Glossary

Hashed Time Locked Contract (HTLC)

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A Time Locked Contract is a Bitcoin transaction which includes a timelock. This Bitcoin transaction is hashed to form a Hashed Time Locked Contract or HTLC, which is used mainly on the Lightning Network to allow Lightning payments to be routed across multiple nodes. Lightning routing allows two parties to trustlessly transact without a direct channel between them, using intermediary channels instead.

Related Terms
Lightning Network
The Lightning Network (LN) is a protocol designed to allow instant and cheap Bitcoin transactions. While it is still experimental, it shows great promise for Bitcoin’s ability to scale.
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Lightning Channel
A Lightning channel is a connection between two parties enabling instant, cheap transactions between the two parties. The Lightning Network is composed of thousands of channels.
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Timelock
A Bitcoin transaction can be created such that the recipient of the outputs cannot spend them before a specified time. This time can be specified in UTC time or block height.
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Hash Function
A cryptographic hash function is a one-way, random mathematical function. Hash functions underlie Bitcoin's security model in several ways.
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Off-Chain
Off-chain is a term used to describe any data that is not registered on the Bitcoin blockchain. Bitcoin transactions on other layers, including the Lightning Network, are off-chain transactions. Off-chain transactions are usually quicker and cheaper than on-chain transactions.
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