What is an escrow service
An escrow is created by a written, binding agreement between two parties. An agreement whereby an amount of money or an asset is deposited with a third party as collateral as part of a business arrangement. The amounts are released upon the occurrence of a termination condition expressly specified by the parties.
Typically, the funds are made available to the seller when the product or service is delivered and accepted by the buyer. If, on the other hand, the buyer rejects the delivered product, the funds are returned to the buyer.
Purpose of Escrow
In complex business negotiations, parties may wish to better protect themselves. For this reason, it is common practice to include Escrow Agreements in contracts. These are guarantee agreements that may provide for the establishment of an account to secure the transaction.
This is referred to as an Escrow Account.
This type of escrow service is very useful for both physical and online transactions, as it allows the parties to settle a transaction in a neutral, impartial, stable and transparent manner.
Escrow services cannot be influenced by any of the parties involved in the agreement. In fact, the result they present must faithfully match the pre-established conditions in the service agreement.
What is Blockchain Escrow
An escrow service is one of the most common and widely seen custodial services in the cryptocurrency ecosystem. In this context, the service leverages blockchain infrastructure and the ability to write code that executes on the network, i.e. smart contracts.
The escrow service involves the creation of a guarantee escrow contract, where the funds or assets are in a reserve phase through the intervention of a third party. In blockchain escrow services, the third party is the smart
contract that holds back the money as long as the programmed conditions are not met. As with traditional escrow services, the third party is allocated an amount of money to hold until certain conditions are verified.
This method is currently widely used in the cryptocurrency world on platforms that support smart contracts.
What is a Blockchain escrow payment
A blockchain escrow payment works basically the same as a traditional escrow payment. In other words, an escrow payment typically has three participants. Two of them are the parties involved and the third is the mediator in case of disputes. In a traditional escrow payment, the intermediary is the one who holds the money, but in escrow payments on
the blockchain, this is not necessary because the smart contract acts as the third party.
When the service or product has been shipped and the requester has checked the status and is satisfied, the smart contract releases the money to the seller.
If it is an online transaction involving cryptocurrencies, tokens or other crypto assets and it is with an untrusted actor, a blockchain escrow service is perfect for this case.
Advantages of Blockchain escrow services
Escrow payments processed through the blockchain have one major advantage: the money is never in the complete control of a single actor. All this is possible thanks to smart contracts, i.e. the ability to schedule transactions to perform specific actions based on a set of predefined, transparent, and immutable conditions.
During the transaction, the money is not really under the control of any of the actors. In order to mobilize all or part of the money, the signature of all parties involved is required, and if this is not possible, the seller can regain control of the money by programming the smart contract. This makes the
system very secure against various situations.
However, it is important that the control over the money is actually programmed under conditions that all parties accept.
Companies that offer traditional escrow services are often integrated into marketplaces where supply and demand meet, but are likely to charge a less competitive transaction or service fee while the transactions can’t be easily followed or traced. In contrast, our blockchain escrow services offer complete transparency at a lower price, thanks to the fast and secure blockchain technology which we use.
Conclusions
The escrow service offers great advantages for both the buyer and the seller. However, its greatest advantage is the guarantee of security and the building of trust between the parties involved.
Therefore, the escrow service offers great advantages over traditional prepayment systems. They create security, trust, responsibility and make the work much more efficient and flexible.
In the case of cryptocurrency transactions, escrow services allow transactions to be carried out transparently and securely. With the guarantee that they are completely unknown, they can carry out their transactions at a lower cost, without fraud.
