Hashed Time-Locked Contract

A hashed time-locked contract (HTLC) is a type of smart contract that requires a cryptographic proof to unlock funds within a specified timeframe. If the proof is not provided before the deadline, the funds are returned to the original sender.

This mechanism is the backbone of trustless atomic swaps, allowing two parties to exchange assets without needing a third-party intermediary. HTLCs ensure that both parties fulfill their side of the bargain, effectively eliminating the risk of one party walking away with the funds.

They are foundational to payment channel networks like the Lightning Network. While powerful, HTLCs have limitations regarding capital efficiency and privacy, leading to the development of more advanced protocols.

They remain a core concept in the study of decentralized financial settlement.