Hashed Timelock Contracts Explained

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[1] | The Purpose of HTLCs

Hashed Timelock Contracts are a form of smart contract that enables secure cross-chain swaps. They use cryptographic proofs and time constraints to guarantee that a swap is either completed entirely or entirely refunded, which helps prevent fraudulent activity.

[2] | Application on TON

This technology will be utilized for upcoming cross-chain swaps on STONfi, the leading DEX on the $TON blockchain. HTLCs are what make these swaps both fast and dependable for users.

[3] | The Agreement Process

Both participants agree to the swap terms, which include a specific time window. Each party creates a cryptographic hash from a secret number and places it into a smart contract on their respective blockchain, such as TON or Bitcoin. The contracts are interconnected so that each party's hash is locked in the other's contract.

[4] | Verification and Execution

The participants first check the validity of the opposing contract. If any detail is incorrect, the swap is canceled and the involved tokens are returned. If the contracts are valid, the parties then reveal their secret numbers.

[5] | Ensuring a Secure Outcome

The contracts verify that the revealed secrets match the original hashes. If they are correct, the swap is finalized. If the time limit passes without the correct secrets being provided, the swap expires and the tokens are automatically returned. This creates an atomic swap, meaning the entire operation completes successfully or it does not happen at all, ensuring a secure and decentralized process without any intermediary.