Hashed TimeLock Contract (HTLC)

A term used to describe time-bound smart contracts between crypto traders.

The Hashed TimeLock Contract (HTLC) is a type of conditional smart contract that is both time-based and relies on funds-restrictive hash functions. This smart contract essentially involves two traders who agree on a future transaction, effectively locking down the agreed-upon funds until the transaction is confirmed. So, HTLC is the crypto space’s equivalent of a forwards contract and serves as further guarantee regarding the authenticity of the smart contract.

With HTLC, if the receiving party does not acknowledge funds within the agreed-upon period, the funds will be reversed.