Back in 2018 when its whitepaper was published, Satoshi Nakomoto referred to Bitcoin as a “Peer-to-Peer Electronic Cash System”.
Bitcoin would eventually come to be more similar to commodities like gold rather than an alternative fiat. However, cryptocurrencies have progressively evolved from being just a form of investment to actually serving their original purpose.
This change over the past year has been the result of the increasing popularity of Decentralized Apps. These are platforms that use cryptocurrencies and blockchain to distribute data and computing power. This application of blockchain has facilitated the use of crypto as an actual means of exchange.
Bitcoin is now widely accepted as a valid payment method. Companies like Microsoft, PayPal, Overstock, Starbucks, and Home Depot, are some of the companies accepting the cryptocurrency. Bitcoin and other cryptocurrencies are a great way to receive payments, no matter where the other person is due to their speed and low transaction fees.
However, when exchanging services for money, it is difficult for 2 strangers to be sure the other person will fulfill their side of the deal. Well, Bitcoin escrow services are a great way to use Bitcoin and ensure you get what you paid or worked for or ensure that you won’t get scammed for what you paid for. In this article, we will tell you all about these services and some of the platforms you can use.
If you are considering taking advantage of the benefits Bitcoin escrow services bring, make sure to keep reading!
What Exactly Is A Bitcoin Escrow?
Escrow services are not unique to the crypto world as they have been around for centuries. An escrow service is when a third party holds an asset and/or money on behalf of those participating in a transaction. Once the transaction is completed and the asset or service has been transferred, the escrow is returned to the appropriate party.
Escrow services are usually associated with real estate but can be used in a variety of industries. Some of these industries include art, jewelry, stocks, intellectual property, and of course, cryptocurrency.
With scams becoming more frequent, it is not uncommon (and even healthy) for people to be wary. With Bitcoin being decentralized, there is no one you can contact to get your money back if you fall prey. Well, escrow services will not only provide you with security and peace of mind… But also your potential client.
There are 2 ways in which a bitcoin escrow service can operate: Via a multi-signature wallet, or a trustworthy third party. These methods work as follows:
- When a multi-signature party is used, the Bitcoin is deposited and the keys are given to you, the other party, and the arbitrator. 2 of the 3 signatures are then needed to release the funds. If the transaction goes smoothly, an arbitrator won’t be needed.
- If a trustworthy party (such as a platform) is used, the funds will be deposited to their wallet directly. The third party will then be in charge of transferring the funds once the agreement is reached or broken. In this method, it is entirely up to them who receives the Bitcoin, which makes it a bit riskier if you don’t do your research first.
Bitcoin escrow services are most commonly used as a means to trade cryptocurrency for fiat. However, some Bitcoin escrow services allow the exchange of goods and services. In this article, we will tell you about 2 projects that have proven to be safe and reliable.
What Bitcoin Escrow Services Are Safe To Use?
Using a Bitcoin escrow service will always be risky as you are trusting a third party you may not know. However, as long as you use a secure platform, the risks are fewer than not using a Bitcoin escrow at all.
Bitcoin escrow services are not as popular as cryptocurrency exchanges, which makes it harder to choose one. While we are providing you with two different services you can use safely, there is always the chance you choose a different service. If this is the case, make absolutely sure to do your research to ensure the safety of your funds or work.
This being said, let’s talk about 2 Bitcoin escrow services you might want to consider using. One of them operates with a multi-signature wallet and the other one with an individual escrow agent. Let’s jump straight to the topic!
This escrow service has been active since 2013, with its team claiming to have completed transactions worth more than 11000 BTC ever since. While this claim can’t be corroborated due to the private nature of escrow services, the site has a good reputation.
The site charges a low fee of 1% for its services and provides a high degree of privacy and security. Transactions are automated but if a dispute was to take place, a neutral third party will handle it. This service works as follows:
- One of the parties involved in the trade starts an escrow transaction by filling a form.
- Both parties confirm their email and Bitcoin addresses.
- The party who is buying is sent a link to a page showing the bitcoin payment address.
- The buyer can now pay using this payment address.
- The seller delivers the goods or services to the buyer.
- The buyer has time to review the product or service.
- Bitcoins are released or a dispute is started.
As you can see, the process is pretty straightforward. The platform also ensures your Bitcoin is covered while under its control. If the Bitcoin was to get stolen from their servers, misplaced, or lost as a result of negligence on their part, they will cover it.
While BTC-Asia is a known Bitcoin escrow service, we still recommend not using it for a high-value transaction until you have tried its service. Ensuring the service works for you is better done with low-value transactions. After all, it is all about making and saving money, not losing it.
BitRated is another well-known escrow service that self-defines as a Bitcoin Trust Platform. This service makes use of multi-signature wallets to ensure the safety of the funds. As we said before, this means multiple parties have keys to the wallet. Transactions can only be completed if a majority accepts their legitimacy.
The platform offers you and the other party a list of arbitrators, each of them with a trust score. This score is based on user reviews, a web of trust, and their online presence. This ensures the person you are choosing as arbitrator is someone well known by the community.
The use of this Bitcoin Escrow service is also pretty straightforward. It works as follows:
- Both parties nominate trust agents they would accept as arbiters for their transaction.
- Both parties agree on both the contract and trust agents.
- A new trade is then created by the buyer.
- All parties (buyer, seller, and trusted agent) agree to participate in the trade after reviewing the agreement.
- The buyer makes the payment to a multi-signature wallet address previously created by the platform.
- The seller verifies that the payment has been made to the wallet.
- The goods or services are provided, with the payment being locked while the transaction takes place.
- Once the exchange is complete, the seller and buyer can agree that the transaction has been completed to their satisfaction.
- Two possible outcomes can take place:
- If seller and buyer agree, the funds are released without the need of the trusted agent’s agreement.
- If one of the parties disagrees, the trusted agent intervenes. The case is reviewed and he will decide the outcome.
When using this service, it is extremely important to check the information for the trusted agent. Remember this person will be the one to deal with disputes if issues arise. These trusted agents will also let you know their fees in advance, so you can know how much you will have to pay.
Unlike other blockchain applications that use smart contracts, Bitcoin escrow servers depend on people to take place. While this results in higher risk as you are trusting a stranger, they provide added flexibility you couldn’t have with other solutions. It is up to you to ensure the trusted agent or escrow service is reliable.
Keeping in mind this risk, it is up to you to decide if a Bitcoin escrow service is the right option for you. However, we believe these two services have enough reputation to back them up and can provide you with a reliable service.
Using Bitcoin to receive payments can be a great way to make some extra money from side hustling and invest at the same time. If you want to know about some side hustles you can do to make more money, we recommend you check our side hustles section!
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