Hashed TimeLock Contract (HTLC)

A Hashed TimeLock Contract (HTLC) might sound like something out of a sci-fi movie, but it’s actually just a clever way to make sure that money only changes hands if certain conditions are met. It’s a type of smart contract used in blockchain that’s really handy for things like atomic swaps, where you’re trading one cryptocurrency for another across different blockchains without needing a middleman. The "hashed" part comes from using cryptographic hashes to secure the transaction, and the "timelock" part makes sure it all happens within a certain timeframe.

So, let’s say you and a friend want to exchange some Bitcoin for Ethereum. An HTLC can be set up to ensure that the Bitcoin only gets sent if the Ethereum is sent too, and both of you have a set amount of time to complete the trade. If either of you doesn’t follow through, the contract cancels itself, and the funds go back to where they started. It’s kind of like having an escrow service, but without needing a third party to hold onto the money.