Escrow Services for Bitcoin: What You Gain or May Lose
In his seminal white paper, Bitcoin creator Satoshi Nakamoto described the security requirements of crypto as “Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.”
But not everyone was sold on the idea and many remained skeptical about using bitcoin for online transactions. This is where escrow comes into play.
In an online business transaction, a bitcoin escrow service serves as a neutral third party and middleman between buyer and seller. It also provides protection for both parties in a marketplace that is rife with fraud and scams. Escrow definitely has its share of pros and cons.
What is bitcoin?
It is a cryptocurrency that is decentralized and bypasses any form of intermediaries, whether a central bank or a single administrator. This form of electronic cash is exchanged from user to user through the peer-to-peer Bitcoin network.
If you need crypto, you can buy them from a friend or accept bitcoins as payment for goods and services. Bitcoins can be converted to cash through a bitcoin exchange.
Benefits of escrow services when using bitcoin
Protection for both the seller and buyer
In case a seller decides to back out of a deal, an escrow ensures that a buyer doesn’t lose in the process. In case a seller turns out to be a scammer, an escrow service protects whatever crypto a buyer has deposited.
In the event that a transaction falls through and a dispute ensues, an escrow service also acts as a mediator and arbitrator. Ultimately, they get to decide who will receive the bitcoin funds.
In a crypto marketplace, you need some form of security in all transactions. This is what an escrow service provides. They make sure that making payments or purchasing things online using bitcoin is safer for both parties involved.
Your funds are kept secure until a deal has been made and the bitcoins are approved for release to the seller. An escrow service uses a secure wallet and payment processor that require multiple signatures before the funds are released.
An additional layer of trust
An escrow guarantees the seller that the buyer has the necessary funds and guarantees the buyer that a seller can deliver the product or service as promised. This helps to prevent potential scams and adds a layer of trust in many transactions in the bitcoin marketplace.
Drawbacks of escrow services when using bitcoin
Escrow services or no, the fact remains that you’re still sending your money to strangers. Bitcoin transactions operate anonymously so you’ll never know who is behind an escrow site. You just have to trust them with your funds and hope they won’t be the one to scam you.
There are plenty of them online, more so in the crypto marketplace. Some of them even imitate well-known providers of escrow services to fool people into doing business with them. This requires in-depth research on your part before dealing with a provider.
System response delays can be harrowing for a buyer waiting for their goods to arrive and for sellers waiting for the payment to clear and appear in their account. It’s worse if you’re talking thousands of dollars.
Whether you choose an escrow service or not is up to you. But stay safe and choose the best service provider.
One of the safer place by the crypto community is Escrow100
Escrow100 has managed to stand out for the right reasons. This Escrow service is known for its fast and secure transactions. While we were dubious of these claims when trying it out, we soon found that the service was truly one of the fastest out there. Moreover, the fact that you are able to keep your anonymity intact when using the service is an excellent feature for both buyers and sellers.