diff --git a/glide.lock b/glide.lock
index d593f7e7..d61acf0e 100644
--- a/glide.lock
+++ b/glide.lock
@@ -1,5 +1,5 @@
-hash: 0bdf51a0e40c8cba475333645a769b711e699be36803b02f3b14430642ab79b2
-updated: 2016-10-17T19:44:40.047044856-07:00
+hash: 2106ce14ff53c14d3d0d3d8f34e1cf01c01a79eef409ffe871cd5783b77939c8
+updated: 2016-10-27T20:34:19.347013604-07:00
 imports:
 - name: github.com/aead/chacha20
   version: 7e1038a97ad08a9a16cb88ed7a6778b366ba4d99
@@ -61,6 +61,8 @@ imports:
   version: 6d212800a42e8ab5c146b8ace3490ee17e5225f9
   subpackages:
   - spew
+- name: github.com/go-errors/errors
+  version: a41850380601eeb43f4350f7d17c6bbd8944aaf8
 - name: github.com/golang/protobuf
   version: 98fa357170587e470c5f27d3c3ea0947b71eb455
   subpackages:
@@ -77,7 +79,7 @@ imports:
 - name: github.com/howeyc/gopass
   version: f5387c492211eb133053880d23dfae62aa14123d
 - name: github.com/lightningnetwork/lightning-onion
-  version: 81647ffa2c5e17c0447d359e1963a54e18be85c4
+  version: f38a054899049d1f5bdb6550c17724060384161b
 - name: github.com/roasbeef/btcd
   version: baea7691cc3c59480703fe1a3fb5595c838c963c
   subpackages:
@@ -120,7 +122,7 @@ imports:
 - name: github.com/urfave/cli
   version: a14d7d367bc02b1f57d88de97926727f2d936387
 - name: golang.org/x/crypto
-  version: 5f31782cfb2b6373211f8f9fbf31283fa234b570
+  version: ca7e7f10cb9fd9c1a6ff7f60436c086d73714180
   subpackages:
   - hkdf
   - nacl/secretbox
@@ -131,7 +133,7 @@ imports:
   - pbkdf2
   - ssh/terminal
 - name: golang.org/x/net
-  version: 8b4af36cd21a1f85a7484b49feb7c79363106d8e
+  version: b336a971b799939dd16ae9b1df8334cb8b977c4d
   subpackages:
   - context
   - http2
@@ -141,7 +143,7 @@ imports:
   - lex/httplex
   - internal/timeseries
 - name: golang.org/x/sys
-  version: 9bb9f0998d48b31547d975974935ae9b48c7a03c
+  version: c200b10b5d5e122be351b67af224adc6128af5bf
   subpackages:
   - unix
 - name: google.golang.org/grpc
@@ -155,7 +157,4 @@ imports:
   - naming
   - transport
   - peer
-- name: github.com/go-errors/errors
-  version: a41850380601eeb43f4350f7d17c6bbd8944aaf8
-
 testImports: []
diff --git a/glide.yaml b/glide.yaml
index 33217684..763b240f 100644
--- a/glide.yaml
+++ b/glide.yaml
@@ -57,6 +57,7 @@ import:
 - package: google.golang.org/grpc
   version: ^1.0.0
 - package: github.com/lightningnetwork/lightning-onion
+  version: master
 - package: github.com/grpc-ecosystem/grpc-gateway
   version: ^1.1.0
 - package: github.com/aead/chacha20
diff --git a/lnwire/htlc_addrequest.go b/lnwire/htlc_addrequest.go
index 31f4bd37..451cbb3b 100644
--- a/lnwire/htlc_addrequest.go
+++ b/lnwire/htlc_addrequest.go
@@ -57,6 +57,7 @@ type HTLCAddRequest struct {
 	// and the shared secret is fresh, then the node should stip off a layer
 	// of encryption, exposing the next hop to be used in the subsequent
 	// HTLCAddRequest message.
+	// TODO(roasbeef): can be fixed sized now that v1 Sphinx is "done".
 	OnionBlob []byte
 }
 
diff --git a/peer.go b/peer.go
index 3c8b331c..2c6a0d05 100644
--- a/peer.go
+++ b/peer.go
@@ -1109,13 +1109,24 @@ func (p *peer) handleUpstreamMsg(state *commitmentState, msg lnwire.Message) {
 			p.Disconnect()
 			return
 		}
-		sphinxPacket, err := state.sphinx.ProcessOnionPacket(onionPkt)
+
+		// Attempt to process the Sphinx packet. We include the payment
+		// hash of the HTLC as it's authenticated within the Sphinx
+		// packet itself as associated data in order to thwart attempts
+		// a replay attacks. In the case of a replay, an attacker is
+		// *forced* to use the same payment hash twice, thereby losing
+		// their money entirely.
+		rHash := htlcPkt.RedemptionHashes[0][:]
+		sphinxPacket, err := state.sphinx.ProcessOnionPacket(onionPkt, rHash)
 		if err != nil {
 			peerLog.Errorf("unable to process onion pkt: %v", err)
 			p.Disconnect()
 			return
 		}
 
+		// TODO(roasbeef): perform sanity checks on per-hop payload
+		//  * time-lock is sane, fee, chain, etc
+
 		// We just received an add request from an upstream peer, so we
 		// add it to our state machine, then add the HTLC to our
 		// "settle" list in the event that we know the pre-image
@@ -1144,7 +1155,8 @@ func (p *peer) handleUpstreamMsg(state *commitmentState, msg lnwire.Message) {
 		// switch, we'll attach the routing information so the switch
 		// can finalize the circuit.
 		case sphinx.MoreHops:
-			// TODO(roasbeef): send cancel + error if not in rounting table
+			// TODO(roasbeef): send cancel + error if not in
+			// routing table
 			state.pendingCircuits[index] = sphinxPacket
 		default:
 			peerLog.Errorf("mal formed onion packet")
diff --git a/rpcserver.go b/rpcserver.go
index 7f601bf9..badb27eb 100644
--- a/rpcserver.go
+++ b/rpcserver.go
@@ -564,16 +564,6 @@ func (r *rpcServer) SendPayment(paymentStream lnrpc.Lightning_SendPaymentServer)
 			}
 			rpcsLog.Tracef("[sendpayment] selected route: %v", path)
 
-			// Generate the raw encoded sphinx packet to be
-			// included along with the HTLC add message.
-			// We snip off the first hop from the path as within
-			// the routing table's star graph, we're always the
-			// first hop.
-			sphinxPacket, err := generateSphinxPacket(path[1:])
-			if err != nil {
-				return err
-			}
-
 			// If we're in debug HTLC mode, then all outgoing
 			// HTLC's will pay to the same debug rHash. Otherwise,
 			// we pay to the rHash specified within the RPC
@@ -585,6 +575,16 @@ func (r *rpcServer) SendPayment(paymentStream lnrpc.Lightning_SendPaymentServer)
 				copy(rHash[:], nextPayment.PaymentHash)
 			}
 
+			// Generate the raw encoded sphinx packet to be
+			// included along with the HTLC add message.  We snip
+			// off the first hop from the path as within the
+			// routing table's star graph, we're always the first
+			// hop.
+			sphinxPacket, err := generateSphinxPacket(path[1:], rHash[:])
+			if err != nil {
+				return err
+			}
+
 			// Craft an HTLC packet to send to the routing
 			// sub-system. The meta-data within this packet will be
 			// used to route the payment through the network.
@@ -606,10 +606,11 @@ func (r *rpcServer) SendPayment(paymentStream lnrpc.Lightning_SendPaymentServer)
 			// TODO(roasbeef): semaphore to limit num outstanding
 			// goroutines.
 			go func() {
-				// Finally, send this next packet to the routing layer in order
-				// to complete the next payment.
-				// TODO(roasbeef): this should go through the L3 router once
-				// multi-hop is in place.
+				// Finally, send this next packet to the
+				// routing layer in order to complete the next
+				// payment.
+				// TODO(roasbeef): this should go through the
+				// L3 router once multi-hop is in place.
 				if err := r.server.htlcSwitch.SendHTLC(htlcPkt); err != nil {
 					errChan <- err
 					return
@@ -632,10 +633,11 @@ func (r *rpcServer) SendPayment(paymentStream lnrpc.Lightning_SendPaymentServer)
 // the onion route specified by the passed list of graph vertexes. The blob
 // returned from this function can immediately be included within an HTLC add
 // packet to be sent to the first hop within the route.
-func generateSphinxPacket(vertexes []graph.ID) ([]byte, error) {
-	var dest sphinx.LightningAddress
-	e2eMessage := []byte("test")
-
+func generateSphinxPacket(vertexes []graph.ID, paymentHash []byte) ([]byte, error) {
+	// First convert all the vertexs from the routing table to in-memory
+	// public key objects. These objects are necessary in order to perform
+	// the series of ECDH operations required to construct the Sphinx
+	// packet below.
 	route := make([]*btcec.PublicKey, len(vertexes))
 	for i, vertex := range vertexes {
 		vertexBytes, err := hex.DecodeString(vertex.String())
@@ -651,15 +653,35 @@ func generateSphinxPacket(vertexes []graph.ID) ([]byte, error) {
 		route[i] = pub
 	}
 
-	// Next generate the onion routing packet which allows
-	// us to perform privacy preserving source routing
-	// across the network.
-	var onionBlob bytes.Buffer
-	sphinxPacket, err := sphinx.NewOnionPacket(route, dest,
-		e2eMessage)
+	// Next we generate the per-hop payload which gives each node within
+	// the route the necessary information (fees, CLTV value, etc) to
+	// properly forward the payment.
+	// TODO(roasbeef): properly set CLTV value, payment amount, and chain
+	// within hop paylods.
+	var hopPayloads [][]byte
+	for i := 0; i < len(route); i++ {
+		payload := bytes.Repeat([]byte{byte('A' + i)},
+			sphinx.HopPayloadSize)
+		hopPayloads = append(hopPayloads, payload)
+	}
+
+	sessionKey, err := btcec.NewPrivateKey(btcec.S256())
 	if err != nil {
 		return nil, err
 	}
+
+	// Next generate the onion routing packet which allows
+	// us to perform privacy preserving source routing
+	// across the network.
+	sphinxPacket, err := sphinx.NewOnionPacket(route, sessionKey,
+		hopPayloads, paymentHash)
+	if err != nil {
+		return nil, err
+	}
+
+	// Finally, encode Sphinx packet using it's wire represenation to be
+	// included within the HTLC add packet.
+	var onionBlob bytes.Buffer
 	if err := sphinxPacket.Encode(&onionBlob); err != nil {
 		return nil, err
 	}