diff --git a/docker/lnd/Dockerfile b/docker/lnd/Dockerfile
index 8cce0878..8b500b49 100644
--- a/docker/lnd/Dockerfile
+++ b/docker/lnd/Dockerfile
@@ -7,7 +7,7 @@ RUN apk update && \
     apk add git
 
 # Copy in the local repository to build from.
-RUN git clone https://github.com/lightningnetwork/lnd.git --branch v0.9.0-beta
+RUN git clone https://github.com/lightningnetwork/lnd.git --branch v0.10.1-beta
 
 # Force Go to use the cgo based DNS resolver. This is required to ensure DNS
 # queries required to connect to linked containers succeed.
diff --git a/itests/config.ini b/itests/config.ini
index e1be2e0e..5d9375a5 100644
--- a/itests/config.ini
+++ b/itests/config.ini
@@ -4,6 +4,7 @@ network=simnet
 [lnd]
 rpc_host=lnd
 rpc_port=10009
+port=9735
 
 [electrum]
 rpc_host=
diff --git a/itests/generate_blocks.sh b/itests/generate_blocks.sh
new file mode 100755
index 00000000..b58532b0
--- /dev/null
+++ b/itests/generate_blocks.sh
@@ -0,0 +1,10 @@
+#!/bin/bash
+
+
+while true; do
+    alice_address=$(docker exec -it lnd_alice lncli --network=simnet newaddress np2wkh | jq .address -r)
+    MINING_ADDRESS=$alice_address docker-compose up -d btcd
+    echo "Mining 1 blocks to address: $alice_address ..."
+    docker-compose run btcctl generate 400
+    sleep 10
+done
diff --git a/itests/run_itest.sh b/itests/run_itest.sh
index 2cf67c0d..e207061d 100755
--- a/itests/run_itest.sh
+++ b/itests/run_itest.sh
@@ -1,5 +1,17 @@
 #!/bin/bash
 
+trap "exit" INT TERM
+trap "kill 0" EXIT
+
+function mine_blocks {
+    while true; do
+	printf "Mining 1 block to address: $MINING_ADDRESS ..."
+	docker-compose run btcctl generate 1
+	sleep 10
+    done
+}
+
+
 cd itests
 docker-compose down --volumes
 docker-compose build
@@ -14,6 +26,10 @@ docker-compose run btcctl generate 400
 echo "Finished mining blocks."
 sleep 10
 
+echo "Continue mining blocks, 1 every 10 seconds."
+mine_blocks &
+echo "Background mining task is in background..."
+
 echo "Running test.sh...."
 docker-compose run test ./test.sh
 
diff --git a/itests/shell.py b/itests/shell.py
new file mode 100644
index 00000000..e69de29b
diff --git a/itests/test.py b/itests/test.py
index e4800c47..e977dc8a 100644
--- a/itests/test.py
+++ b/itests/test.py
@@ -18,10 +18,10 @@ import logging
 import random
 import time
 
-
 from bitcoin.core import lx, x
 from squeak.params import SelectParams
 from squeak.core import CSqueak
+from squeak.core import CheckSqueak
 from squeak.core import HASH_LENGTH
 from squeak.core import MakeSqueakFromStr
 from squeak.core.signing import CSigningKey
@@ -89,6 +89,14 @@ def load_lightning_client() -> LNDLightningClient:
     )
 
 
+
+def bxor(b1, b2): # use xor for bytes
+    result = bytearray()
+    for b1, b2 in zip(b1, b2):
+        result.append(b1 ^ b2)
+    return bytes(result)
+
+
 def run():
     # Set the network to simnet for itest.
     SelectParams("mainnet")
@@ -102,7 +110,7 @@ def run():
         lnd_lightning_client = load_lightning_client()
         balance_from_client = lnd_lightning_client.get_wallet_balance()
         print("Balance from direct client: %s" % balance_from_client)
-        assert balance_from_client.total_balance == 1505000000000
+        assert balance_from_client.total_balance >= 1505000000000
 
         # Make the stubs
         server_stub = squeak_server_pb2_grpc.SqueakServerStub(server_channel)
@@ -164,6 +172,53 @@ def run():
         ))
         assert get_hash(squeak) not in set(lookup_response.hashes)
 
+        # Buy the squeak data key
+        buy_response = server_stub.BuySqueak(squeak_server_pb2.BuySqueakRequest(hash=post_response.hash))
+        print("Server buy response: " + str(buy_response))
+        assert buy_response.offer.payment_request.startswith('ln')
+
+        # Connect to the server lightning node
+        # lightning_host_port = buy_response.offer.host + ':' + buy_response.offer.port
+        lightning_host_port = buy_response.offer.host
+        # connect_peer_response = lnd_lightning_client.connect_peer(buy_response.offer.pubkey, 'lnd_sqkserver')
+        connect_peer_response = lnd_lightning_client.connect_peer(buy_response.offer.pubkey, lightning_host_port)
+        print("Server connect peer response: " + str(connect_peer_response))
+
+        # List peers
+        list_peers_response = lnd_lightning_client.list_peers()
+        print("Server list peers response: " + str(list_peers_response))
+
+        # Open channel to the server lightning node
+        # pubkey_bytes = bytes.fromhex(buy_response.offer.pubkey)
+        open_channel_response = lnd_lightning_client.open_channel_sync(buy_response.offer.pubkey, 1000000)
+        print("Server open channel response: " + str(open_channel_response))
+
+        # List channels
+        list_channels_response = lnd_lightning_client.list_channels()
+        print("Server list channels response: " + str(list_channels_response))
+
+        # Sleep for 30 seconds to confirm the channel open transaction
+        time.sleep(60)
+
+        # List channels
+        list_channels_response = lnd_lightning_client.list_channels()
+        print("Server list channels response: " + str(list_channels_response))
+
+        # Pay the invoice
+        preimage = None
+        payment = lnd_lightning_client.pay_invoice_sync(buy_response.offer.payment_request)
+        print("Server pay invoice response: " + str(payment))
+        preimage = payment.payment_preimage
+        print("preimage: " + str(preimage))
+
+        # Clear the data key from the squeak and verify with the payment preimage
+        new_data_key = bxor(buy_response.offer.nonce, preimage)
+        print("new data key: " + str(new_data_key))
+        squeak.ClearDataKey()
+        squeak.SetDataKey(new_data_key)
+        CheckSqueak(squeak)
+        print("Finished checking squeak.")
+
 
 
 if __name__ == '__main__':
diff --git a/squeakserver/common/lnd_lightning_client.py b/squeakserver/common/lnd_lightning_client.py
index 98d03100..9895dadf 100644
--- a/squeakserver/common/lnd_lightning_client.py
+++ b/squeakserver/common/lnd_lightning_client.py
@@ -52,3 +52,74 @@ class LNDLightningClient():
     def get_wallet_balance(self):
         # Retrieve and display the wallet balance
         return self.stub.WalletBalance(self.ln_module.WalletBalanceRequest(), metadata=[('macaroon', self.macaroon)])
+
+    def add_invoice(self, preimage, amount):
+        """ Create a new invoice with the given hash pre-image.
+
+        args:
+        preimage -- the preimage bytes used to create the invoice
+        amount -- the value of the invoice
+        """
+        invoice = self.ln_module.Invoice(
+            r_preimage = preimage,
+            value=amount,
+        )
+        return self.stub.AddInvoice(invoice, metadata=[('macaroon', self.macaroon)])
+
+    def pay_invoice_sync(self, payment_request):
+        """ Pay an invoice with a given payment_request
+
+        args:
+        payment_request -- the payment_request as a string
+        """
+        send_payment_request = self.ln_module.SendRequest(
+            payment_request=payment_request,
+        )
+        return self.stub.SendPaymentSync(send_payment_request, metadata=[('macaroon', self.macaroon)])
+
+    def connect_peer(self, pubkey, host):
+        """ Connect to a lightning node peer.
+
+        args:
+        pubkey -- The identity pubkey of the Lightning node
+        host -- The network location of the lightning node
+        """
+        lightning_address = self.ln_module.LightningAddress(
+            pubkey=pubkey,
+            host=host,
+        )
+        connect_peer_request = self.ln_module.ConnectPeerRequest(
+            addr=lightning_address,
+        )
+        return self.stub.ConnectPeer(connect_peer_request, metadata=[('macaroon', self.macaroon)])
+
+    def get_info(self):
+        """ Get info about the lightning network node.
+        """
+        get_info_request = self.ln_module.GetInfoRequest()
+        return self.stub.GetInfo(get_info_request, metadata=[('macaroon', self.macaroon)])
+
+    def open_channel_sync(self, pubkey_str, local_amount):
+        """ Open a channel with a remote lightning node.
+
+        args:
+        pubkey (str) -- The identity pubkey of the Lightning node
+        local_amount -- The number of satoshis the wallet should commit to the channel
+        """
+        open_channel_request = self.ln_module.OpenChannelRequest(
+            node_pubkey_string=pubkey_str,
+            local_funding_amount=local_amount,
+        )
+        return self.stub.OpenChannelSync(open_channel_request, metadata=[('macaroon', self.macaroon)])
+
+    def list_channels(self):
+        """ List the channels
+        """
+        list_channels_request = self.ln_module.ListChannelsRequest()
+        return self.stub.ListChannels(list_channels_request, metadata=[('macaroon', self.macaroon)])
+
+    def list_peers(self):
+        """ List the peers
+        """
+        list_peers_request = self.ln_module.ListPeersRequest()
+        return self.stub.ListPeers(list_peers_request, metadata=[('macaroon', self.macaroon)])
diff --git a/squeakserver/common/rpc/squeak_server.proto b/squeakserver/common/rpc/squeak_server.proto
index b80ca74a..5b4fb2fe 100644
--- a/squeakserver/common/rpc/squeak_server.proto
+++ b/squeakserver/common/rpc/squeak_server.proto
@@ -36,6 +36,10 @@ service SqueakServer {
   */
   rpc LookupSqueaks (LookupSqueaksRequest) returns (LookupSqueaksReply) {}
 
+  /** sqk: `buysqueak`
+  */
+  rpc BuySqueak (BuySqueakRequest) returns (BuySqueakReply) {}
+
 }
 
 message PostSqueakRequest {
@@ -57,6 +61,11 @@ message LookupSqueaksRequest {
     int32 max_block = 3;
 }
 
+message BuySqueakRequest {
+    /// Hash of the squeak to buy.
+    bytes hash = 1;
+}
+
 message PostSqueakReply {
     /// The squeak.
     bytes hash = 1;
@@ -72,6 +81,11 @@ message LookupSqueaksReply {
     repeated bytes hashes = 1;
 }
 
+message BuySqueakReply {
+    /// The buy offer
+    SqueakBuyOffer offer = 1;
+}
+
 message Squeak {
     /// Hash of the squeak.
     bytes hash = 1;
@@ -79,3 +93,29 @@ message Squeak {
     /// Serialized squeak.
     bytes serialized_squeak = 2;
 }
+
+message SqueakBuyOffer {
+    /// The squeak hash.
+    bytes squeak_hash = 1;
+
+    /// The decryption nonce
+    bytes nonce = 2;
+
+    /// The amount
+    int64 amount = 3;
+
+    /// The invoice preimage hash.
+    bytes preimage_hash = 4;
+
+    /// The invoice
+    string payment_request = 5;
+
+    /// The seller node pubkey
+    string pubkey = 6;
+
+    /// The host of the seller lightning node
+    string host = 7;
+
+    /// The port of the seller lightning node
+    string port = 8;
+}
diff --git a/squeakserver/server/buy_offer.py b/squeakserver/server/buy_offer.py
new file mode 100644
index 00000000..dd89ed1b
--- /dev/null
+++ b/squeakserver/server/buy_offer.py
@@ -0,0 +1,13 @@
+
+
+class BuyOffer():
+
+    def __init__(self, squeak_hash, nonce, amount, preimage_hash, payment_request, pubkey, host, port):
+        self.squeak_hash = squeak_hash
+        self.nonce = nonce
+        self.amount = amount
+        self.preimage_hash = preimage_hash
+        self.payment_request = payment_request
+        self.pubkey = pubkey
+        self.host = host
+        self.port = port
diff --git a/squeakserver/server/lightning_address.py b/squeakserver/server/lightning_address.py
new file mode 100644
index 00000000..d1ae7be0
--- /dev/null
+++ b/squeakserver/server/lightning_address.py
@@ -0,0 +1,4 @@
+from collections import namedtuple
+
+
+LightningAddressHostPort = namedtuple('LightningAddress', ['host', 'port'])
diff --git a/squeakserver/server/main.py b/squeakserver/server/main.py
index 514d4ca1..2f1d5bdc 100644
--- a/squeakserver/server/main.py
+++ b/squeakserver/server/main.py
@@ -1,3 +1,4 @@
+import socket
 import argparse
 import logging
 import signal
@@ -14,6 +15,7 @@ import squeakserver.common.rpc.lnd_pb2 as ln
 import squeakserver.common.rpc.lnd_pb2_grpc as lnrpc
 
 from squeakserver.common.lnd_lightning_client import LNDLightningClient
+from squeakserver.server.lightning_address import LightningAddressHostPort
 from squeakserver.server.squeak_server_servicer import SqueakServerServicer
 from squeakserver.server.squeak_server_handler import SqueakServerHandler
 from squeakserver.server.db_params import parse_db_params
@@ -30,6 +32,17 @@ def load_lightning_client(config) -> LNDLightningClient:
     )
 
 
+def load_lightning_host_port(config) -> LNDLightningClient:
+    lnd_ip_address = socket.gethostbyname(
+        config['lnd']['rpc_host'],
+    )
+    lnd_port = config['lnd']['port']
+    return LightningAddressHostPort(
+        lnd_ip_address,
+        lnd_port,
+    )
+
+
 def load_rpc_server(config, handler) -> SqueakServerServicer:
     return SqueakServerServicer(
         config['server']['rpc_host'],
@@ -51,8 +64,9 @@ def start_rpc_server(handler):
     server.serve()
 
 
-def load_handler(lightning_client, postgres_db):
+def load_handler(lightning_host_port, lightning_client, postgres_db):
     return SqueakServerHandler(
+        lightning_host_port,
         lightning_client,
         postgres_db
     )
@@ -142,8 +156,9 @@ def run_server(config):
 
     print('starting lightning client here...', flush=True)
     lightning_client = load_lightning_client(config)
+    lightning_host_port = load_lightning_host_port(config)
     # db_factory = load_db_factory(config)
-    handler = load_handler(lightning_client, postgres_db)
+    handler = load_handler(lightning_host_port, lightning_client, postgres_db)
 
     # start rpc server
     # start_rpc_server(handler)
diff --git a/squeakserver/server/squeak_server_handler.py b/squeakserver/server/squeak_server_handler.py
index 71e83269..ca59a89a 100644
--- a/squeakserver/server/squeak_server_handler.py
+++ b/squeakserver/server/squeak_server_handler.py
@@ -5,7 +5,11 @@ from squeak.core.signing import CSigningKey
 from squeak.core.signing import CSqueakAddress
 
 from squeakserver.common.lnd_lightning_client import LNDLightningClient
+from squeakserver.server.buy_offer import BuyOffer
 from squeakserver.server.postgres_db import PostgresDb
+from squeakserver.server.util import generate_offer_nonce
+from squeakserver.server.util import bxor
+from squeakserver.server.lightning_address import LightningAddressHostPort
 
 
 logger = logging.getLogger(__name__)
@@ -17,9 +21,11 @@ class SqueakServerHandler(object):
 
     def __init__(
             self,
+            lightning_host_port: LightningAddressHostPort,
             lightning_client: LNDLightningClient,
             postgres_db: PostgresDb,
     ) -> None:
+        self.lightning_host_port = lightning_host_port
         self.lightning_client = lightning_client
         self.postgres_db = postgres_db
 
@@ -42,3 +48,41 @@ class SqueakServerHandler(object):
         hashes = self.postgres_db.lookup_squeaks(addresses, min_block, max_block)
         logger.info("Got hashes from db: " + str(hashes))
         return hashes
+
+    def handle_buy_squeak(self, squeak_hash):
+        logger.info("Handler buy squeak by hash: " + str(squeak_hash))
+
+        # Get the squeak from the database
+        squeak = self.postgres_db.get_squeak(squeak_hash)
+        # Get the datakey from the squeak
+        data_key = squeak.GetDataKey()
+        # Generate a new random offer nonce
+        nonce = generate_offer_nonce()
+        # Get the invoice preimage from the nonce and the squeak data key
+        logger.info("Handling buy with nonce: " + str(nonce))
+        logger.info("Handling buy with data_key: " + str(data_key))
+        preimage = bxor(nonce, data_key)
+        # TODO: Get the offer price
+        amount = 100
+
+        logger.info("Handling buy with preimage: " + str(preimage))
+        # Create the lightning invoice
+        add_invoice_response = self.lightning_client.add_invoice(preimage, amount)
+        preimage_hash = add_invoice_response.r_hash
+        invoice_payment_request = add_invoice_response.payment_request
+
+        # Get the lightning network node pubkey
+        get_info_response = self.lightning_client.get_info()
+        pubkey = get_info_response.identity_pubkey
+
+        # Return the buy offer
+        return BuyOffer(
+            squeak_hash,
+            nonce,
+            amount,
+            preimage_hash,
+            invoice_payment_request,
+            pubkey,
+            self.lightning_host_port.host,
+            self.lightning_host_port.port,
+        )
diff --git a/squeakserver/server/squeak_server_servicer.py b/squeakserver/server/squeak_server_servicer.py
index 427e1d76..83301936 100644
--- a/squeakserver/server/squeak_server_servicer.py
+++ b/squeakserver/server/squeak_server_servicer.py
@@ -85,6 +85,41 @@ class SqueakServerServicer(squeak_server_pb2_grpc.SqueakServerServicer):
             hashes=hashes,
         )
 
+    def BuySqueak(self, request, context):
+        squeak_hash = request.hash
+        # TODO: check if hash is valid
+
+        buy_response = self.handler.handle_buy_squeak(squeak_hash)
+
+        if buy_response == None:
+            context.set_code(grpc.StatusCode.INVALID_ARGUMENT)
+            return squeak_server_pb2.BuySqueakReply(
+                offer=None,
+            )
+
+        offer_squeak_hash = buy_response.squeak_hash
+        amount = buy_response.amount
+        nonce = buy_response.nonce
+
+        if offer_squeak_hash != squeak_hash:
+            context.set_code(grpc.StatusCode.INVALID_ARGUMENT)
+            return squeak_server_pb2.BuySqueakReply(
+                offer=None,
+            )
+
+        return squeak_server_pb2.BuySqueakReply(
+            offer=squeak_server_pb2.SqueakBuyOffer(
+                squeak_hash=offer_squeak_hash,
+                nonce=nonce,
+                amount=amount,
+                preimage_hash=buy_response.preimage_hash,
+                payment_request=buy_response.payment_request,
+                pubkey=buy_response.pubkey,
+                host=buy_response.host,
+                port=buy_response.port,
+            )
+        )
+
     def serve(self):
         print('Calling serve...', flush=True)
         server = grpc.server(futures.ThreadPoolExecutor(max_workers=10))
diff --git a/squeakserver/server/util.py b/squeakserver/server/util.py
index 52f473d0..d971fe21 100644
--- a/squeakserver/server/util.py
+++ b/squeakserver/server/util.py
@@ -1,4 +1,19 @@
+import os
+
+
+DATA_KEY_LENGTH = 32
 
 
 def get_hash(squeak):
     return squeak.GetHash()[::-1]
+
+
+def generate_offer_nonce():
+    return os.urandom(DATA_KEY_LENGTH)
+
+
+def bxor(b1, b2): # use xor for bytes
+    result = bytearray()
+    for b1, b2 in zip(b1, b2):
+        result.append(b1 ^ b2)
+    return bytes(result)