The Capital
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The Capital

What Are Escrows In Crypto?

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Introducing crypto escrow services and why we need them.

The age of the coronavirus pandemic will be remembered as the time when most individuals and institutions have gone online to connect and communicate, to transact business, and to transfer funds.

As we are all now crowding the digital space at a fast rate, a lot of thieves and scammers have also proliferated and preyed on unsuspecting people’s errors and natural defects like greed and neglect, to the tune of millions and millions of funds and assets lost forever.

The care community of the Internet offered countless counteractions to combat digital vandalism and cyber criminality through apps and software positioned to protect and guard each and every Internet activity. Government regulations are closely following, but even then, the large measure of success is still based on user smartness.

The virtual market has evolved so much, especially now that we are in the blockchain technology and cryptocurrency times.

Enter Escrow

Millions of investors and traders engage in the business of buying and selling of cryptocurrencies albeit anonymous to one another. As nothing is guaranteed as to the personality of actors involved in agreements from common to complex except the ability of one to deliver and the other’s capacity to pay, the power of escrow comes into play.

Escrow is a third-party service that legally binds two agreeing parties entering into a contract to honor their part of the agreement as either the buyer or the seller and safe keeps the funds involved and causes its release once obligations are met.

The word escrow comes from the Old French word escroue, which means a scroll of parchment or a scrap of paper that an intermediary holds secure until the completion of the contract.

Escrow on Blockchain

Sales processes are trusted highly by buyers whenever escrow services are present. It means that the sellers have enough capital to participate credibly. Traditional escrow services are bank-based and use their bank accounts which can be vulnerable and risky to their reputations. A new emerging breed of escrow services have virtually eliminated the use of bank accounts and, instead, utilize blockchain technology.

Escrow on Crypto

If you are dealing with different kinds of cryptocurrencies in trades and fund transfers, it is advisable to avail of a third-party crypto escrow service to facilitate payments. The escrow service will keep the funds for a transaction between anonymous parties until the cryptocurrency or products are turned over. The escrow service is there to protect buyers from becoming victims of fraud by requiring sellers to deposit cryptocurrencies up front first before other steps are to be taken, such as payments to be made. When disputes do occur, the escrow service will arbitrate and determine the rightful recipient of the stored crypto.

Many crypto exchanges have automatic escrow services. But the thing is, while you are protecting your funds from strangers, you are also entrusting it to an escrow service stranger. It is best to do your research to find out reputable companies to act as your crypto escrow service provider. As all are beginners in the field and track records are rather short, there is no other way than to try their legitimacy and reputation. The following guidelines are offered to give you a glimpse of what to look for in an escrow service:

Security. An escrow service is considered secured if the entrusted funds cannot be transferred to anyone else except for the seller and the buyer.

Passivity. The escrow service takes a passive stance in the negotiations between contracting parties and would only be activated in case of disputes, or when it is time to pay.

Privacy. Sensitive business dealings and secret information can inadvertently be leaked on the blockchain if privacy protocols are not well-placed. Escrow services must not let their guards down, and only those allowed in the contract are given the keys to scrutinizing documents.

Group Escrow. Trust becomes an issue when adjudicating disputes in all honesty. It is a risky measure to entrust it to a single arbitrator even with highly reputable objectivity. A group escrow model is suggested where the buyer and the seller assemble a group of ad hoc mediators.


Scouting for a credible crypto escrow company and finding one is your best and safest option. Transacting parties will have peace of mind in knowing that funds, assets, data, or products are securely kept in a cold storage, offline, free from hacks, untouched by any internet connectivity, and running on blockchain.

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