A transactional agreement called a “Hashed Timelock Contract” (HTLC) is used in the crypto sector to provide conditional payments. It generally involves a payment where the recipient or beneficiary is required to confirm receipt of the payment by a given deadline.
The recipient must acknowledge the payment by providing cryptographic proof of payment in order to retain their right to that payment. The payee is then given their money back.
With this kind of smart contract, the recipient of the payment has a set amount of time to recognize it or risk losing it. Since HTLC payments are conditional, they are more efficient for blockchain transactions. Because of this characteristic, HTLCs are key instruments employed by the lightning network.
