diff --git a/lightningd/Makefile b/lightningd/Makefile
index f7c1bb496..09b040953 100644
--- a/lightningd/Makefile
+++ b/lightningd/Makefile
@@ -148,7 +148,7 @@ check-makefile: check-lightningd-makefile
 check-lightningd-makefile:
 	@for f in lightningd/*.h lightningd/*/*.h; do if ! echo $(LIGHTNINGD_HEADERS_NOGEN) $(LIGHTNINGD_HEADERS_GEN) "" | grep -q "$$f "; then echo $$f not mentioned in LIGHTNINGD_HEADERS_NOGEN or LIGHTNINGD_HEADERS_GEN >&2; exit 1; fi; done
 
-lightningd/lightningd: $(LIGHTNINGD_OBJS) $(LIGHTNINGD_OLD_OBJS) $(LIGHTNINGD_OLD_LIB_OBJS) $(LIGHTNINGD_LIB_OBJS) $(LIGHTNINGD_JSMN_OBJS) $(CORE_OBJS) $(CORE_TX_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(WIRE_ONION_OBJS) $(CCAN_OBJS) $(CCAN_SHACHAIN48_OBJ) $(LIGHTNINGD_HSM_CONTROL_OBJS) $(LIGHTNINGD_HANDSHAKE_CONTROL_OBJS) $(LIGHTNINGD_GOSSIP_CONTROL_OBJS) $(LIBBASE58_OBJS) $(LIGHTNINGD_OPENING_CONTROL_OBJS) $(LIGHTNINGD_CHANNEL_CONTROL_OBJS) $(LIGHTNINGD_CLOSING_CONTROL_OBJS) $(WALLET_LIB_OBJS) libsecp256k1.a libsodium.a libwallycore.a
+lightningd/lightningd: $(LIGHTNINGD_OBJS) $(LIGHTNINGD_OLD_OBJS) $(LIGHTNINGD_OLD_LIB_OBJS) $(LIGHTNINGD_LIB_OBJS) $(LIGHTNINGD_JSMN_OBJS) $(CORE_OBJS) $(CORE_TX_OBJS) $(BITCOIN_OBJS) $(WIRE_OBJS) $(WIRE_ONION_OBJS) $(CCAN_OBJS) $(CCAN_SHACHAIN48_OBJ) $(LIGHTNINGD_HSM_CONTROL_OBJS) $(LIGHTNINGD_HANDSHAKE_CONTROL_OBJS) $(LIGHTNINGD_GOSSIP_CONTROL_OBJS) $(LIBBASE58_OBJS) $(LIGHTNINGD_OPENING_CONTROL_OBJS) $(LIGHTNINGD_CHANNEL_CONTROL_OBJS) $(LIGHTNINGD_CLOSING_CONTROL_OBJS) $(LIGHTNINGD_ONCHAIN_CONTROL_OBJS) $(WALLET_LIB_OBJS) libsecp256k1.a libsodium.a libwallycore.a
 
 clean: lightningd-clean
 
diff --git a/lightningd/peer_control.c b/lightningd/peer_control.c
index 1fde8cbf0..ea55c707d 100644
--- a/lightningd/peer_control.c
+++ b/lightningd/peer_control.c
@@ -30,6 +30,7 @@
 #include <lightningd/hsm_control.h>
 #include <lightningd/key_derive.h>
 #include <lightningd/new_connection.h>
+#include <lightningd/onchain/gen_onchain_wire.h>
 #include <lightningd/onchain/onchain_wire.h>
 #include <lightningd/opening/gen_opening_wire.h>
 #include <lightningd/peer_htlcs.h>
@@ -213,8 +214,8 @@ void peer_fail_transient(struct peer *peer, const char *fmt, ...)
 		return;
 	}
 
-	/* Reconnect unless we've dropped to chain. */
-	if (!peer_on_chain(peer)) {
+	/* Reconnect unless we've dropped/are dropping to chain. */
+	if (!peer_on_chain(peer) && peer->state != CLOSINGD_COMPLETE) {
 		peer_reconnect(peer);
 		return;
 	}
@@ -1013,6 +1014,283 @@ static enum watch_result funding_announce_cb(struct peer *peer,
 	return DELETE_WATCH;
 }
 
+static void peer_onchain_finished(struct subd *subd, int status)
+{
+	/* Moved on?  Eg. reorg, and it has a new onchaind. */
+	if (subd->peer->owner != subd)
+		return;
+
+	if (status != 0) {
+		log_broken(subd->peer->log, "onchaind died status %i", status);
+		subd->peer->owner = NULL;
+		return;
+	}
+
+	/* FIXME: Remove peer from db. */
+	log_info(subd->peer->log, "onchaind complete, forgetting peer");
+
+	/* Peer is gone. */
+	tal_free(subd->peer);
+}
+
+static int handle_onchain_init_reply(struct peer *peer, const u8 *msg)
+{
+	u8 state;
+
+	if (!fromwire_onchain_init_reply(msg, NULL, &state)) {
+		log_broken(peer->log, "Invalid onchain_init_reply");
+		return -1;
+	}
+
+	if (!peer_state_on_chain(state)) {
+		log_broken(peer->log, "Invalid onchain_init_reply state %u (%s)",
+			   state, peer_state_name(state));
+		return -1;
+	}
+
+	/* We could come from almost any state. */
+	peer_set_condition(peer, peer->state, state);
+	return 0;
+}
+
+static enum watch_result onchain_tx_watched(struct peer *peer,
+					    const struct bitcoin_tx *tx,
+					    unsigned int depth,
+					    void *unused)
+{
+	u8 *msg;
+	struct sha256_double txid;
+
+	if (depth == 0) {
+		struct subd *old_onchaind = peer->owner;
+		log_unusual(peer->log, "Chain reorganization!");
+		peer->owner = NULL;
+		tal_free(old_onchaind);
+
+		/* FIXME!
+		topology_rescan(peer->ld->topology, peer->funding_txid);
+		*/
+
+		/* We will most likely be freed, so this is a noop */
+		return KEEP_WATCHING;
+	}
+
+	bitcoin_txid(tx, &txid);
+	msg = towire_onchain_depth(peer, &txid, depth);
+	subd_send_msg(peer->owner, take(msg));
+	return KEEP_WATCHING;
+}
+
+static void watch_tx_and_outputs(struct peer *peer,
+				 const struct bitcoin_tx *tx);
+
+static enum watch_result onchain_txo_watched(struct peer *peer,
+					     const struct bitcoin_tx *tx,
+					     size_t input_num,
+					     const struct block *block,
+					     void *unused)
+{
+	u8 *msg;
+
+	watch_tx_and_outputs(peer, tx);
+
+	msg = towire_onchain_spent(peer, tx, input_num, block->height);
+	subd_send_msg(peer->owner, take(msg));
+
+	/* We don't need to keep watching: If this output is double-spent
+	 * (reorg), we'll get a zero depth cb to onchain_tx_watched, and
+	 * restart onchaind. */
+	return DELETE_WATCH;
+}
+
+/* To avoid races, we watch the tx and all outputs. */
+static void watch_tx_and_outputs(struct peer *peer,
+				 const struct bitcoin_tx *tx)
+{
+	struct sha256_double txid;
+	struct txwatch *txw;
+
+	bitcoin_txid(tx, &txid);
+
+	/* Make txwatch a parent of txo watches, so we can unwatch together. */
+	txw = watch_tx(peer->owner, peer->ld->topology, peer, tx,
+		       onchain_tx_watched, NULL);
+
+	for (size_t i = 0; i < tal_count(tx->output); i++)
+		watch_txo(txw, peer->ld->topology, peer, &txid, i,
+			  onchain_txo_watched, NULL);
+}
+
+static int handle_onchain_broadcast_tx(struct peer *peer, const u8 *msg)
+{
+	struct bitcoin_tx *tx;
+
+	tx = tal(msg, struct bitcoin_tx);
+	if (!fromwire_onchain_broadcast_tx(msg, NULL, tx)) {
+		log_broken(peer->log, "Invalid onchain_broadcast_tx");
+		return -1;
+	}
+
+	/* We don't really care if it fails, we'll respond via watch. */
+	broadcast_tx(peer->ld->topology, peer, tx, NULL);
+	return 0;
+}
+
+static int handle_onchain_unwatch_tx(struct peer *peer, const u8 *msg)
+{
+	/* FIXME: unwatch tx and children here. */
+	return 0;
+}
+
+static int handle_extracted_preimage(struct peer *peer, const u8 *msg)
+{
+	struct preimage preimage;
+
+	if (!fromwire_onchain_extracted_preimage(msg, NULL, &preimage)) {
+		log_broken(peer->log, "Invalid extracted_preimage");
+		return -1;
+	}
+
+	onchain_fulfilled_htlc(peer, &preimage);
+	return 0;
+}
+
+static int onchain_msg(struct subd *sd, const u8 *msg, const int *fds)
+{
+	enum onchain_wire_type t = fromwire_peektype(msg);
+
+	switch (t) {
+	/* We let peer_onchain_finished handle these. */
+	case WIRE_ONCHAIN_BAD_COMMAND:
+	case WIRE_ONCHAIN_INTERNAL_ERROR:
+	case WIRE_ONCHAIN_CRYPTO_FAILED:
+		break;
+
+	case WIRE_ONCHAIN_INIT_REPLY:
+		return handle_onchain_init_reply(sd->peer, msg);
+
+	case WIRE_ONCHAIN_BROADCAST_TX:
+		return handle_onchain_broadcast_tx(sd->peer, msg);
+
+	case WIRE_ONCHAIN_UNWATCH_TX:
+		return handle_onchain_unwatch_tx(sd->peer, msg);
+
+ 	case WIRE_ONCHAIN_EXTRACTED_PREIMAGE:
+		return handle_extracted_preimage(sd->peer, msg);
+
+	/* We send these, not receive them */
+	case WIRE_ONCHAIN_INIT:
+	case WIRE_ONCHAIN_SPENT:
+	case WIRE_ONCHAIN_DEPTH:
+	case WIRE_ONCHAIN_HTLC:
+	case WIRE_ONCHAIN_KNOWN_PREIMAGE:
+		break;
+	}
+
+	return 0;
+}
+
+static u8 *p2wpkh_for_keyidx(const tal_t *ctx, struct lightningd *ld, u64 keyidx)
+{
+	struct pubkey shutdownkey;
+
+	if (!bip32_pubkey(ld->bip32_base, &shutdownkey, keyidx))
+		return NULL;
+
+	return scriptpubkey_p2wpkh(ctx, &shutdownkey);
+}
+
+/* With a reorg, this can get called multiple times; each time we'll kill
+ * onchaind (like any other owner), and restart */
+static enum watch_result funding_spent(struct peer *peer,
+				       const struct bitcoin_tx *tx,
+				       size_t input_num,
+				       const struct block *block,
+				       void *unused)
+{
+	u8 *msg, *scriptpubkey;
+	struct sha256_double our_last_txid;
+	s64 keyindex;
+	struct pubkey ourkey;
+
+	peer_fail_permanent_str(peer, "Funding transaction spent");
+	peer->owner = new_subd(peer->ld, peer->ld,
+			       "lightningd_onchain", peer,
+			       onchain_wire_type_name,
+			       onchain_msg,
+			       peer_onchain_finished,
+			       NULL, NULL);
+
+	if (!peer->owner) {
+		log_broken(peer->log, "Could not subdaemon onchain: %s",
+			   strerror(errno));
+		return KEEP_WATCHING;
+	}
+
+	/* We re-use this key to send other outputs to. */
+	if (peer->local_shutdown_idx >= 0)
+		keyindex = peer->local_shutdown_idx;
+	else {
+		/* FIXME: Save to db */
+		keyindex = wallet_get_newindex(peer->ld);
+		if (keyindex < 0) {
+			log_broken(peer->log, "Could not get keyindex");
+			return KEEP_WATCHING;
+		}
+	}
+	scriptpubkey = p2wpkh_for_keyidx(peer, peer->ld, keyindex);
+	if (!scriptpubkey) {
+		peer_internal_error(peer,
+				    "Can't get shutdown script %"PRIu64,
+				    keyindex);
+		return DELETE_WATCH;
+	}
+
+	if (!bip32_pubkey(peer->ld->bip32_base, &ourkey, keyindex)) {
+		peer_internal_error(peer,
+				    "Can't get shutdown key %"PRIu64,
+				    keyindex);
+		return DELETE_WATCH;
+	}
+
+	/* This could be a mutual close, but it doesn't matter. */
+	bitcoin_txid(peer->last_tx, &our_last_txid);
+
+	msg = towire_onchain_init(peer, peer->seed, &peer->their_shachain.chain,
+				  peer->funding_satoshi,
+				  &peer->channel_info->old_remote_per_commit,
+				  &peer->channel_info->remote_per_commit,
+				  peer->our_config.to_self_delay,
+				  peer->channel_info->their_config.to_self_delay,
+				  peer->channel_info->feerate_per_kw,
+				  peer->our_config.dust_limit_satoshis,
+				  &peer->channel_info->theirbase.revocation,
+				  &our_last_txid,
+				  scriptpubkey,
+				  peer->remote_shutdown_scriptpubkey,
+				  &ourkey,
+				  peer->funder,
+				  &peer->channel_info->theirbase.payment,
+				  &peer->channel_info->theirbase.delayed_payment,
+				  tx,
+				  block->height,
+				  peer->last_htlc_sigs,
+				  tal_count(peer->htlcs));
+	subd_send_msg(peer->owner, take(msg));
+
+	/* FIXME: Don't queue all at once, use an empty cb... */
+	for (size_t i = 0; i < tal_count(peer->htlcs); i++) {
+		msg = towire_onchain_htlc(peer, peer->htlcs+i);
+		subd_send_msg(peer->owner, take(msg));
+	}
+
+	/* FIXME: Send any known HTLC preimage for live HTLCs! */
+	watch_tx_and_outputs(peer, tx);
+
+	/* We keep watching until peer finally deleted, for reorgs. */
+	return KEEP_WATCHING;
+}
+
 static enum watch_result funding_lockin_cb(struct peer *peer,
 					   const struct bitcoin_tx *tx,
 					   unsigned int depth,
@@ -1116,6 +1394,11 @@ static void opening_got_hsm_funding_sig(struct funding_channel *fc,
 	watch_tx(fc->peer, fc->peer->ld->topology, fc->peer, tx,
 		 funding_lockin_cb, NULL);
 
+	/* FIXME: Remove arg from cb? */
+	watch_txo(fc->peer, fc->peer->ld->topology, fc->peer,
+		  fc->peer->funding_txid, fc->peer->funding_outnum,
+		  funding_spent, NULL);
+
 	/* We could defer until after funding locked, but makes testing
 	 * harder. */
 	tal_del_destructor(fc, fail_fundchannel_command);
@@ -1215,16 +1498,6 @@ static int peer_got_funding_locked(struct peer *peer, const u8 *msg)
 	return 0;
 }
 
-static u8 *p2wpkh_for_keyidx(const tal_t *ctx, struct lightningd *ld, u64 keyidx)
-{
-	struct pubkey shutdownkey;
-
-	if (!bip32_pubkey(ld->bip32_base, &shutdownkey, keyidx))
-		return NULL;
-
-	return scriptpubkey_p2wpkh(ctx, &shutdownkey);
-}
-
 static int peer_got_shutdown(struct peer *peer, const u8 *msg)
 {
 	u8 *scriptpubkey;
@@ -1945,6 +2218,10 @@ static bool opening_fundee_finished(struct subd *opening,
 	watch_txid(peer, peer->ld->topology, peer, peer->funding_txid,
 		   funding_lockin_cb, NULL);
 
+	/* FIXME: Remove arg from cb? */
+	watch_txo(peer, peer->ld->topology, peer, peer->funding_txid,
+		  peer->funding_outnum, funding_spent, NULL);
+
 	/* Unowned. */
 	peer->owner = NULL;
 
diff --git a/lightningd/peer_control.h b/lightningd/peer_control.h
index eb768f72a..019e7f8b1 100644
--- a/lightningd/peer_control.h
+++ b/lightningd/peer_control.h
@@ -117,12 +117,17 @@ static inline bool peer_can_remove_htlc(const struct peer *peer)
 		|| peer->state == ONCHAIND_OUR_UNILATERAL;
 }
 
+static inline bool peer_state_on_chain(enum peer_state state)
+{
+	return state == ONCHAIND_CHEATED
+		|| state == ONCHAIND_THEIR_UNILATERAL
+		|| state == ONCHAIND_OUR_UNILATERAL
+		|| state == ONCHAIND_MUTUAL;
+}
+
 static inline bool peer_on_chain(const struct peer *peer)
 {
-	return peer->state == ONCHAIND_CHEATED
-		|| peer->state == ONCHAIND_THEIR_UNILATERAL
-		|| peer->state == ONCHAIND_OUR_UNILATERAL
-		|| peer->state == ONCHAIND_MUTUAL;
+	return peer_state_on_chain(peer->state);
 }
 
 /* BOLT #2:
diff --git a/lightningd/peer_htlcs.c b/lightningd/peer_htlcs.c
index 265117f18..5fdba9d98 100644
--- a/lightningd/peer_htlcs.c
+++ b/lightningd/peer_htlcs.c
@@ -687,6 +687,20 @@ out:
 	return true;
 }
 
+static void fulfill_our_htlc_out(struct peer *peer, struct htlc_out *hout,
+				 const struct preimage *preimage)
+{
+	hout->preimage = tal_dup(hout, struct preimage, preimage);
+	htlc_out_check(hout, __func__);
+
+	/* FIXME: Save to db */
+
+	if (hout->in)
+		fulfill_htlc(hout->in, preimage);
+	else
+		payment_succeeded(peer->ld, hout, preimage);
+}
+
 static bool peer_fulfilled_our_htlc(struct peer *peer,
 				    const struct fulfilled_htlc *fulfilled)
 {
@@ -703,19 +717,34 @@ static bool peer_fulfilled_our_htlc(struct peer *peer,
 	if (!htlc_out_update_state(peer, hout, RCVD_REMOVE_COMMIT))
 		return false;
 
-	hout->preimage = tal_dup(hout, struct preimage,
-				 &fulfilled->payment_preimage);
-	htlc_out_check(hout, __func__);
-
-	/* FIXME: Save to db */
-
-	if (hout->in)
-		fulfill_htlc(hout->in, &fulfilled->payment_preimage);
-	else
-		payment_succeeded(peer->ld, hout, &fulfilled->payment_preimage);
+	fulfill_our_htlc_out(peer, hout, &fulfilled->payment_preimage);
 	return true;
 }
 
+void onchain_fulfilled_htlc(struct peer *peer, const struct preimage *preimage)
+{
+	struct htlc_out_map_iter outi;
+	struct htlc_out *hout;
+	struct sha256 payment_hash;
+
+	sha256(&payment_hash, preimage, sizeof(*preimage));
+
+	/* FIXME: use db to look this up! */
+	for (hout = htlc_out_map_first(&peer->ld->htlcs_out, &outi);
+	     hout;
+	     hout = htlc_out_map_next(&peer->ld->htlcs_out, &outi)) {
+		if (hout->key.peer != peer)
+			continue;
+
+		if (!structeq(&hout->payment_hash, &payment_hash))
+			continue;
+
+		fulfill_our_htlc_out(peer, hout, preimage);
+		/* We keep going: this is something of a leak, but onchain
+		 * we have no real way of distinguishing HTLCs anyway */
+	}
+}
+
 static bool peer_failed_our_htlc(struct peer *peer,
 				 const struct failed_htlc *failed)
 {
diff --git a/lightningd/peer_htlcs.h b/lightningd/peer_htlcs.h
index d39f1f585..6116d1bb4 100644
--- a/lightningd/peer_htlcs.h
+++ b/lightningd/peer_htlcs.h
@@ -11,6 +11,8 @@ struct channel_info {
 	struct channel_config their_config;
 	struct pubkey remote_fundingkey;
 	struct basepoints theirbase;
+	/* The old_remote_per_commit is for the locked-in remote commit_tx,
+	 * and the remote_per_commit is for the commit_tx we're modifying now. */
 	struct pubkey remote_per_commit, old_remote_per_commit;
 	u32 feerate_per_kw;
 };
@@ -38,4 +40,6 @@ enum onion_type send_htlc_out(struct peer *out, u64 amount, u32 cltv,
 			      struct htlc_in *in,
 			      struct pay_command *pc,
 			      struct htlc_out **houtp);
+
+void onchain_fulfilled_htlc(struct peer *peer, const struct preimage *preimage);
 #endif /* LIGHTNING_LIGHTNINGD_PEER_HTLCS_H */