Un escrow service o escrow service It is one of the most frequent and seen custody services in the ecosystem of the cryptocurrencies. This service involves the creation of a guarantee deposit contract, where the funds or assets are in a reserve phase through the intervention of a third party. After guaranteeing and verifying compliance with the agreements between the parties involved, the funds are released. That is to say, a third party or intermediary is appointed an amount of money to safeguard it until the verification of certain conditions. Then the money is released and delivered to the seller or service provider, as the case may be.
This type of custody service is very useful when carrying out both physical operations and online agreements, since they provide us with a means to carry out an operation in a neutral, impartial, stable and transparent. Escrow services cannot be influenced by any of the parties involved in the agreement. In fact, the result they present must be faithfully adjusted to the pre-established conditions in the service agreement. That is why these provide a high level of security and confidence to the parties involved.
First of all, what is an escrow payments?
Escrow payments or escrow payments are payments in which the money remains in custody or deposit until the operation that originates the payment is completed correctly. It is a secure payment system that is used for example by escrow services, and whose purpose is to add security to an economic exchange between different people.
To achieve this, people who establish an exchange choose a third party they trust to be this external agent. This third party will serve as custodian of the money, ensuring that the exchange rules are respected for both parties. Thus, at the end of the exchange, the external agent verifies that everything is in order and the payment is released for the recipient to use and enjoy it. In this way, both parties can be fully satisfied by the exchange and the risk of breach of conditions in a contract is eliminated.
Now, in the world in which we see more and more the devastating role of cryptocurrencies, you are surely wondering, what is the logic of escrow payments? Well, the truth, all the logic in the world, and that is that they are very useful especially, if you are looking to exchange cryptocurrencies, tokens or some other value with untrustworthy actors. In addition, in the crypto world, the best thing is that payments in escrow do not have to leave total control of the funds in one of the parties, and even that third party can simply be a smart contract designed especially for this purpose.
Purpose of escrow payments
The main objective of escrow payments is to provide the highest security to the parties in the middle of an exchange. The idea is to avoid any negative situation that affects one of the parties due to the dishonest treatment of the other.
Hence, this type of payment is widely used, for example in P2P payment platforms. This is because it guarantees at all times that the parties will act honestly. Since acting in another way can lead to loss of reputation or expulsion of the dishonest party.
How does an escrow service work?
To guarantee security and trust in the parties involved in an agreement, The escrow service must be provided by an independent, neutral and certified third party. This with the aim of protecting both the seller and the buyer.
One of the most common ways custodial services are used is to purchase a product. Thus the buyer deposits the money in an account of the escrow service provider. And once you receive the product and check that it is in good condition, inform the escrow to make the transfer to the seller. So that helps avoid typical scams where one person deposits for a product, and then the other disappears with the money. But another very common point in which this custody contract methodology is used is in the provision of services.
And it is currently being widely used in the world of cryptocurrencies where they use the smarts contracts. Then, when paying for the provision of a service or acquiring a good or asset, the two parties involved establish an agreement. Guiding the conditions relevant to the agreement in terms of form, money and time. The service applicant or buyer makes the deposit in advance. And these funds remain in custody and safekeeping in an escrow account. Thus, when the service or product is shipped and the applicant checks the status and is satisfied, the funds will be released to the other party.
Decentralized escrow payments How do they work?
A blockchain escrow payment works basically the same way as a traditional escrow payment. In other words, an escrow payment normally has three participants. This leaves us that, two of them are the parties involved and the third is the intermediary in case of disputes. In a traditional escrow payment, the intermediary is the one who holds the money, but in escrow payments on blockchain this is unnecessary.
And is that unlike traditional escrow payments, escrow payments made on blockchain have a gigantic advantage: the money will never actually be in total control of a single actor. This may seem nonsense, but it is not. All of this is possible thanks to smart contracts, that is, the ability to schedule transactions to carry out certain actions based on a series of predefined, transparent and immutable conditions.
Let's see it in an example:
Laura has a total of 10 BTC that she wants to use for a self-construction donation campaign, under the tutelage of the ConstruyeHogar Foundation. In this sense, Laura and ConstruyeHogar have created a 3-of-3 multisig wallet for each of their beneficiaries. In this way, Laura, the foundation and the beneficiary have a digital signature to be able to access the money in question. In fact, mobilizing that money will only be possible with the digital signature of all of them.
At first, Laura and the foundation provide seed capital to their beneficiaries, but the rest of the capital injections are only possible by showing progress in construction. Without advances, there is no money, unless Laura and the foundation agree to release that money under certain conditions. Additionally, the wallet has been programmed so that if it has been inactive for a certain time, it alters its multi-signature structure to 1-of-3. In this way, Laura will be the only one authorized to mobilize that money and effectively return the money inside that purse.
If we read this example in detail, we will see that the money is not really under the control of any of the actors. In fact, to mobilize all or part of that money the signature of the three parties involved is necessary, and in case that cannot be possible, the programming of that purse and its coins will allow Laura to regain control of her money spent a while. This makes the system very safe against various situations, even those in which the parties may completely differ in their opinions and assessments. However, the important thing is that the control of the money is actually divided, programmed under conditions that all participants accept.
In this example we have used Bitcoin, but the system is replicable practically in any cryptocurrency that has the minimum functionalities. In fact, blockchains like Ethereum or derivatives (Ethereum Classic or NEO) can do much more thanks to their powerful smart contracts. The truth is that at all times the pillars of the blockchain are present: security and non-trust in third parties.
Benefits of escrow services
The escrow service provides great benefits to both the buyer and the seller. But its biggest advantage is guarantee security and build trust between the parties involved.
In the case of the requestor of a service or buyer of a product, the escrow completely eliminates the possibility of losing the money invested. Since if you are not satisfied with the service or the product is not delivered, your money can be refunded. For its part, for the service provider or seller there is also an advantage. Since the funds are under the custody of a neutral third party, you are sure that by fulfilling the agreement you will receive your guaranteed payment. And that this will be delivered in time for when the service contract ends.
In the case of operations with cryptocurrencies, escrow services have allowed multiple transactions to be carried out transparently and securely. With the guarantee of totally unknown people they can carry out their operations without them ending up being scam or fraud. For example in the purchase of ICO, the use of escrow guarantees seriousness and responsibility for investors who want to finance these projects. Since it is very common for ICO developers to be little or nothing known in the business world, so it can create a certain environment of mistrust and uncertainty for investors. So, escrow services guarantee that ICO projects do not end in failureIf not, they become safer and more profitable.
Therefore, custody services offer great advantages over traditional prepayment systems. Generating security, trust, responsibility and doing much more work efficient and agile.
Where to find escrow services?
Today you can find multiple companies that offer escrow services. Some of them are solid companies with extensive experience in this field. Although it is also possible to find newly created companies that do not have a great reputation for offering these services.
But today we will talk to you about Bit2Me. Here you can hire the escrow service with all the advantages that this custody system offers you. We are leaders in the cryptocurrency industry with more than 5 years of experience leading the market for these assets. We have total 24 / 7 availability and a team of experts that will provide technical advice during the development of the entire process. Additionally, we employ complex security algorithms so that asset custody is shielded and secured. And none of the parties involved in the process can influence or modify the system to release the funds in their favor.
Contact us in the mail firstname.lastname@example.org or on the phone +34910913788
Escrow service process at Bit2Me
At Bit2Me we know that it is vitally important to ensure safe transactions when operating with cryptocurrencies. Whether for marketing or for the purchase or sale of goods and services. That is why we offer you custody services where the seller and the buyer establish and organize an agreement. Let's look at the process in detail:
- The buyer or applicant for services and the seller or provider of services guide and define an agreement. Establishing terms and conditions in which both agree.
- The buyer or requestor of services issues a payment through the Bit2Me escrow service. When Bit2Me checks the funds, it will notify the parties involved.
- The seller or service provider sends the products or performs the services to the buyer. Bit2Me verifies that the products have been received by the buyer or that the service has been performed successfully and satisfactorily.
- Once the buyer or requestor of services agrees with the products or the service received, he informs Bit2Me.
- Bit2Me releases the funds in custody to the seller or service provider.
This service can be used not only in the purchase and sale of cryptocurrencies, but also in obtaining goods and services. Bit2Me can be your trusted and specialized independent broker.