HTLCs (Hash Time-Locked Contracts)

The atomicity primitive that makes Lightning routing work. An HTLC is "claimable with preimage r such that hash(r) = H, OR refundable after CLTV expires".

Lifecycle

Sender → first hop

Alice → Bob: update_add_htlc(amount, hash, cltv, onion)

The onion contains routing data for Bob to forward.

Forward chain

Bob receives, peels onion, sees instructions to forward to Carol:

Bob → Carol: update_add_htlc(amount - bob_fee, hash, cltv - bob_delta, onion')

Continues until destination Dave (final hop, onion is empty payload).

Settlement (cooperative)

Dave reveals preimage r:

Dave → Carol: update_fulfill_htlc(channel_id, htlc_id, r)
Carol → Bob:  update_fulfill_htlc(...)   (verifies hash(r) = H, propagates)
Bob → Alice:  update_fulfill_htlc(...)

Each hop earns its fee (held in the HTLC amount).

Settlement (failed)

Carol → Bob: update_fail_htlc(channel_id, htlc_id, encrypted_failure)
Bob → Alice: update_fail_htlc(...)

Failure encryption uses ChaCha20 with onion shared secrets, hop-by-hop (only Alice can decrypt the original failure).

Settlement (force-close)

If a peer is unresponsive past timeout → force-close that channel, HTLC resolved on chain.

CLTV deltas

The HTLC has CLTV expiry. As the payment travels:

Sender's HTLC has the highest CLTV.
Each forwarder reduces CLTV by their cltv_expiry_delta parameter.
Receiver's HTLC has the smallest CLTV.

This ordering ensures:

Receiver claims at low CLTV.
Forwarders have time to claim from upstream.
If anything goes wrong, refunds happen in safe order.

Standard cltv_expiry_delta: 40-100 blocks per hop typically.

HTLC scripts on chain (post force-close)

For an HTLC the channel partner offered to you:

hash160(payment_hash) OP_EQUALVERIFY <local_htlc_pk> OP_CHECKSIG
  OR
<cltv> OP_CHECKLOCKTIMEVERIFY OP_DROP <remote_htlc_pk> OP_CHECKSIG
  OR
<revocation_pubkey> OP_CHECKSIG

Three paths: success (preimage), timeout (CLTV), revocation (cheating detection).

2nd-stage HTLC txs

After force-close, HTLC outputs aren't directly spendable — they go through pre-signed 2nd-stage txs:

HTLC-success-tx: spends HTLC output revealing preimage; output is to_local-style with CSV delay before claimable by you.
HTLC-timeout-tx: spends HTLC output after CLTV; same CSV-delayed output.

This 2-stage structure is required for legacy commitment because sigs are pre-committed at channel open (no flexibility post-broadcast).

Anchor zero-fee variant

option_anchors_zero_fee_htlc_tx: HTLC 2nd-stage txs are 0-fee at sign time, fee-bumped via the commitment's anchors when broadcast.

PTLCs (Point Time-Locked Contracts)

Modern Schnorr/Taproot-based replacement for HTLCs:

Instead of hash(r) = H, use r * G = T (Schnorr point).
Use adaptor signatures: each hop holds a pre-signature conditional on revealing the secret.
Privacy gain: each hop sees a different T (derived per-hop), so observers can't correlate hops by hash value.

Status: BOLT update in flight; implementations partial.

In-flight HTLC limits

Channel-level limits (advertised in accept_channel):

max_accepted_htlcs (default ~483).
max_htlc_value_in_flight_msat.
dust_limit_satoshis.

Excess HTLCs cause update_add_htlc to fail.

"Stuck" HTLCs

Causes:

Downstream node unresponsive (route stuck mid-forward).
Mempool fee spike preventing on-chain resolution.
Channel partner offline at force-close time.

Recovery:

Watchtower or self-monitoring + force-close to reclaim funds.
Standard fix: wait for CLTV expiry, force-close the upstream channel, recover via 2nd-stage timeout tx.

Replacement cycling impact

HTLC-timeout txs are pre-signed at channel open. An attacker could historically "pin" these via low-fee descendants → honest party can't broadcast → CLTV passes upstream → loss.

Post TRUC v3 + ephemeral anchors: pinning surface removed.

Common bugs

CLTV delta too small → upstream HTLC times out before downstream resolves → forced refund and lost fees.
Race condition: peer reveals preimage just before CLTV → both parties try to claim, possible loss.
Misencoded onion failure → hop can't decrypt; routing data lost.
Custom records (BOLT 4 TLV) incorrectly formatted → some impls reject HTLCs.

lightning-htlcs