diff --git a/docs/docs/getting-started/offline-mode.md b/docs/docs/getting-started/offline-mode.md
new file mode 100644
index 00000000000..71a8cd6554f
--- /dev/null
+++ b/docs/docs/getting-started/offline-mode.md
@@ -0,0 +1,9 @@
+Hydra supports an offline mode, which allows for disabling the Layer 1 interface (that is, the underlying Cardano blockchain which Hydra heads use to seed funds and ultimately funds are withdrawn to). Disabling Layer 1 interactions allows use-cases which would otherwise require running and configuring an entire Layer 1 private devnet. For example, the offline mode can be used to quickly validate a series of transactions against a UTxO, without having to spin up an entire Layer 1 Cardano node.
+
+In this offline mode, only the Layer 2 ledger is run, along with the Hydra API and persistence, to support interacting with the offline Hydra. Therefore, ledger genesis parameters that normally influence things like time-based transaction validation, may be set to defaults that aren't reflective of mainnet. To set this, set --ledger-protocol-parameters to a non-zero file, as described [here](https://hydra.family/head-protocol/unstable/docs/configuration/#ledger-parameters).
+
+To initialize the Layer 2 ledger's UTXO state, offline mode takes an obligatory --initial-utxo parameter, which points to a JSON encoded UTXO file. This UTXO is independent of Event Source loaded events, and the latter are validated against this UTXO. The UTXO follows the following schema `{ txout : {address, value : {asset : quantity}, datum, datumhash, inlinedatum, referenceScript }`
+
+An example UTXO:
+```json
+{"1541287c2598ffc682742c961a96343ac64e9b9030e6b03a476bb18c8c50134d#0":{"address":"addr_test1vqg9ywrpx6e50uam03nlu0ewunh3yrscxmjayurmkp52lfskgkq5k","datum":null,"datumhash":null,"inlineDatum":null,"referenceScript":null,"value":{"lovelace":100000000}},"39786f186d94d8dd0b4fcf05d1458b18cd5fd8c6823364612f4a3c11b77e7cc7#0":{"address":"addr_test1vru2drx33ev6dt8gfq245r5k0tmy7ngqe79va69de9dxkrg09c7d3","datum":null,"datumhash":null,"inlineDatum":null,"referenceScript":null,"value":{"lovelace":100000000}}}```
\ No newline at end of file
diff --git a/hydra-node/src/Hydra/Chain/Offline.hs b/hydra-node/src/Hydra/Chain/Offline.hs
index dd25200f35d..6343d7a3258 100644
--- a/hydra-node/src/Hydra/Chain/Offline.hs
+++ b/hydra-node/src/Hydra/Chain/Offline.hs
@@ -7,6 +7,8 @@ import Cardano.Api.GenesisParameters (fromShelleyGenesis)
 import Cardano.Ledger.Slot (unSlotNo)
 import Cardano.Slotting.Time (SystemStart (SystemStart), mkSlotLength)
 import Control.Monad.Class.MonadAsync (link)
+import Data.Aeson qualified as Aeson
+import Data.Aeson.Types qualified as Aeson
 import Hydra.Cardano.Api (GenesisParameters (..), ShelleyEra, ShelleyGenesis (..), StandardCrypto, Tx)
 import Hydra.Chain (
   Chain (..),
@@ -36,7 +38,18 @@ offlineHeadId = UnsafeHeadId "offline"
 offlineHeadSeed :: HeadSeed
 offlineHeadSeed = UnsafeHeadSeed "offline"
 
+newtype InitialUTxOParseException = InitialUTxOParseException String
+  deriving stock (Show)
+
+instance Exception InitialUTxOParseException where
+  displayException (InitialUTxOParseException err) =
+    "Failed to parse initial UTXO: "
+      <> err
+      <> ". Example UTXO: "
+      <> "{\"1541287c2598ffc682742c961a96343ac64e9b9030e6b03a476bb18c8c50134d#0\":{\"address\":\"addr_test1vqg9ywrpx6e50uam03nlu0ewunh3yrscxmjayurmkp52lfskgkq5k\",\"datum\":null,\"datumhash\":null,\"inlineDatum \":null,\"referenceScript\":null,\"value\":{\"lovelace\":100000000}},\"39786f186d94d8dd0b4fcf05d1458b18cd5fd8c6823364612f4a3c11b77e7cc7#0\":{\"address\":\"addr_test1vru2drx33ev6dt8gfq245r5k0tmy7ngqe79va69de9dxkrg09c7d3\",\"datum\":null,\"datumhash\":null,\"inlineDatum\":null,\"referenceScript\":null,\"value\":{\"lovelace\":100000000}}}"
+
 -- | Load the given genesis file or use defaults specific to the offline mode.
+-- Throws: 'InitialUTxOParseException' if the initial UTXO file could not be parsed.
 loadGenesisFile :: Maybe FilePath -> IO (GenesisParameters ShelleyEra)
 loadGenesisFile ledgerGenesisFile =
   -- TODO: uses internal cardano-api lib
@@ -46,8 +59,11 @@ loadGenesisFile ledgerGenesisFile =
         now <- getCurrentTime
         -- TODO: uses internal cardano-api lib
         pure shelleyGenesisDefaults{sgSystemStart = now}
-      Just fp ->
-        readJsonFileThrow (parseJSON @(ShelleyGenesis StandardCrypto)) fp
+      Just fp -> do
+        jsonVal <- Aeson.eitherDecodeFileStrict fp >>= either fail pure -- just crash if we can't read the file
+        case Aeson.parseEither (parseJSON @(ShelleyGenesis StandardCrypto)) jsonVal of
+          Right a -> pure a
+          Left e -> throwIO $ InitialUTxOParseException e
 
 withOfflineChain ::
   OfflineChainConfig ->