Hashed TimeLock Contract (HTLC)
A Hashed TimeLock Contract (HTLC) is a type of smart contract used in crypto to ensure secure, trustless transactions between two parties. It combines cryptographic hashes with time-based conditions, making sure funds are only released if both parties meet the agreed terms within a set deadline.
What is a Hashed TimeLock Contract (HTLC)?
The name Hashed TimeLock Contract might sound intimidating, but it’s really a combination of two simple ideas:
- Hashlock: A cryptographic lock that requires a secret code (called a preimage) to unlock funds.
- Timelock: A deadline that ensures the transaction is either completed on time or automatically canceled.
Put together, these features allow two people who don’t fully trust each other to safely exchange digital assets without a middleman.
Why HTLCs Matter
HTLCs are a cornerstone of advanced crypto systems because they remove the need for trust:
- Atomic swaps: They make cross-chain trading possible without centralized exchanges.
- Lightning Network: HTLCs power fast, low-cost Bitcoin payments by ensuring that payment channels are settled correctly.
- Security: Funds are either safely transferred or automatically refunded, reducing the risk of fraud.
By enabling conditional and time-based transfers, HTLCs bridge the gap between different blockchains and support scalability solutions.
Real-World Example
Suppose you want to buy something with Bitcoin, but the seller only accepts Litecoin. Instead of going through an exchange, you could use an HTLC-powered atomic swap. This way, you swap your BTC for their LTC directly, without trusting a third party, and without worrying that one side will disappear with the funds.
FAQ
What does HTLC stand for?
HTLC stands for Hashed TimeLock Contract. It’s a type of smart contract that uses two conditions to secure a transaction: a hashlock and a timelock.
Are HTLCs only for Bitcoin?
No. They can be used on many blockchains that support smart contracts and time-based conditions.
What happens if the time runs out?
The funds are returned to the sender, ensuring no one loses money unfairly.
Why are HTLCs important for the Lightning Network?
Because they guarantee that payments routed across multiple participants are either completed fully or refunded safely.
Disclaimer: Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more at: https://go.payb.is/FCA-Info
