One of the biggest and most important potentials of the CLTV function is to allow the creation of payment channels and that these can be implemented correctly. Through the payment channels, micro-transactions can be created outside the blockchain. All without having to pay so many commission fees for each one and without collapsing the blockchain.
In payment channels, a user can carry out a transaction to another by depositing a certain amount of cryptocurrencies in a multi-signature address (MultiSig). Both users will have access to that address. And the user who carries out the transaction can sign small transactions that will be made to the other user from those funds. This until you get the desired product. The remaining funds will be returned to you in a return transaction for each micro-transaction you make. While the merchant will be able to claim the final accumulated payment, which will have been made without collapsing the blockchain and for which Maria paid only a commission fee.
Example of how CLTV works
If Maria wants to see a video, but she must pay 1 sat per second viewed. Maria does not want to carry out these 1 sat per second transactions through a conventional Bitcoin transaction. Since for this you must pay the commission fee for each transaction you make. In addition, you must wait for said transaction to be confirmed in a block; what happens every 10 min in Bitcoin.
Seeing that it is not convenient, María decides to create a payment channel. In this channel, it will make a deposit in a multi-signature address of 0.5 BTC, which is equivalent to 50.000.000 satoshis. Both the merchant and Maria will have access to the multi-signature address. So when Maria starts viewing the video, she will sign a transaction where she will send 1 sat to the merchant for the first second displayed. And 49.999.999 sats to a change address for your membership.
This process will be repeated several times as long as Maria continues to watch the video. That is to say, she will continue signing micro-transactions and paying the amount of satoshis equivalent to the seconds that she visualizes of the video, and depositing her laps in a return address. If Maria only viewed 2 seconds of video, then she will sign a new transaction, but this time 2 sat for the merchant and 49.999.998 sat for her return address. If you viewed only 3 seconds, you will sign another transaction, but this time 3 sat for the merchant and 49.999.997 sat for your return address.
During this process, the merchant will not claim or sign the 1 sat or 2 sat transactions received. Rather, he will wait for Maria to view everything she wants from the video and claim the final payment. That is, the largest transaction. The rest of the transactions made at the beginning will not be signed since it would imply a double expense. So the merchant must choose the largest transaction that contains all the received satoshis, in this example the 3 satoshis transaction.
In addition, in the end, the merchant signs only one transaction, this is the one that will be added to the blockchain and will be the only one for which the commission fee corresponding to the miners must be canceled. Furthermore, Maria can implement a CLTV transaction at the beginning to guarantee the returnability of your funds deposited in the multi-signature address. If you set a certain time for both to sign the transaction, and for whatever reason, one or neither of you can sign it before that time. So Maria can get her money back. Because if the transaction is not signed before the established condition, Maria can sign the transaction and have her money back after the established time has elapsed.
So in summary, the code OP_CHECKLOCKTIMEVERIFY offers a positive advantage for the implementation of smart contracts. This guarantees the integrity of the funds until they have reached the established block height or time mark. While avoiding system failure due to transaction malleability.