in Bitcoin

A practical example of Bitcoin escrow

One of the systems that has certainly made Bitcoin payments secure for customers and merchants is what is called Bitcoin escrow, a sort of security filter for the parties that use it so that they cannot fall into online scams.

An escrow is therefore a tool that acts as a link between two or more parties, regarding a payment, in this case in Bitcoin, allowing to block or freeze funds until the conditions of sale are fulfilled and both parties are satisfied.

Let’s imagine, for example, that a user wants to buy a good or service from an online seller, and that they accept Bitcoin. The amount in BTC sent to buy a product will be blocked until the seller provides the goods to the buyer and the buyer is satisfied.

This is a great method especially in case you are buying a service online, for example from a freelancer or if you are dealing with a seller or buyer you don’t know.

They may never finish the required work, do it wrong or do not ship any products. This way, instead, with the escrow you have an extra guarantee.

Using an escrow, which we can also call an escrow deposit, the buyer will not send the Bitcoins directly to the seller, but to a deposit, which the seller can check but the funds will be blocked until the buyer is happy.

Obviously this is just one of the uses of this system. In case of disputes the system provides an arbitrator who will decide whether to refund the buyer or proceed with the payment to the seller.

This escrow system with Bitcoin is actually the same mechanism that you find when using Paypal. In practice nothing new has been invented, simply the escrow has also been applied in the crypto world.

The system is used on several crypto platforms, like LocalBitcoin which has an escrow system to make transfers secure.

Even on the dark web is often used, to avoid problems like those that happened long ago with Empire Market, for example.