Escrow

What does escrow mean?

The practice of having a third party act as an intermediary in a transaction. This third party holds the funds on and sends them off when the transaction is completed.

Escrow has developed as a means to ensure trust in a transaction. In some cases it is the only way to ensure that payments will be properly made and that goods will be properly delivered.

Escrow has become useful in cryptocurrencies because of the irrevocable nature of a cryptocurrency transfer.

In peer-to-peer marketplaces such as LocalBitcoins it is common for the exchange to hold the Bitcoin in escrow until proof of payment is received. This has dramatically reduced the amount of theft and fraud on the platform.