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Hashed Time-Locked Contract (HTLC)

HTLCs are a type of smart contract that is applied to transactions. It is a combination of two distinct technologies that, when used together, eliminate counter-party risk. Those two technologies are hashlock and timelock.

In practice, an HTLC transaction is only valid if the counter-parties (recipients) of a transaction acknowledge that they received the payment with a cryptographic proof within a time frame. Otherwise, the transaction automatically revokes via the law of the smart contract itself.

HTLCs are useful for both atomic swaps and in Lighting Network bidirectional payment channels.