HomeCryptoBitcoinBitcoin escrow: what is it and how does it work?

Bitcoin escrow: what is it and how does it work?

One of the systems that have certainly made Bitcoin payments secure for customers and merchants is what is known as Bitcoin escrow, a kind of security filter for parties who use it so that they avoid falling into online scams.

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

A practical example of Bitcoin escrow

Suppose, 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 if buying a service online, for example from a freelancer or if the seller or buyer is someone unknown.

They may fail to finish the job, do it poorly or not send any products. In this way, the escrow provides an extra guarantee.

Using an escrow, which can also be called an escrow deposit, the buyer does not send the bitcoin directly to the seller, but to an escrow address, allowing the seller to check it, but keeping the funds blocked until the buyer is satisfied.

This is obviously 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 is found when using PayPal. Nothing new has been invented, simply the escrow has been applied in the crypto world as well.

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

It is also often used on the dark web, to avoid problems such as those that occurred long ago with Empire Market, for example.


Alfredo de Candia
Alfredo de Candia
Android developer for over 8 years with a dozen of developed apps, Alfredo at age 21 has climbed Mount Fuji following the saying: "He who climbs Mount Fuji once in his life is a wise man, who climbs him twice is a Crazy". Among his app we find a Japanese database, a spam and virus database, the most complete database on Anime and Manga series birthdays and a shitcoin database. Sunday Miner, Alfredo has a passion for crypto and is a fan of EOS.