Sending funds from Electrum 4.5.5 watch-only wallet

Hey everyone, so I’ve been digging into the documentation for Electrum and I've noticed some inconsistencies with version 4.5.5. I checked out some support on Reddit and also looked at the Electrum guides on sending transactions. The parts that confuse me are where it says "Create an unsigned transaction" and "Get your transaction signed". After saving the unsigned transaction, I'm left with a file called Watch only deterministic wallet-e6765ab4.psbt, but the guides mention that no transaction ID should show up until the offline wallet signs it. Also, shouldn't the file be a .txn format like unsignedTransacton.txn? So, my question is, will I end up losing my funds, or does the Electrum documentation just need a refresh?

The procedure from the old guide should still be the same as the latest version of the Electrum wallet. Where did you get the .txn file format? The guide from Electrum doesn't mention that you need a .txn file when generating an unsigned transaction. .psbt is the right file you looking for, transfer it to another device to sign the transaction and you can just copy the raw signed transaction and paste it to Notepad and transfer it to the online device then paste it to any of the broadcasting sites listed from this link below. - https://en.bitcoin.it/wiki/Transaction_broadcasting Please note that once it's broadcasted to any of these sites, the transaction will be processed once it confirms that it is no longer reversible. About the .txn there's an option to choose .txn file when saving the signed transaction. Look at the image below as a reference.

When you create a watch-only wallet using the Master Public Key, it becomes a deterministic watch only wallet. The unsigned transaction will have no tnx id until it's signed by the offline wallet. You just have to click on the send or share button and copy the file its set in default file format, the ".psbt". And no, so long you don't make any mistakes while Inputting the transaction details like address or the fees you won't loss your coins. So do wel to check properly before broadcasting the transaction.

Thanks, that worked. Time to test spending some BTC on LN from a hot wallet, apparently there's no fees? Just need to find somewhere to spend it? Also, the offline Electrum USB cold wallet shows no balance, so in terms of a $5 wrench attack, a new watch-only wallet would need to be created using the offline MPK (master public key) and then entering the passphrase. Is there a way an Electrum watch-only wallet can have a fake wallet to show a fake amount if under duress? I know hardware wallets can do this.

Yes, The official documentation is quite outdated, even the images are from versions before Electrum's transition to PSBT workflow. Unfortunately, there's no Electrum feature like that. You can create multiple wallets in Electrum and it loads the last wallet that you've opened, you can utilize that to show that you only own that amount. But attackers may know it that they might just force you to show your recently loaded wallet list. No fees only if the recipient is the owner of the other end of the payment channel you've used. If the payment requires routing through other channels to get to the recipient, there'll be minimal fee based from the routing channel owners' rates. As for Electrum's lightning implementation, it's self-custodial so you'll be the one who's in charge of managing your channels and liquidity. In other words, you wont be able to use lightning right off the bat. You'll need to create a channel by spending some of your on-chain funds, then manage your channel(s)' liquidity since you'll only get outbound capacity upon establishing a channel. More info in this thread: Electrum Lightning Network walkthrough And this question may need its own thread.

In this (hypothetical and targeted) $5 wrench attack, the attacker will just use your seed phrase to create a hot wallet, and sweep your funds. Create a new watch-only wallet, and import 1PJiGp2yDLvUgqeBsuZVCBADArNsk6XEiw. Or 1E6NkSVsBewyz8Z8wJBYVTKgWmdqcUSWkS, depending on what you're trying to accomplish.

It's worth to mention you need to pay TX fee when opening/creating and closing the LN channel. Such feature doesn't exist. At best, you could create 2 wallet (one with tons of coins and one with small amount of coins) along with it's associated watch-only wallet. Obviously you need to place the main wallet (one with tons of coins) and it's watch-only file on different folder. But i doubt it's enough to fool criminal.

An equivalent (but a less elaborate one) to this decoy wallet scheme is to create a decoy wallet with one seed and to create the actual wallet with the same seed and custom words extending the seed thanks to the named feature. Then you will get 2 different Master Public Keys allowing you to create 2 watch-only wallets. A fake one with few funds onto it, and the real one. Under duress you will be able to show the decoy one. The plausible deniability works better if you've written your seed somewhere (without the custom words ofc) that can be found or checked by the racketeers. You will also need to delete the entry of your "hidden" wallet after using it in the "Recently open" history by editing the config file of Electrum. The feature of a HW wallet : https://www.ledger.com/academy/passphrase-an-advanced-security-feature

Thanks, a $5 wrench attack would need the mnemonic/seed phrase and the passphrase/13/25th word.

Yes, without it, the extortionists will only get what you've left on your decoy wallet. It's a small price to pay for the plausible deniability actually. But it's better to place your seed in a box or a drawer with a lock or a padlock, so they can't believe you are giving them an old or a secondary seed, without the main part of your funds. They must think you are giving them the precious one. Otherwise they could try to threat you more just to be sure you are not deceiving them. Sometimes when they rob women they even ask them to open their mouth to check if they haven't put their rings or their earrings in their mouth.