Making larger Bitcoin (BTC) transactions for commercial or other purposes can be intimidating – and that’s why many choose to use Bitcoin escrow services. In other words, these can help you ensure that you don’t part with your documents until all aspects of your agreement have been completed.
But are Bitcoin escrow services all they are supposed to be? And which ones are gaining ground in 2020?
Up to the brass shelves: what is an escrow service?
Escrow service is provided by a third party, who may temporarily hold and regulate payment in a transaction, ensuring that both parties involved comply with the terms of their agreement.
Once all the conditions of the agreed transaction have been met, the Escrow Service Provider will authorize the payment.
Indeed, escrow exists to ensure that large payments are processed in a timely manner and under conditions agreed in advance.
Traditionally, banks and other financial institutions have provided escrow services. Nowadays, you can also find a large number of Internet-based escrow service providers.
How does Bitcoin escrow work?
As bitcoin transactions are irreversible, it should not be surprising to learn that providers of cryptocurrency services are becoming more common.
In fact, you may have already used a Bitcoin escrow service without realizing it!
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If you traded on a platform like LocalBitcoins, for example, you will have used an escrow service.
On this peer-to-peer trading platform, when a buyer finds a seller and completes a transaction, the seller’s bitcoin holdings are temporarily blocked by LocalBitcoins until the buyer has sent the money.
Once the BTC payment has been received by the seller, the exchange will in turn release the bitcoin held in third hands.
Besides peer to peer exchanges that use escrow solutions, there are also dedicated Bitcoin escrow service providers.
Although the exact steps vary slightly from provider to provider, Bitcoin escrow generally works as follows:
- Once all aspects of a transaction have been agreed, the two parties involved choose an escrow service that they wish to use to make the Bitcoin payment.
- The terms of the transaction are met and both parties agree that they have been completed.
- The paying party in bitcoin releases funds held in third hands.
- The recipient receives their bitcoin payment.
Service providers, in turn, charge a small commission.
Choose a Bitcoin escrow service
Here are five bitcoin escrow services that many traders consider relatively safe.
Bitrate
Bitrated is an Israeli-based provider that has been operating since 2013. The company says it provides “reputation management and consumer protection for the bitcoin ecosystem”.
Technically speaking, however, Bitrated is not exactly an escrow service provider. Instead, its payment platform allows cryptocurrency users to perform bitcoin transactions based on multiple transactions using smart contracts.
This means that when one party wants to make a larger Bitcoin payment to another party, both parties choose a third-party provider who can also access a key from the multisig wallet.
Provided that at least two parties agree that the terms of the transaction have been respected, the funds will be released (because two signatures are required to respect the terms of the smart contract).
Bitrate is free to use, but third-party agents may charge a fee for fulfilling their role in the transaction.
Coinsavr
Coinsavr allows cryptocurrency users to keep their funds on deposit when processing bitcoin transactions.
This Canadian-based company offers a user-friendly web dashboard, but you must first deposit your tokens on their platform before you can use escrow services.
Coinsavr charges a fixed fee of 1% plus USD 2 for escrow transactions.
Escaroo
Escaroo is a relatively new online provider that launched in 2019. It claims to allow cryptocurrency users to add a level of security to their cryptocurrency transactions.
Using a KeylessEscrow system powered by an intelligent contract and not a depositary, this UK-based startup which is registered with (offshore) Jersey Financial Services Commission says it allows users to make secure payments when funds are temporarily frozen to ensure all transaction conditions have been met.
Escaroo charges a flat fee of 1.5% for personal and small business transactions, with custom fees for corporate transactions.
IBC Group
IBC Group is a blockchain financial services company that claims to focus primarily on fundraising based on digital assets.
According to its website, IBC declares to adhere to the international directives KYC and AML and uses smart contracts within the framework of its escrow offer, for which it invoices a fixed rate of 1%.
ItBit Escrow
ItBit Escrow is a cryptographic escrow service provided by a New York-based and regulated New York-based exchange called ItBit.
The company claims that all USD funds held on the ItBit platform are Federal Deposit Insurance Corporation-insured, and he also claims to be a regulated crypto custodian.
The minimum transaction size for ItBit Escrow is $ 50,000 and the primary target group for this engagement is professional and institutional traders.
ItBit also charges a flat fee for escrow transactions.
Are there any risks?
Using an escrow service for larger bitcoin transactions can help mitigate the risk if you make a financial deal and cryptography is involved.
However, as is the case with everything in finance, you can never be too careful. Remember that with escrow services, at some point, you will have to trust a third party with your funds, so some risks remain.
Try to use a regulated service when possible, and make sure that the service you use is overboard before you ask yourself – escrow or not to hire?
