diff --git a/channeldb/invoice_test.go b/channeldb/invoice_test.go
index a24c2f674..537480e97 100644
--- a/channeldb/invoice_test.go
+++ b/channeldb/invoice_test.go
@@ -20,7 +20,10 @@ var (
 )
 
 func randInvoice(value lnwire.MilliSatoshi) (*Invoice, error) {
-	var pre, payAddr [32]byte
+	var (
+		pre     lntypes.Preimage
+		payAddr [32]byte
+	)
 	if _, err := rand.Read(pre[:]); err != nil {
 		return nil, err
 	}
@@ -32,7 +35,7 @@ func randInvoice(value lnwire.MilliSatoshi) (*Invoice, error) {
 		CreationDate: testNow,
 		Terms: ContractTerm{
 			Expiry:          4000,
-			PaymentPreimage: pre,
+			PaymentPreimage: &pre,
 			PaymentAddr:     payAddr,
 			Value:           value,
 			Features:        emptyFeatures,
@@ -360,13 +363,18 @@ func TestInvoiceCancelSingleHtlc(t *testing.T) {
 		t.Fatalf("unable to make test db: %v", err)
 	}
 
+	preimage := lntypes.Preimage{1}
+	paymentHash := preimage.Hash()
+
 	testInvoice := &Invoice{
 		Htlcs: map[CircuitKey]*InvoiceHTLC{},
+		Terms: ContractTerm{
+			Value:           lnwire.NewMSatFromSatoshis(10000),
+			Features:        emptyFeatures,
+			PaymentPreimage: &preimage,
+		},
 	}
-	testInvoice.Terms.Value = lnwire.NewMSatFromSatoshis(10000)
-	testInvoice.Terms.Features = emptyFeatures
 
-	var paymentHash lntypes.Hash
 	if _, err := db.AddInvoice(testInvoice, paymentHash); err != nil {
 		t.Fatalf("unable to find invoice: %v", err)
 	}
@@ -1059,15 +1067,20 @@ func TestCustomRecords(t *testing.T) {
 		t.Fatalf("unable to make test db: %v", err)
 	}
 
+	preimage := lntypes.Preimage{1}
+	paymentHash := preimage.Hash()
+
 	testInvoice := &Invoice{
 		Htlcs: map[CircuitKey]*InvoiceHTLC{},
+		Terms: ContractTerm{
+			Value:           lnwire.NewMSatFromSatoshis(10000),
+			Features:        emptyFeatures,
+			PaymentPreimage: &preimage,
+		},
 	}
-	testInvoice.Terms.Value = lnwire.NewMSatFromSatoshis(10000)
-	testInvoice.Terms.Features = emptyFeatures
 
-	var paymentHash lntypes.Hash
 	if _, err := db.AddInvoice(testInvoice, paymentHash); err != nil {
-		t.Fatalf("unable to find invoice: %v", err)
+		t.Fatalf("unable to add invoice: %v", err)
 	}
 
 	// Accept an htlc with custom records on this invoice.
diff --git a/channeldb/invoices.go b/channeldb/invoices.go
index 4b9c10022..a7ed43245 100644
--- a/channeldb/invoices.go
+++ b/channeldb/invoices.go
@@ -17,9 +17,9 @@ import (
 )
 
 var (
-	// UnknownPreimage is an all-zeroes preimage that indicates that the
+	// unknownPreimage is an all-zeroes preimage that indicates that the
 	// preimage for this invoice is not yet known.
-	UnknownPreimage lntypes.Preimage
+	unknownPreimage lntypes.Preimage
 
 	// invoiceBucket is the name of the bucket within the database that
 	// stores all data related to invoices no matter their final state.
@@ -150,6 +150,7 @@ const (
 	featuresType    tlv.Type = 11
 	invStateType    tlv.Type = 12
 	amtPaidType     tlv.Type = 13
+	hodlInvoiceType tlv.Type = 14
 )
 
 // InvoiceRef is a composite identifier for invoices. Invoices can be referenced
@@ -261,8 +262,8 @@ type ContractTerm struct {
 
 	// PaymentPreimage is the preimage which is to be revealed in the
 	// occasion that an HTLC paying to the hash of this preimage is
-	// extended.
-	PaymentPreimage lntypes.Preimage
+	// extended. Set to nil if the preimage isn't known yet.
+	PaymentPreimage *lntypes.Preimage
 
 	// Value is the expected amount of milli-satoshis to be paid to an HTLC
 	// which can be satisfied by the above preimage.
@@ -346,6 +347,10 @@ type Invoice struct {
 	// Htlcs records all htlcs that paid to this invoice. Some of these
 	// htlcs may have been marked as canceled.
 	Htlcs map[CircuitKey]*InvoiceHTLC
+
+	// HodlInvoice indicates whether the invoice should be held in the
+	// Accepted state or be settled right away.
+	HodlInvoice bool
 }
 
 // HtlcState defines the states an htlc paying to an invoice can be in.
@@ -439,14 +444,19 @@ type InvoiceStateUpdateDesc struct {
 	NewState ContractState
 
 	// Preimage must be set to the preimage when NewState is settled.
-	Preimage lntypes.Preimage
+	Preimage *lntypes.Preimage
 }
 
 // InvoiceUpdateCallback is a callback used in the db transaction to update the
 // invoice.
 type InvoiceUpdateCallback = func(invoice *Invoice) (*InvoiceUpdateDesc, error)
 
-func validateInvoice(i *Invoice) error {
+func validateInvoice(i *Invoice, paymentHash lntypes.Hash) error {
+	// Avoid conflicts with all-zeroes magic value in the database.
+	if paymentHash == unknownPreimage.Hash() {
+		return fmt.Errorf("cannot use hash of all-zeroes preimage")
+	}
+
 	if len(i.Memo) > MaxMemoSize {
 		return fmt.Errorf("max length a memo is %v, and invoice "+
 			"of length %v was provided", MaxMemoSize, len(i.Memo))
@@ -459,6 +469,10 @@ func validateInvoice(i *Invoice) error {
 	if i.Terms.Features == nil {
 		return errors.New("invoice must have a feature vector")
 	}
+
+	if i.Terms.PaymentPreimage == nil && !i.HodlInvoice {
+		return errors.New("non-hodl invoices must have a preimage")
+	}
 	return nil
 }
 
@@ -475,7 +489,7 @@ func (i *Invoice) IsPending() bool {
 func (d *DB) AddInvoice(newInvoice *Invoice, paymentHash lntypes.Hash) (
 	uint64, error) {
 
-	if err := validateInvoice(newInvoice); err != nil {
+	if err := validateInvoice(newInvoice, paymentHash); err != nil {
 		return 0, err
 	}
 
@@ -1131,7 +1145,13 @@ func serializeInvoice(w io.Writer, i *Invoice) error {
 	}
 	featureBytes := fb.Bytes()
 
-	preimage := [32]byte(i.Terms.PaymentPreimage)
+	preimage := [32]byte(unknownPreimage)
+	if i.Terms.PaymentPreimage != nil {
+		preimage = *i.Terms.PaymentPreimage
+		if preimage == unknownPreimage {
+			return errors.New("cannot use all-zeroes preimage")
+		}
+	}
 	value := uint64(i.Terms.Value)
 	cltvDelta := uint32(i.Terms.FinalCltvDelta)
 	expiry := uint64(i.Terms.Expiry)
@@ -1139,6 +1159,11 @@ func serializeInvoice(w io.Writer, i *Invoice) error {
 	amtPaid := uint64(i.AmtPaid)
 	state := uint8(i.State)
 
+	var hodlInvoice uint8
+	if i.HodlInvoice {
+		hodlInvoice = 1
+	}
+
 	tlvStream, err := tlv.NewStream(
 		// Memo and payreq.
 		tlv.MakePrimitiveRecord(memoType, &i.Memo),
@@ -1161,6 +1186,8 @@ func serializeInvoice(w io.Writer, i *Invoice) error {
 		// Invoice state.
 		tlv.MakePrimitiveRecord(invStateType, &state),
 		tlv.MakePrimitiveRecord(amtPaidType, &amtPaid),
+
+		tlv.MakePrimitiveRecord(hodlInvoiceType, &hodlInvoice),
 	)
 	if err != nil {
 		return err
@@ -1256,12 +1283,13 @@ func fetchInvoice(invoiceNum []byte, invoices kvdb.RBucket) (Invoice, error) {
 
 func deserializeInvoice(r io.Reader) (Invoice, error) {
 	var (
-		preimage  [32]byte
-		value     uint64
-		cltvDelta uint32
-		expiry    uint64
-		amtPaid   uint64
-		state     uint8
+		preimageBytes [32]byte
+		value         uint64
+		cltvDelta     uint32
+		expiry        uint64
+		amtPaid       uint64
+		state         uint8
+		hodlInvoice   uint8
 
 		creationDateBytes []byte
 		settleDateBytes   []byte
@@ -1281,7 +1309,7 @@ func deserializeInvoice(r io.Reader) (Invoice, error) {
 		tlv.MakePrimitiveRecord(settleIndexType, &i.SettleIndex),
 
 		// Terms.
-		tlv.MakePrimitiveRecord(preimageType, &preimage),
+		tlv.MakePrimitiveRecord(preimageType, &preimageBytes),
 		tlv.MakePrimitiveRecord(valueType, &value),
 		tlv.MakePrimitiveRecord(cltvDeltaType, &cltvDelta),
 		tlv.MakePrimitiveRecord(expiryType, &expiry),
@@ -1291,6 +1319,8 @@ func deserializeInvoice(r io.Reader) (Invoice, error) {
 		// Invoice state.
 		tlv.MakePrimitiveRecord(invStateType, &state),
 		tlv.MakePrimitiveRecord(amtPaidType, &amtPaid),
+
+		tlv.MakePrimitiveRecord(hodlInvoiceType, &hodlInvoice),
 	)
 	if err != nil {
 		return i, err
@@ -1307,13 +1337,21 @@ func deserializeInvoice(r io.Reader) (Invoice, error) {
 		return i, err
 	}
 
-	i.Terms.PaymentPreimage = lntypes.Preimage(preimage)
+	preimage := lntypes.Preimage(preimageBytes)
+	if preimage != unknownPreimage {
+		i.Terms.PaymentPreimage = &preimage
+	}
+
 	i.Terms.Value = lnwire.MilliSatoshi(value)
 	i.Terms.FinalCltvDelta = int32(cltvDelta)
 	i.Terms.Expiry = time.Duration(expiry)
 	i.AmtPaid = lnwire.MilliSatoshi(amtPaid)
 	i.State = ContractState(state)
 
+	if hodlInvoice != 0 {
+		i.HodlInvoice = true
+	}
+
 	err = i.CreationDate.UnmarshalBinary(creationDateBytes)
 	if err != nil {
 		return i, err
@@ -1443,10 +1481,16 @@ func copyInvoice(src *Invoice) *Invoice {
 		Htlcs: make(
 			map[CircuitKey]*InvoiceHTLC, len(src.Htlcs),
 		),
+		HodlInvoice: src.HodlInvoice,
 	}
 
 	dest.Terms.Features = src.Terms.Features.Clone()
 
+	if src.Terms.PaymentPreimage != nil {
+		preimage := *src.Terms.PaymentPreimage
+		dest.Terms.PaymentPreimage = &preimage
+	}
+
 	for k, v := range src.Htlcs {
 		dest.Htlcs[k] = copyInvoiceHTLC(v)
 	}
@@ -1619,10 +1663,16 @@ func updateInvoiceState(invoice *Invoice, hash lntypes.Hash,
 	case ContractOpen:
 		if update.NewState == ContractSettled {
 			// Validate preimage.
-			if update.Preimage.Hash() != hash {
-				return ErrInvoicePreimageMismatch
+			switch {
+			case update.Preimage != nil:
+				if update.Preimage.Hash() != hash {
+					return ErrInvoicePreimageMismatch
+				}
+				invoice.Terms.PaymentPreimage = update.Preimage
+
+			case invoice.Terms.PaymentPreimage == nil:
+				return errors.New("unknown preimage")
 			}
-			invoice.Terms.PaymentPreimage = update.Preimage
 		}
 
 	// Once settled, we are in a terminal state.
diff --git a/contractcourt/channel_arbitrator.go b/contractcourt/channel_arbitrator.go
index f6f7fedad..8ad7585a1 100644
--- a/contractcourt/channel_arbitrator.go
+++ b/contractcourt/channel_arbitrator.go
@@ -1457,8 +1457,7 @@ func (c *ChannelArbitrator) isPreimageAvailable(hash lntypes.Hash) (bool,
 		return false, err
 	}
 
-	preimageAvailable = invoice.Terms.PaymentPreimage !=
-		channeldb.UnknownPreimage
+	preimageAvailable = invoice.Terms.PaymentPreimage != nil
 
 	return preimageAvailable, nil
 }
diff --git a/htlcswitch/link_test.go b/htlcswitch/link_test.go
index 739dc0594..5bf076e9f 100644
--- a/htlcswitch/link_test.go
+++ b/htlcswitch/link_test.go
@@ -437,7 +437,9 @@ func TestChannelLinkCancelFullCommitment(t *testing.T) {
 
 	var wg sync.WaitGroup
 	for i := 0; i < count; i++ {
-		preimages[i] = lntypes.Preimage{byte(i >> 8), byte(i)}
+		// Deterministically generate preimages. Avoid the all-zeroes
+		// preimage because that will be rejected by the database.
+		preimages[i] = lntypes.Preimage{byte(i >> 8), byte(i), 1}
 
 		wg.Add(1)
 		go func(i int) {
@@ -2015,13 +2017,13 @@ func TestChannelLinkBandwidthConsistency(t *testing.T) {
 	// If we now send in a valid HTLC settle for the prior HTLC we added,
 	// then the bandwidth should remain unchanged as the remote party will
 	// gain additional channel balance.
-	err = bobChannel.SettleHTLC(invoice.Terms.PaymentPreimage, bobIndex, nil, nil, nil)
+	err = bobChannel.SettleHTLC(*invoice.Terms.PaymentPreimage, bobIndex, nil, nil, nil)
 	if err != nil {
 		t.Fatalf("unable to settle htlc: %v", err)
 	}
 	htlcSettle := &lnwire.UpdateFulfillHTLC{
 		ID:              0,
-		PaymentPreimage: invoice.Terms.PaymentPreimage,
+		PaymentPreimage: *invoice.Terms.PaymentPreimage,
 	}
 	aliceLink.HandleChannelUpdate(htlcSettle)
 	time.Sleep(time.Millisecond * 500)
@@ -2193,7 +2195,7 @@ func TestChannelLinkBandwidthConsistency(t *testing.T) {
 		outgoingHTLCID: addPkt.outgoingHTLCID,
 		htlc: &lnwire.UpdateFulfillHTLC{
 			ID:              0,
-			PaymentPreimage: invoice.Terms.PaymentPreimage,
+			PaymentPreimage: *invoice.Terms.PaymentPreimage,
 		},
 		obfuscator: NewMockObfuscator(),
 	}
@@ -3153,13 +3155,13 @@ func TestChannelLinkBandwidthChanReserve(t *testing.T) {
 	// If we now send in a valid HTLC settle for the prior HTLC we added,
 	// then the bandwidth should remain unchanged as the remote party will
 	// gain additional channel balance.
-	err = bobChannel.SettleHTLC(invoice.Terms.PaymentPreimage, bobIndex, nil, nil, nil)
+	err = bobChannel.SettleHTLC(*invoice.Terms.PaymentPreimage, bobIndex, nil, nil, nil)
 	if err != nil {
 		t.Fatalf("unable to settle htlc: %v", err)
 	}
 	htlcSettle := &lnwire.UpdateFulfillHTLC{
 		ID:              bobIndex,
-		PaymentPreimage: invoice.Terms.PaymentPreimage,
+		PaymentPreimage: *invoice.Terms.PaymentPreimage,
 	}
 	aliceLink.HandleChannelUpdate(htlcSettle)
 	time.Sleep(time.Millisecond * 500)
@@ -4730,7 +4732,7 @@ func testChannelLinkBatchPreimageWrite(t *testing.T, disconnect bool) {
 	for i, invoice := range invoices {
 		ctx.sendSettleBobToAlice(
 			uint64(i),
-			invoice.Terms.PaymentPreimage,
+			*invoice.Terms.PaymentPreimage,
 		)
 	}
 
@@ -5772,7 +5774,8 @@ func TestChannelLinkHoldInvoiceRestart(t *testing.T) {
 
 	// Convert into a hodl invoice and save the preimage for later.
 	preimage := invoice.Terms.PaymentPreimage
-	invoice.Terms.PaymentPreimage = channeldb.UnknownPreimage
+	invoice.Terms.PaymentPreimage = nil
+	invoice.HodlInvoice = true
 
 	// We must add the invoice to the registry, such that Alice
 	// expects this payment.
@@ -5814,7 +5817,10 @@ func TestChannelLinkHoldInvoiceRestart(t *testing.T) {
 	<-registry.settleChan
 
 	// Settle the invoice with the preimage.
-	registry.SettleHodlInvoice(preimage)
+	err = registry.SettleHodlInvoice(*preimage)
+	if err != nil {
+		t.Fatalf("settle hodl invoice: %v", err)
+	}
 
 	// Expect alice to send a settle and commitsig message to bob.
 	ctx.receiveSettleAliceToBob()
@@ -5957,10 +5963,12 @@ func TestChannelLinkRevocationWindowHodl(t *testing.T) {
 
 	// Convert into hodl invoices and save the preimages for later.
 	preimage1 := invoice1.Terms.PaymentPreimage
-	invoice1.Terms.PaymentPreimage = channeldb.UnknownPreimage
+	invoice1.Terms.PaymentPreimage = nil
+	invoice1.HodlInvoice = true
 
 	preimage2 := invoice2.Terms.PaymentPreimage
-	invoice2.Terms.PaymentPreimage = channeldb.UnknownPreimage
+	invoice2.Terms.PaymentPreimage = nil
+	invoice2.HodlInvoice = true
 
 	// We must add the invoices to the registry, such that Alice
 	// expects the payments.
@@ -6009,7 +6017,10 @@ func TestChannelLinkRevocationWindowHodl(t *testing.T) {
 	}
 
 	// Settle invoice 1 with the preimage.
-	registry.SettleHodlInvoice(preimage1)
+	err = registry.SettleHodlInvoice(*preimage1)
+	if err != nil {
+		t.Fatalf("settle hodl invoice: %v", err)
+	}
 
 	// Expect alice to send a settle and commitsig message to bob. Bob does
 	// not yet send the revocation.
@@ -6017,7 +6028,10 @@ func TestChannelLinkRevocationWindowHodl(t *testing.T) {
 	ctx.receiveCommitSigAliceToBob(1)
 
 	// Settle invoice 2 with the preimage.
-	registry.SettleHodlInvoice(preimage2)
+	err = registry.SettleHodlInvoice(*preimage2)
+	if err != nil {
+		t.Fatalf("settle hodl invoice: %v", err)
+	}
 
 	// Expect alice to send a settle for htlc 2.
 	ctx.receiveSettleAliceToBob()
diff --git a/htlcswitch/test_utils.go b/htlcswitch/test_utils.go
index 429963d2c..ae64cf1bd 100644
--- a/htlcswitch/test_utils.go
+++ b/htlcswitch/test_utils.go
@@ -547,8 +547,8 @@ func getChanID(msg lnwire.Message) (lnwire.ChannelID, error) {
 // invoice which should be added by destination peer.
 func generatePaymentWithPreimage(invoiceAmt, htlcAmt lnwire.MilliSatoshi,
 	timelock uint32, blob [lnwire.OnionPacketSize]byte,
-	preimage, rhash, payAddr [32]byte) (*channeldb.Invoice, *lnwire.UpdateAddHTLC,
-	uint64, error) {
+	preimage *lntypes.Preimage, rhash, payAddr [32]byte) (
+	*channeldb.Invoice, *lnwire.UpdateAddHTLC, uint64, error) {
 
 	// Create the db invoice. Normally the payment requests needs to be set,
 	// because it is decoded in InvoiceRegistry to obtain the cltv expiry.
@@ -556,6 +556,7 @@ func generatePaymentWithPreimage(invoiceAmt, htlcAmt lnwire.MilliSatoshi,
 	// step and always returning the value of testInvoiceCltvExpiry, we
 	// don't need to bother here with creating and signing a payment
 	// request.
+
 	invoice := &channeldb.Invoice{
 		CreationDate: time.Now(),
 		Terms: channeldb.ContractTerm{
@@ -567,6 +568,7 @@ func generatePaymentWithPreimage(invoiceAmt, htlcAmt lnwire.MilliSatoshi,
 				nil, lnwire.Features,
 			),
 		},
+		HodlInvoice: preimage == nil,
 	}
 
 	htlc := &lnwire.UpdateAddHTLC{
@@ -591,7 +593,7 @@ func generatePayment(invoiceAmt, htlcAmt lnwire.MilliSatoshi, timelock uint32,
 	blob [lnwire.OnionPacketSize]byte) (*channeldb.Invoice,
 	*lnwire.UpdateAddHTLC, uint64, error) {
 
-	var preimage [sha256.Size]byte
+	var preimage lntypes.Preimage
 	r, err := generateRandomBytes(sha256.Size)
 	if err != nil {
 		return nil, nil, 0, err
@@ -608,7 +610,7 @@ func generatePayment(invoiceAmt, htlcAmt lnwire.MilliSatoshi, timelock uint32,
 	copy(payAddr[:], r)
 
 	return generatePaymentWithPreimage(
-		invoiceAmt, htlcAmt, timelock, blob, preimage, rhash, payAddr,
+		invoiceAmt, htlcAmt, timelock, blob, &preimage, rhash, payAddr,
 	)
 }
 
@@ -1345,7 +1347,7 @@ func (n *twoHopNetwork) makeHoldPayment(sendingPeer, receivingPeer lnpeer.Peer,
 	// Generate payment: invoice and htlc.
 	invoice, htlc, pid, err := generatePaymentWithPreimage(
 		invoiceAmt, htlcAmt, timelock, blob,
-		channeldb.UnknownPreimage, rhash, payAddr,
+		nil, rhash, payAddr,
 	)
 	if err != nil {
 		paymentErr <- err
diff --git a/invoices/invoiceregistry.go b/invoices/invoiceregistry.go
index 2bea21ed8..633284668 100644
--- a/invoices/invoiceregistry.go
+++ b/invoices/invoiceregistry.go
@@ -652,12 +652,6 @@ func (i *InvoiceRegistry) processKeySend(ctx invoiceUpdateCtx) error {
 		return errors.New("invalid keysend preimage")
 	}
 
-	// Don't accept zero preimages as those have a special meaning in our
-	// database for hodl invoices.
-	if preimage == channeldb.UnknownPreimage {
-		return errors.New("invalid keysend preimage")
-	}
-
 	// Only allow keysend for non-mpp payments.
 	if ctx.mpp != nil {
 		return errors.New("no mpp keysend supported")
@@ -688,7 +682,7 @@ func (i *InvoiceRegistry) processKeySend(ctx invoiceUpdateCtx) error {
 		Terms: channeldb.ContractTerm{
 			FinalCltvDelta:  finalCltvDelta,
 			Value:           amt,
-			PaymentPreimage: preimage,
+			PaymentPreimage: &preimage,
 			Features:        features,
 		},
 	}
@@ -948,7 +942,7 @@ func (i *InvoiceRegistry) SettleHodlInvoice(preimage lntypes.Preimage) error {
 		return &channeldb.InvoiceUpdateDesc{
 			State: &channeldb.InvoiceStateUpdateDesc{
 				NewState: channeldb.ContractSettled,
-				Preimage: preimage,
+				Preimage: &preimage,
 			},
 		}, nil
 	}
diff --git a/invoices/test_utils_test.go b/invoices/test_utils_test.go
index 8d98b132b..d7846aec2 100644
--- a/invoices/test_utils_test.go
+++ b/invoices/test_utils_test.go
@@ -92,7 +92,7 @@ var (
 	testInvoiceAmt = lnwire.MilliSatoshi(100000)
 	testInvoice    = &channeldb.Invoice{
 		Terms: channeldb.ContractTerm{
-			PaymentPreimage: testInvoicePreimage,
+			PaymentPreimage: &testInvoicePreimage,
 			Value:           testInvoiceAmt,
 			Expiry:          time.Hour,
 			Features:        testFeatures,
@@ -102,12 +102,12 @@ var (
 
 	testHodlInvoice = &channeldb.Invoice{
 		Terms: channeldb.ContractTerm{
-			PaymentPreimage: channeldb.UnknownPreimage,
-			Value:           testInvoiceAmt,
-			Expiry:          time.Hour,
-			Features:        testFeatures,
+			Value:    testInvoiceAmt,
+			Expiry:   time.Hour,
+			Features: testFeatures,
 		},
 		CreationDate: testInvoiceCreationDate,
+		HodlInvoice:  true,
 	}
 )
 
@@ -225,7 +225,7 @@ func newTestInvoice(t *testing.T, preimage lntypes.Preimage,
 
 	return &channeldb.Invoice{
 		Terms: channeldb.ContractTerm{
-			PaymentPreimage: preimage,
+			PaymentPreimage: &preimage,
 			PaymentAddr:     payAddr,
 			Value:           testInvoiceAmount,
 			Expiry:          expiry,
diff --git a/invoices/update.go b/invoices/update.go
index 625223782..ff420b855 100644
--- a/invoices/update.go
+++ b/invoices/update.go
@@ -81,7 +81,7 @@ func updateInvoice(ctx *invoiceUpdateCtx, inv *channeldb.Invoice) (
 
 		case channeldb.HtlcStateSettled:
 			return nil, ctx.settleRes(
-				inv.Terms.PaymentPreimage,
+				*inv.Terms.PaymentPreimage,
 				ResultReplayToSettled,
 			), nil
 
@@ -187,8 +187,7 @@ func updateMpp(ctx *invoiceUpdateCtx,
 
 	// Check to see if we can settle or this is an hold invoice and
 	// we need to wait for the preimage.
-	holdInvoice := inv.Terms.PaymentPreimage == channeldb.UnknownPreimage
-	if holdInvoice {
+	if inv.HodlInvoice {
 		update.State = &channeldb.InvoiceStateUpdateDesc{
 			NewState: channeldb.ContractAccepted,
 		}
@@ -201,7 +200,7 @@ func updateMpp(ctx *invoiceUpdateCtx,
 	}
 
 	return &update, ctx.settleRes(
-		inv.Terms.PaymentPreimage, ResultSettled,
+		*inv.Terms.PaymentPreimage, ResultSettled,
 	), nil
 }
 
@@ -269,14 +268,13 @@ func updateLegacy(ctx *invoiceUpdateCtx,
 
 	case channeldb.ContractSettled:
 		return &update, ctx.settleRes(
-			inv.Terms.PaymentPreimage, ResultDuplicateToSettled,
+			*inv.Terms.PaymentPreimage, ResultDuplicateToSettled,
 		), nil
 	}
 
 	// Check to see if we can settle or this is an hold invoice and we need
 	// to wait for the preimage.
-	holdInvoice := inv.Terms.PaymentPreimage == channeldb.UnknownPreimage
-	if holdInvoice {
+	if inv.HodlInvoice {
 		update.State = &channeldb.InvoiceStateUpdateDesc{
 			NewState: channeldb.ContractAccepted,
 		}
@@ -290,6 +288,6 @@ func updateLegacy(ctx *invoiceUpdateCtx,
 	}
 
 	return &update, ctx.settleRes(
-		inv.Terms.PaymentPreimage, ResultSettled,
+		*inv.Terms.PaymentPreimage, ResultSettled,
 	), nil
 }
diff --git a/lnrpc/invoicesrpc/addinvoice.go b/lnrpc/invoicesrpc/addinvoice.go
index 171e85b7b..c1cde48a3 100644
--- a/lnrpc/invoicesrpc/addinvoice.go
+++ b/lnrpc/invoicesrpc/addinvoice.go
@@ -88,6 +88,10 @@ type AddInvoiceData struct {
 	// Whether this invoice should include routing hints for private
 	// channels.
 	Private bool
+
+	// HodlInvoice signals that this invoice shouldn't be settled
+	// immediately upon receiving the payment.
+	HodlInvoice bool
 }
 
 // AddInvoice attempts to add a new invoice to the invoice database. Any
@@ -97,7 +101,7 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 	invoice *AddInvoiceData) (*lntypes.Hash, *channeldb.Invoice, error) {
 
 	var (
-		paymentPreimage lntypes.Preimage
+		paymentPreimage *lntypes.Preimage
 		paymentHash     lntypes.Hash
 	)
 
@@ -108,26 +112,9 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 		return nil, nil,
 			errors.New("preimage and hash both set")
 
-	// Prevent the unknown preimage magic value from being used for a
-	// regular invoice. This would cause the invoice the be handled as if it
-	// was a hold invoice.
-	case invoice.Preimage != nil &&
-		*invoice.Preimage == channeldb.UnknownPreimage:
-
-		return nil, nil,
-			fmt.Errorf("cannot use all zeroes as a preimage")
-
-	// Prevent the hash of the unknown preimage magic value to be used for a
-	// hold invoice. This would make it impossible to settle the invoice,
-	// because it would still be interpreted as not having a preimage.
-	case invoice.Hash != nil &&
-		*invoice.Hash == channeldb.UnknownPreimage.Hash():
-
-		return nil, nil,
-			fmt.Errorf("cannot use hash of all zeroes preimage")
-
 	// If no hash or preimage is given, generate a random preimage.
 	case invoice.Preimage == nil && invoice.Hash == nil:
+		paymentPreimage = &lntypes.Preimage{}
 		if _, err := rand.Read(paymentPreimage[:]); err != nil {
 			return nil, nil, err
 		}
@@ -136,12 +123,12 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 	// If just a hash is given, we create a hold invoice by setting the
 	// preimage to unknown.
 	case invoice.Preimage == nil && invoice.Hash != nil:
-		paymentPreimage = channeldb.UnknownPreimage
 		paymentHash = *invoice.Hash
 
 	// A specific preimage was supplied. Use that for the invoice.
 	case invoice.Preimage != nil && invoice.Hash == nil:
-		paymentPreimage = *invoice.Preimage
+		preimage := *invoice.Preimage
+		paymentPreimage = &preimage
 		paymentHash = invoice.Preimage.Hash()
 	}
 
@@ -410,6 +397,7 @@ func AddInvoice(ctx context.Context, cfg *AddInvoiceConfig,
 			PaymentAddr:     paymentAddr,
 			Features:        invoiceFeatures,
 		},
+		HodlInvoice: invoice.HodlInvoice,
 	}
 
 	log.Tracef("[addinvoice] adding new invoice %v",
diff --git a/lnrpc/invoicesrpc/invoices_server.go b/lnrpc/invoicesrpc/invoices_server.go
index e915bc1a0..3d840a5ba 100644
--- a/lnrpc/invoicesrpc/invoices_server.go
+++ b/lnrpc/invoicesrpc/invoices_server.go
@@ -274,6 +274,8 @@ func (s *Server) AddHoldInvoice(ctx context.Context,
 		FallbackAddr:    invoice.FallbackAddr,
 		CltvExpiry:      invoice.CltvExpiry,
 		Private:         invoice.Private,
+		HodlInvoice:     true,
+		Preimage:        nil,
 	}
 
 	_, dbInvoice, err := AddInvoice(ctx, addInvoiceCfg, addInvoiceData)
diff --git a/lnrpc/invoicesrpc/utils.go b/lnrpc/invoicesrpc/utils.go
index 1d3bab33c..9ae1818e9 100644
--- a/lnrpc/invoicesrpc/utils.go
+++ b/lnrpc/invoicesrpc/utils.go
@@ -22,7 +22,7 @@ func decodePayReq(invoice *channeldb.Invoice,
 	paymentRequest := string(invoice.PaymentRequest)
 	if paymentRequest == "" {
 		preimage := invoice.Terms.PaymentPreimage
-		if preimage == channeldb.UnknownPreimage {
+		if preimage == nil {
 			return nil, errors.New("cannot reconstruct pay req")
 		}
 		hash := [32]byte(preimage.Hash())
@@ -149,7 +149,7 @@ func CreateRPCInvoice(invoice *channeldb.Invoice,
 		IsKeysend:       len(invoice.PaymentRequest) == 0,
 	}
 
-	if preimage != channeldb.UnknownPreimage {
+	if preimage != nil {
 		rpcInvoice.RPreimage = preimage[:]
 	}