Nowadays the cryptocurrency is gaining an important place in various industries. Bitcoin – the most important and biggest cryptocurrency – represents many commercial advantages over traditional money operations. Fast and cheap, making money transfers around the world with bitcoin is completely simple and only takes seconds. Bitcoin doesn´t have centralized regulation, and many other benefits you probably already heard about. And now there’s Bitcoin escrow.
So, what is Bitcoin escrow, and how is it helping bitcoin grow ever more popular?
The answer is simple: Security!
Bitcoin escrow is a custody service that allows an even more secure payment. The mediator in the case of bitcoin escrow “holds” the buyer’s money until the terms of the sale are attended by the seller. at which point the buyer releases the payment to the seller.
In other words, Bitcoin escrow is a great option when a buyer and a seller have agreed to use bitcoin as the payment method. The buyer deposits the bitcoins necessary to the transaction in order for the seller to start the delivery. All while ensuring the buyer has a way to pay. This way both parties in the transaction are protected and have a more secure agreement.
but, why use it?
Bitcoin transactions are not reversible. When using a traditional payment method, a buyer has different options to secure their money. If your product never arrives you can ask your bank or the cardholder to reverse the transaction. With bitcoin, you don’t have a support system to help you in such cases. With the help of bitcoin escrow, this is becoming part of the past. Now you have a secure way to shop online using bitcoin and avoid being scammed.
How does Bitcoin escrow work?
Using bitcoin escrow means you add a third party to the transaction. This third party is impartial in the transaction and is only participating as a quiet supervisor that ensures both parties in the deal do their duties. Imagine you have a security box with 3 different keys, one key goes to the seller, the next one to the buyer, and the final one to the third-party. They are responsible for seeing that everything is going well. This way the money will only be transferred if both parties agree to the transaction, so the third key will come in order for the seller to get the money when the buyer is sure about the purchase.
The two most common questions are:
- what happens if some of the parties are not happy with the transaction? And
- How can bitcoin escrow protect me?
Firstly, if – for any reason – the buyer or the seller wish to dispute the transaction, the third-party participant can mediate the trade between them using messages. Secondly, the seller is not able to cancel the escrow after the buyer has made the payment. Escrow can only be canceled by the buyer. Furthermore, the transaction is extremely fast. As soon the issue is suggested, the third party takes the necessary measures to resolve the transaction avoiding both parties been scammed.
Finally, we are going to illustrate this with a small example of how bitcoin escrow works:
Imagine you are going to buy the latest phone model online. The seller has an option of bitcoin payment which is perfect for you because you avoid bank transactions and over expenses. You consent to use a bitcoin escrow service in order to have a safe purchase. Best case scenario: you make the payment and the seller sends you your new phone. Here, bitcoin escrow allows you to complete the transaction, both parties are happy.
But what happens if the seller never makes the delivery? In this case, you can contact the bitcoin escrow service and the transaction is deleted. So you won’t have your new phone, but you will have your money, and you can get your phone from a different seller. When the seller is safe, once the buyer has concluded the transaction, there is no way the company doesn’t receive the payment because it is already in the “box” and supervised by the bitcoin escrow service. So there is no way the buyer can try to recover the money unfairly. So this is a protection method for both parties in any transaction.