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How does Escrow work?
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What is Escrow?

Escrow is the process of holding funds from transactions by a third party until all terms of the transaction are met. Escrow is an important technology that provides trust between the parties, which has already become the standard for quality service. Thanks to its mechanism, control over the transaction asset pass from the seller to an independent party, which can be the blockchain itself. Escrow also helps in resolving disputes when the parties for some reason cannot agree.

Purpose and benefits of escrow

The main goal of Escrow is to provide maximum security for the parties in the exchange process. The idea is to avoid any negative situation that affects one of the parties due to the dishonest behavior of the other. Therefore, this type of payment is widely used on P2P payment platforms, as it always ensures that the parties act fairly.

The main advantage of escrow is that the volume of the transaction cannot be completely controlled by any participant. This is made possible by the smart contracts underlying the algorithm, so the exchange always takes place based on a series of predefined and transparent actions with unchanged conditions.

Multisig contracts

Multisig contracts are based on the conditions for signing cryptocurrency transactions by several participants. For example, the Cripz platform uses the Multisig Escrow (2-out-3) technology in its work, which means that during the transaction, an Escrow account will be formed in the blockchain, which can be unlocked with two keys out of three existing ones. In each transaction, the right to sign has the seller, the buyer, and the Cripz platform. The basic principle of operation of Multisig Escrow (2-of-3) is to assign digital signatures to the participants in the transaction to confirm the transactions made.

The buyer signs the transaction after the transfer of fiat funds to the seller's details, and the seller signs the transaction when he confirms, for his part, that this transfer has been received. As soon as the Escrow account receives the signatures of two participants, the cryptocurrency from the storage is automatically transferred to the buyer's wallet.

The third signature is always assigned to the platform, which acts as a guarantor, to resolve disputes. If one of the parties does not complete their part of the transaction and there is a dispute between the participants, the platform representative will help to complete the transaction by taking over the right to sign one of the parties to ensure a fair outcome of the transaction.

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Cripz
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GUARANTOR OF SAFE TRANSACTIONS
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