Escrow
Tutorials

An Introduction to Bitcoin Escrow Service

Spread the love

Escrow in the financial sense means an arrangement where a third party (not the buyer or the seller)  holds funds in safekeeping pending the completion of a promised obligation.

The word derives from the Old French word escroue, meaning a scrap of paper or a scroll of parchment; this indicated the deed that was held by a  third party until a transaction was completed.

Since bitcoin can be spent just like real money, you’ll need bitcoin escrow to ensure that the bitcoins are only transferred after the promised obligation has been fulfilled. 

Escrow services are great because they give buyers trust in a sales process by showing them that the seller has the funds on hands. Different types of escrow services use bank accounts to do this and put their reputations on the line. Now for the first time in history bank accounts are no longer needed thanks to a new breed of escrow services which use blockchain technology like bitcoin.

Now the definition for the bitcoin escrow service has been established, now let’s explore the need for it: 

Why do you need Bitcoin Escrow? 

Let’s say you want to hire a freelancer to fix errors in your website and the payment is to be made in bitcoin. Since there is no personal familiarity with the freelancer, there is no way for the person you are dealing with to gauge your legitimacy. In other words, to him, you maybe a scammer who wants some free work done from gullible freelancers. 

A similar situation can be when you want to sell your bitcoin for a gift card. How can you be sure that the buyer will send you the equivalent amount in gift cards after you’ve sent him the bitcoin? If he does not send you the gift card, then there is no way for you to get your bitcoins back, it’s as good as lost. And how do you establish the order in which to make the transaction? 

A bitcoin escrow service solves this conundrum by safely keeping your bitcoins in the deposit account to protect both the buyer and the seller. The bitcoin is placed in the control of an independent third party. This helps keep the transactions more secure by keeping the payment safe until all the terms have been met. The terms can be to only release bitcoins when the freelancer has done his work or the BTC buyer has sent the gift card.

So this is in fact like a safety net when you are doing a one time or even multiple transactions with someone you don’t know or don’t have a legally binding contract with. While the payment is in escrow the users can safely go through with the transaction without the risk of losing money or fraud. Using an escrow service makes it a lot easier for both the parties than having to draw up contracts or agreements for this. A quick buy and sell transaction without the extra time spent.

 Escrows are particularly useful when it comes to money, large or small amounts, all equally important to us. 

An introduction to our Escrow Service

Paxful is one of the best escrow service in the Internet and its value is that it allows you to fund an escrow using any form of payment in the world such as PayPal, cash, gift cards and more. Be it a gift card, online wallet transfer, cash into a bank account or Western Union. For the first time ever you can use a trusted escrow service without banks  The question here is – how do we do this safely? How do I know that I am going to get Bitcoin after I’ve made a payment? Looking at it from the other side, how do I make sure that the payment I am about to receive is valid before handing over my Bitcoins?

Here’s where our safe escrow service comes to play.

How does the Paxful escrow work?

Escrow

Paxful is a peer-to-peer Bitcoin marketplace, a place where people can meet and safely trade bitcoin for almost any type of payment imaginable. Like ebay for money! This is how the process works:

Our bitcoin vendors create offers with the terms they require and set a price. Once a buyer finds and offer that they like, the trade starts. This automatically triggers the bitcoin from the vendor’s wallet to go to escrow, where it will be held until the transaction is complete.

When both the buyer and the seller have verified that the transaction has been confirmed and all the terms have been met, the money will be released to the buyer’s wallet.

If at any point there may be a disagreement between the buyer and the seller, the process moves along to dispute. Our moderators will then investigate all the info and take into consideration all the details available and make a decision to whom the bitcoins will be awarded. Mostly transactions happen breezily without the need for the dispute process, but there may be some people that will try and take advantage of others. This is why we have the best moderator ninjas on site. Your business and money are important to us and we will do all we can to keep it safe. Our moderators and support ninjas are the ones that make our escrow one of the best bitcoin escrow servince in existence.

How does the trade work?

If you are looking to buy Bitcoin, browse through our Buy Bitcoin page. Search for a payment method you are interested in and select an offer you like. Carefully read the terms of the offer and once happy to go ahead, simply type in the amount you wish and click buy. You will then be redirected to a chat page with the vendor.

At this point the Bitcoins will be held in escrow.

Follow all the instructions by the vendor, if needed submit documents and make a payment. Once all this has been done, make sure you click “I have paid”. Otherwise, the trade will timeout and the bitcoins will be returned to the vendor. Once the vendor confirms they have received the funds, the Bitcoins will be released from the escrow into your wallet.

The timescales of the trades vary depending on what payment method is used, some are pretty much instant, like gift cards for example. Bank transfers and Western Union and some other payment methods may take longer depending on the bank processing times. This is also why we have a 3-hour window before you can file a dispute to give the vendor enough time to confirm and receive your payment.

If you want to sell Bitcoin, go to our Create Offer page. Fill in the details of the payment you wish to receive, your offer terms and instructions and click Create offer. Once your offer is live, wait for a buyer. Once a buyer selects your offer the trade will start automatically and the bitcoins will move to escrow. Once you have verified that the buyer has followed the instructions, provided all the documents needed and you have received the payment, only then release the coins from escrow.

FAQ about our Bitcoin Escrow Service

What happens if I’m away from my computer and forgot to turn my offers off. Will the coins stay in escrow forever?

The coins won’t stay in escrow orever, don’t worry. The trade will timeout after the time period you specified when creating the offer. But always remember to turn your offers off, or click away when you are not available. Unresponsive vendors will be rated on this very soon.

What if I have followed all the instructions and made a payment but the vendor won’t release the Bitcoins?

If a vendor doesn’t release the coins or becomes unresponsive after you’ve made the payment, go into the dispute process. The dispute will become available 3h after the trade has started. Our moderators will look at the evidence provided and award the coins to the party in the right.

If you have any more questions how this works, comment below or get in touch – [email protected]!

Ray

Ray is the CEO of Peer to Peer finance company Paxful, an entrepreneur, philanthropist, and a blockchain enthusiast. In addition to handling his company, he is also an avid reader and stays updated with market trends and emerging technology.

More Posts - Twitter - LinkedIn - Reddit