Consumers spend bitcoin like real money. The only difference? Once your money is out of your wallet, you can’t get it back. Therefore, conducting a safe transaction with someone you don’t know personally may require the help of a third party. This, in part, is how the concept of the bitcoin escrow payment service was born.
But what exactly is a bitcoin escrow service?
Escrow services explained
Escrow services are a type of financial arrangement. In this agreement, a trusted third party holds payment until transacting parties meet the transaction’s agreed-upon terms. This ensures transactions are more secure since the funds in the agreement can only be released when the escrow company oversees the terms of the agreement. Traditionally, people have used escrow services for transactions that involve fiat currencies and, more recently like Bitqt, cryptocurrencies.
Real-life examples of when to use an escrow service
Consumers most commonly use a bitcoin escrow payment service when they are transacting with large sums of money or have an agreement with many obligations. One example is the completion of consulting services that may require a lot of work and have certain requirements that must be met before the funds are released. A consultant may be hesitant to agree to the agreement’s terms without fully trusting the potential client, and a client may not be willing to pay out the agreed-upon funds without personal familiarity.
Another example is buying a property since multiple forms or documentation may also be needed. An escrow agent can also help to ensure each step is executed before any funds are paid. While this applies to documentation, homes also have many contingencies before they are sold, including repairs, a home inspection, or any number of other tasks that the buyer or seller must complete. Depending on the third-party used, users may need to sign off with a contingency release form for each milestone until all conditions are met. Each party must sign off on these milestones for any fund transfers to occur. The escrow service may also be in charge of clearing the title, so the buyer can officially own the new property.
Consider another example. Someone might decide to purchase something with their bitcoin earnings from a company that doesn’t accept bitcoin. To do so, an alternative may be exchanging their bitcoin for a gift card. However, when transacting with an unknown party, who is to say the giftcards are ever sent over? In the event that it isn’t, there really is no going back since no changes can be made on the blockchain. A traditional escrow service may be difficult to use and require lawyers and traditional banks. In contrast, many popular cryptocurrency escrow services are easy to use and can be executed online.
How escrow works
To execute a transaction, a buyer and seller must first agree to a set of terms and engage with the escrow service. The buyer then pays the escrow service through an approved payment method. Once approved, the seller is notified that the funds have been secured and are being held in escrow. The seller can then confidently sell their product or perform the agreed-upon services. Once the terms have been met, the escrow service can release the funds to the seller’s account or public address from the escrow account.
Benefits of using a bitcoin escrow service
- A bitcoin escrow service guarantees safe transactions for both the buyer and seller.
- Fees are relatively low.
- Money transfers are automatic. After a buy receives a product or service, sellers can immediately receive the funds.
- Consumers gain fund protection by using the escrow’s straightforward payment steps.
- Less stress in the purchasing process. Buyers and sellers have no uncertainty about whether they will receive their funds or their products; this is all managed by a third-party escrow.
Selecting a bitcoin escrow service
A licensed escrow service is one of the most trusted and convenient ways to complete transactions online. That said, parties using these services must be careful to ensure the platform is licensed and has a good reputation before releasing any funds. The key to an escrow service is that the third-party is a trusted one.