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Explained: How Bitcoin Escrow Works? Why they are important?

Escrow services are great especially in bitcoin space as they give sellers confidence in the sales process by showing them th
Escrow services are great especially in bitcoin space as they give sellers confidence in the sales process by showing them that the buyer has the money.

Bitcoin transactions are irreversible, so if you are dealing with an untrusted party, it is advisable to use an escrow service to handle Bitcoin payments. Many Bitcoin markets are equipped with an integrated escrow service for safe Bitcoin transactions such as localbitcoins. Escrow services are great because they give sellers confidence in the sales process by showing them that the buyer has the money.


Escrow is when the software source code or money is held by a third party- an escrow agent – – on behalf of the client and the provider. As with a traditional escrow, an online trust works by placing money under the control of an independent and licensed escrow to protect both buyers and sellers in a transaction. Real online trust companies will be listed in a government register and users should never use an online trust service without first checking whether it is genuine by browsing the state’s online registration.

When you use Bitcoin’s escrow services, you do not solve the original problem you have to deal with, which means that you do not send money to strangers.

Escrow is a place of trust in which funds or assets ( in which case, Bitcoin or Litecoin are held with a third party until the agreement is considered to be completed between two parties. Unlike traditional foreign exchange services such as credit cards, bank transfers, and even PayPal, as a buyer, once you have spent your Bitcoin, you cannot recover your money.


On LocalBitcoins, you can exchange Bitcoins for traditional currency through personal transactions. People prefer to buy and sell bitcoin OTC because it allows for faster transactions and more different payment methods.
The centralized exchange of bitcoins is slow and cumbersome, trading directly with other people using the same payment provider makes the movement of money much faster. Hundreds of Bitcoin merchants from around the world are already making a living by trading on localbitcoins using more than 60 plus payment methods.

When you buy Bitcoins from localbitcoins, you are fully protected by escrow, provided that you have proof of payment. Fraudsters benefit from the fact that the Bitcoin transaction is irreversible or try to deceive you in releasing Bitcoin without paying. Escrow is an important concept that you need to understand before you buy something in Bitcoin. As you know, when you transfer money with Bitcoin, you can’t make a refund, the protocol is set.


Paxful is such a trustworthy service and its value is that it allows you to finance a trust through any form of payment in the world such as PayPal, cash, gift cards and more. Paxful is a Bitcoin market, a place where people can meet and exchange Bitcoin safely for almost any kind of payment you can imagine.

Traditional Custody vs Bitcoin Escrow

Traditional custody services have been in existence for decades and are becoming increasingly popular over time.
Although there are ways to establish the owner of a bitcoin account ( in most cases ) by government agencies and police departments, it is actually a lot of hard work. Bitcoin’s escrow services offer the buyer an exceptional level of protection, but they also offer several advantages to sellers. While bitcoin’s escrow services are great for stopping fraud, they are also great for being an unbiased arbiter when a dispute arises around a transaction.