- What is Escrow service
Typically associated with real estate, escrow is relevant and can also be applied to other financial transactions where both parties seek certainty that the deal is completed on fair terms.
There is nothing new to the principle of retaining assets on a special escrow account by the third-party until both parties have reached their contractual requirements. This simple safeguard mechanism that protects both sides has been worked out long time ago.
The principle hasn’t changed, except now, with an advent of the technology in many cases escrow services more and more rely on blockchain technology. It makes a lot of sense as it reduces human factor to a minimum.
2. Why escrow service
Escrow account, or escrow service is basically an agreement that ensures the seller that the buyer has the necessary funds kept separately and they will be available as and when required.
How safe is the escrow service? The only answer is as safe as the escrow account provider. For the most part providers are inherently impartial to any of the two sides and are interested in hurdle free transactions as they put their reputation on the line. So, saying that they are highly reliable wouldn’t be an overstatement.
3. How Bitcoin Escrow Service works
In any type of a deal between customer and contractor, mostly where financial operation is involved, a third party is called to hold the assets until the end of the deal. The end of the deal being fulfilment of the obligation by one of the parties.
In our case, on Cryptster, when Buyer hits "Open Trade" button, the Seller’s bitcoins get locked in escrow account as collateral until payment is through.
If, for any reason, buyer cancels the trade, the deal stops and bitcoins are returned back to the seller.
Otherwise, if the trade proceeds in a due manner, the seller should wait for the payment confirmation and only after making sure that the payment has cleared, release bitcoins from the escrow by hitting "Release escrow" button. Assets should appear in buyer’s account shortly.
Requirements are met, and escrow is released. This is done to ensure a fair trade by guaranteeing that customer doesn’t walk away without paying and contractor gets paid for the provided services.
If you happen to be away from the computer when someone opens a trade on one of your offers, bitcoins will stay in escrow for the duration of the Payment window you had set. Trade cancels by the timeout and Bitcoins go back to the seller’s account where they came from.