Hashed Timelock Contract

What is Hashed Timelock Contract?

The cryptocurrency was designed to streamline transactions between two parties without imposing any form of trading risk. Simply put, the Blockchain network makes it possible for people from all over the world to send and receive cryptocurrencies without getting scammed. One such security feature that makes the digital transaction transparent and safe is the Hashed Timelock Contract template. It is designed to ensure that the sender doesn’t double spend.

The Hashed Timelock contract can be defined as the mutual financial agreement between two parties, in which, both parties agree to process the transaction. However, the receiver is supposed to confirm and accept the payment within a specific timeframe or the money will be returned to the sender.

The transaction is not successful unless the receiver accepts the payment from the sender within the given time. Here, the Timelock contract means that the receiver is given a deadline for accepting the payment. If they Fail to adhere to the deadline and acknowledge the transaction, then the money will be sent back to the sender’s account. Let’s understand the working of the hashed Timelock contract.

How does the Hashed Timelock Contract Work?

The sender of the payment has to develop a Hash to encrypt the input. As soon as the recipient receives the notification of the transaction, they must acknowledge the payment by developing a cryptographic proof. They are supposed to confirm the payment within the given duration. Now, there is no fixed time for the recipients to accept the payment. How much time they get to verify the transaction can vary from contract to contract.

As mentioned before, the recipient has to develop the cryptographic proof of the transaction in order to get the amount credited to their account. Failure to do so within the given time will result in a failed transaction. Deadlines are quite important when it comes to the cryptocurrency exchange. You are supposed to stick to these deadlines when accepting the payment. The Hashed Timelock contract makes it possible for people to exchange cryptocurrencies from two different Blockchain platforms in the shortest possible time.

Perks of the hashed Timelock Contract

The Hashed Timelock contract makes all types of digital transactions safe and fast. The sender does not have to wait for days to know if their transaction is completed or not. Secondly, the sender does not have to worry about double-spending. If the transaction fails or the recipient is unable to accept the payment, then the money will simply return to the seller’s account.

The main benefit of the Hashed Timelock contact is that it prevents counter-party risks. You don’t even need to be friends with the other party or know the recipient/sender to process the transaction. The person who is going to receive the payment is supposed to send the cryptographic proof of the transaction in order to get the amount credited to their account. It makes it super convenient and safe for both recipient and sender to make transactions without having to worry about the security.