models"
 	"github.com/lightningnetwork/lnd/htlcswitch"
@@ -24,7 +25,6 @@ import (
 	"github.com/lightningnetwork/lnd/kvdb"
 	lnmock "github.com/lightningnetwork/lnd/lntest/mock"
 	"github.com/lightningnetwork/lnd/lnwallet"
-	"github.com/lightningnetwork/lnd/lnwallet/btcwallet"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/routing/chainview"
 	"github.com/lightningnetwork/lnd/routing/route"
@@ -126,18 +126,18 @@ func randEdgePolicy(chanID *lnwire.ShortChannelID,
 	}, nil
 }
 
-func createChannelEdge(ctx *testCtx, bitcoinKey1, bitcoinKey2 []byte,
-	chanValue btcutil.Amount, fundingHeight uint32) (*wire.MsgTx, *wire.OutPoint,
-	*lnwire.ShortChannelID, error) {
+func createChannelEdge(bitcoinKey1, bitcoinKey2 []byte,
+	chanValue btcutil.Amount, fundingHeight uint32) ([]byte, *wire.MsgTx,
+	*wire.OutPoint, *lnwire.ShortChannelID, error) {
 
 	fundingTx := wire.NewMsgTx(2)
-	_, tx, err := input.GenFundingPkScript(
+	script, tx, err := input.GenFundingPkScript(
 		bitcoinKey1,
 		bitcoinKey2,
 		int64(chanValue),
 	)
 	if err != nil {
-		return nil, nil, nil, err
+		return nil, nil, nil, nil, err
 	}
 
 	fundingTx.TxOut = append(fundingTx.TxOut, tx)
@@ -146,9 +146,6 @@ func createChannelEdge(ctx *testCtx, bitcoinKey1, bitcoinKey2 []byte,
 		Index: 0,
 	}
 
-	// With the utxo constructed, we'll mark it as closed.
-	ctx.chain.addUtxo(chanUtxo, tx)
-
 	// Our fake channel will be "confirmed" at height 101.
 	chanID := &lnwire.ShortChannelID{
 		BlockHeight: fundingHeight,
@@ -156,16 +153,16 @@ func createChannelEdge(ctx *testCtx, bitcoinKey1, bitcoinKey2 []byte,
 		TxPosition:  0,
 	}
 
-	return fundingTx, &chanUtxo, chanID, nil
+	return script, fundingTx, &chanUtxo, chanID, nil
 }
 
 type mockChain struct {
+	lnwallet.BlockChainIO
+
 	blocks           map[chainhash.Hash]*wire.MsgBlock
 	blockIndex       map[uint32]chainhash.Hash
 	blockHeightIndex map[chainhash.Hash]uint32
 
-	utxos map[wire.OutPoint]wire.TxOut
-
 	bestHeight int32
 
 	sync.RWMutex
@@ -179,7 +176,6 @@ func newMockChain(currentHeight uint32) *mockChain {
 	chain := &mockChain{
 		bestHeight:       int32(currentHeight),
 		blocks:           make(map[chainhash.Hash]*wire.MsgBlock),
-		utxos:            make(map[wire.OutPoint]wire.TxOut),
 		blockIndex:       make(map[uint32]chainhash.Hash),
 		blockHeightIndex: make(map[chainhash.Hash]uint32),
 	}
@@ -213,10 +209,6 @@ func (m *mockChain) GetBestBlock() (*chainhash.Hash, int32, error) {
 	return &blockHash, m.bestHeight, nil
 }
 
-func (m *mockChain) GetTransaction(txid *chainhash.Hash) (*wire.MsgTx, error) {
-	return nil, nil
-}
-
 func (m *mockChain) GetBlockHash(blockHeight int64) (*chainhash.Hash, error) {
 	m.RLock()
 	defer m.RUnlock()
@@ -230,31 +222,6 @@ func (m *mockChain) GetBlockHash(blockHeight int64) (*chainhash.Hash, error) {
 	return &hash, nil
 }
 
-func (m *mockChain) addUtxo(op wire.OutPoint, out *wire.TxOut) {
-	m.Lock()
-	m.utxos[op] = *out
-	m.Unlock()
-}
-
-func (m *mockChain) delUtxo(op wire.OutPoint) {
-	m.Lock()
-	delete(m.utxos, op)
-	m.Unlock()
-}
-
-func (m *mockChain) GetUtxo(op *wire.OutPoint, _ []byte, _ uint32,
-	_ <-chan struct{}) (*wire.TxOut, error) {
-	m.RLock()
-	defer m.RUnlock()
-
-	utxo, ok := m.utxos[*op]
-	if !ok {
-		return nil, btcwallet.ErrOutputSpent
-	}
-
-	return &utxo, nil
-}
-
 func (m *mockChain) addBlock(block *wire.MsgBlock, height uint32, nonce uint32) {
 	m.Lock()
 	block.Header.Nonce = nonce
@@ -459,9 +426,10 @@ func TestEdgeUpdateNotification(t *testing.T) {
 
 	// First we'll create the utxo for the channel to be "closed"
 	const chanValue = 10000
-	fundingTx, chanPoint, chanID, err := createChannelEdge(ctx,
-		bitcoinKey1.SerializeCompressed(), bitcoinKey2.SerializeCompressed(),
-		chanValue, 0)
+	script, fundingTx, chanPoint, chanID, err := createChannelEdge(
+		bitcoinKey1.SerializeCompressed(),
+		bitcoinKey2.SerializeCompressed(), chanValue, 0,
+	)
 	require.NoError(t, err, "unable create channel edge")
 
 	// We'll also add a record for the block that included our funding
@@ -488,6 +456,9 @@ func TestEdgeUpdateNotification(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		ChannelPoint:  *chanPoint,
+		Capacity:      chanValue,
+		FundingScript: fn.Some(script),
 	}
 	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -643,10 +614,11 @@ func TestNodeUpdateNotification(t *testing.T) {
 	// We only accept node announcements from nodes having a known channel,
 	// so create one now.
 	const chanValue = 10000
-	fundingTx, _, chanID, err := createChannelEdge(ctx,
+	script, fundingTx, _, chanID, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		chanValue, startingBlockHeight)
+		chanValue, startingBlockHeight,
+	)
 	require.NoError(t, err, "unable create channel edge")
 
 	// We'll also add a record for the block that included our funding
@@ -675,6 +647,7 @@ func TestNodeUpdateNotification(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		FundingScript: fn.Some(script),
 	}
 	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -825,10 +798,11 @@ func TestNotificationCancellation(t *testing.T) {
 
 	// We'll create the utxo for a new channel.
 	const chanValue = 10000
-	fundingTx, _, chanID, err := createChannelEdge(ctx,
+	script, fundingTx, chanPoint, chanID, err := createChannelEdge(
 		bitcoinKey1.SerializeCompressed(),
 		bitcoinKey2.SerializeCompressed(),
-		chanValue, startingBlockHeight)
+		chanValue, startingBlockHeight,
+	)
 	require.NoError(t, err, "unable create channel edge")
 
 	// We'll also add a record for the block that included our funding
@@ -859,6 +833,9 @@ func TestNotificationCancellation(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		ChannelPoint:  *chanPoint,
+		Capacity:      chanValue,
+		FundingScript: fn.Some(script),
 	}
 	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())
@@ -899,9 +876,11 @@ func TestChannelCloseNotification(t *testing.T) {
 
 	// First we'll create the utxo for the channel to be "closed"
 	const chanValue = 10000
-	fundingTx, chanUtxo, chanID, err := createChannelEdge(ctx,
-		bitcoinKey1.SerializeCompressed(), bitcoinKey2.SerializeCompressed(),
-		chanValue, startingBlockHeight)
+	script, fundingTx, chanUtxo, chanID, err := createChannelEdge(
+		bitcoinKey1.SerializeCompressed(),
+		bitcoinKey2.SerializeCompressed(), chanValue,
+		startingBlockHeight,
+	)
 	require.NoError(t, err, "unable create channel edge")
 
 	// We'll also add a record for the block that included our funding
@@ -928,6 +907,9 @@ func TestChannelCloseNotification(t *testing.T) {
 			BitcoinSig1Bytes: testSig.Serialize(),
 			BitcoinSig2Bytes: testSig.Serialize(),
 		},
+		ChannelPoint:  *chanUtxo,
+		Capacity:      chanValue,
+		FundingScript: fn.Some(script),
 	}
 	copy(edge.BitcoinKey1Bytes[:], bitcoinKey1.SerializeCompressed())
 	copy(edge.BitcoinKey2Bytes[:], bitcoinKey2.SerializeCompressed())