• Hashed Time Lock Contract (HTLC) reduces counterparty risk in decentralized smart contracts by effectively creating a time-based escrow that uses a cryptographic passphrase.

  • This type of smart contract requires the payee to confirm it within a certain period of time or cancel it.
  • Payments using HTLC are conditional and therefore have efficiency advantages for blockchain transactions. This property makes HTLC the primary tool used by the Lightning network.