Why would you ever need to use escrow services when trading cryptocurrency? They might be essential when completing a transaction with a party that you are not sure about. Such payment might be dangerous, so it is highly recommended to use a third-party service. Do you know too little about escrow services and have no idea which to choose? Continue reading this article to make yourself familiar with the topic and ensure the security of your Bitcoin transactions.
Table of contents
- Essential Things to Know About Bitcoin Escrow;
- Available Escrow Services;
- Which Problems Might Occur With Bitcoin Escrow?;
- Bitcoin Escrow Agents;
- Another Option to Use;
Essential Things to Know About Bitcoin Escrow
To begin with, let’s find out what Bitcoin escrow services are and for which purposes they might be used. Escrow service is a mediator service. It is needed to store the money for the payment while a transaction between strange people occurs. You may not trust a person who sells you Bitcoins, so you would like to put your money on the escrow service until the moment when you receive your amount of cryptocurrency.
In general, any Bitcoin escrow service is designed specially for protecting fair sellers or buyers from others’ cheating and the prevention of fraud. How do these services work? Basically, they require Bitcoins and money to be deposited before. This way, it becomes possible to complete Bitcoin transactions and synchronize handing over money and purchased cryptocurrency. There is one more advantage of this service: when any kind of controversy occurs, escrow service will play a role of an arbitrator. In the end, the service itself will make a decision about who Bitcoins actually belong to.
Unfortunately, nowadays, there are not many Bitcoin escrow services that can be trusted. Moreover, many cryptocurrency marketplaces already have Bitcoin escrow services included in the system. For instance, Paxful and LocalBitcoins are the owners of their own escrow services. If you are not a fan of these platforms and prefer using other ones, you will find this article helpful when searching for escrow service. However, there is another option to choose from. The platform is called Bitrated. The essence is the same as escrow service. Bitrated is a multisig wallet (click here to find what it is) that was made to conduct transactions between unknown traders. We will have a closer look at it in the last section of this article. Read on!
Available Escrow Services
As has been already mentioned, there are not many Bitcoin escrow services. We have done comprehensive research and studied a few Bitcoin escrow services to recommend to you the best ones. As we found out, the only actually trustworthy platforms are IBC Group and BTC Asia. Let’s have a look at both of them.
IBC Group is originally a blockchain fundraising service that also includes a Bitcoin escrow service. It looks like this company usually deals with major amounts of cryptocurrency. However, we cannot ensure you that Bitcoin escrow services provided by them are safe and trustworthy. The only good sign of clearness is that all team members’ names are put on one of the website pages.
BTC Asia is a Bitcoin escrow service that was created by Colbert Low. He is a rather famous guy in a Bitcoin community. He has been interested in cryptocurrency since 2013. Colbert has a good reputation that can be verified by working with LocalBitcoins. Over one hundred trades were confirmed on this platform.
Which Problems Might Occur With Bitcoin Escrow?
Now when we have covered the essence of Bitcoin escrow services and looked at two platforms, we can move on to a few problems with Bitcoin escrow. The majority of people who have made Bitcoin transactions had to use Bitcoin escrow service not avoid scams. They probably have faced the same obstacles. You can find some information about them in people’s reviews. We have collected some facts based on traders’ opinions and identified two major difficulties you might face when using any Bitcoin escrow service.
The first problem we are going to discuss is connected to the fact that there is no absolutely secure Bitcoin escrow service that you can trust. Anyway, even when using it, your Bitcoin payment can be in danger. This is so because no Bitcoin escrow services have received a confirmation of being secure. Another thing is that there are not many options to choose from. Traders have no choice when looking for a great escrow service. There is no wide variety of platforms, unlike those for trading. Therefore, people have to make a Bitcoin payment using a service that cannot fully be trusted.
You can find some other escrow services that were not covered above, but most of them are unknown. There are no reviews, no further information about previous transactions and the company’s history. The majority of these services are new to the market, so they do not have any reputation yet. Of course, it can be risky to use these Bitcoin escrows. Bitcoin exchange, especially when it comes to larger transactions) is a very serious process that can not be spoiled by three parties and Bitcoin escrow service.
The second problem you might think about is that, in fact, the disadvantage of a money transaction completed with an unreliable seller does not go away when using escrow service. Do you still send your Does Bitcoin escrow work? Well, yes, but even when being calm about your exchange being fair and financial agreement, you do not know where exactly you place your money. What kind of people is responsible for the platform work? In most cases, it is a mystery who a real escrow agent is. The risk of losing money because not the seller or buyer taking part in trade is unfair, but escrow service is unreliable.
Bitcoin Escrow Agents
Now, if you are not sure whether it is the right option for you to choose, we will give you another idea of how to make your transaction safe for both buyer and seller. It is not necessary to use escrow services provided by a company. Especially when providing escrow services is not a well-developed business yet. It might also be a good idea to complete a transaction with the help of escrow agents. Those are people who have a high rating which means that they can be trusted to ensure the security of your transaction. To find these people, you might want to check the escrow thread on BitcoinTalk. There you will see a lot of users who offer escrow service to help a buyer or a seller carry out a secure payment. However, once again: we cannot confirm that this option is absolutely safe. Moreover, one user can fool you when another one is actually an honest person who will not allow a dispute a further fraud to happen.
Another Option to Use
At the beginning of the article, we promised to tell you about another option to control payment and its security except for the escrow platform. Actually, this way is preferred by many users and considered to be the most reasonable for any trade with a third party and unknown sellers. However, only you decide which option to choose and which platform to use. We just recommend you make all crypto payments with an unknown buyer or seller as safe as you can. For that reason, it is better to find a neutral third party anyway.
Another way for a buyer or seller to be sure about transactions’ safety is using Bitrated. In fact, it is an escrow service at all. It is rather a multisig wallet. This means that it will require some signatures before any funds can be transferred from it. How does it work exactly? Let’s have a look at an example. If three people own a wallet, it will require an agreement of at least two of them to make transactions of any kind.
When it comes to transactions between strangers, this system will be a great option to choose. The platform introduces buyers, sellers, and arbitrators to each other and automatically creates one shared wallet for all of them. The funds from this wallet can be released when two signatures out of three are available. Moreover, an arbitrator’s work is only needed when buyers and sellers cannot agree on the conditions of selling digital coins, the value of transactions. In other cases, when two people do not agree, Bitcoin releases are not possible. This system provides something like smart contracts to provide unique rights to complete payment and gives private keys to the account only for people who really take part in the trade.
Usually, arbitrators charge a fee for doing their work. However, the amount of payment is rather small. In addition, if two traders do not need arbitrator’s help at the end, Bitrated will not charge anything from them. Keep in mind that on this platform, sellers and not buyers pay low transaction fees. Bitrated was originally designed like this, so it cannot be changed.
You might not be sure about which arbitrator to choose. In this case, you can have a look at the feedback page. It is a basic one, but it provides all the needed services. The main thing why you may need this mechanism is to see users with the highest ratings.
All in all, the biggest advantage of Bitrated and the reason why we recommend you trying this escrow service is that it solves the problem of sending money to unknown people. You do not risk it because you only put your cryptocurrency on one shared wallet. The sum will not be released without your agreement. In general, Bitrated is a pretty good escrow service to use. It has some disadvantages, too. For instance, Bitrated does not have some basic functions like texting other users or editing a trade. But most importantly, Bitrated works well as an escrow service.
Can you lose all your money in Bitcoin?
Every Bitcoin trader should understand that buyer finds the best offer on the market but think twice if it seems to be too good compared to other trades. You can simply run into a dishonest seller and deposit your money before they transfer your cryptocurrency. As in almost every sphere of the transaction (no matter if it is crypto- or fiat currency), scams often take place. For example, a dispute can occur during transactions. If fraud from a user who you trade with takes place, you will, unfortunately, lose your money. There is also a risk connected to the security of payment. This is why we recommend using the escrow service.
However, the main thing to remember is that you cannot lose more money than the sum that you have invested in one particular payment. The only case when you can lose all money you have ever invested in buying Bitcoin is when a company folds up or becomes a victim of a hacker attack. The security, in this case, depends on the trading platform you use and how safe it is.
Does Paxful use escrow?
Yes, Paxful is one of a few platforms for trading that have their own escrow service. Every buyer and seller has a unique opportunity to make a transaction without leaving the exchange platform and switching to another escrow service. Users can enjoy transacting and making a deposit right on the platform. Paxful is a well-known company on the market which means that security is guaranteed. If you are already a client of Paxful, we will recommend you to use their service not to waste time searching for something else.
Is converting Bitcoin to cash legal?
Regulations for trading and exchanging Bitcoin depend on the country you live in. Buyers from the USA or the EU can trade and exchange Bitcoins without any worries, while traders from Russia can only mine Bitcoins but not exchange them for fiat currency. In some places, it is even legal to make crypto payments for your purchases, and cryptocurrencies have value, just like some fiat currencies. In other countries, nothing can be paid for with cryptocurrencies.
What role will Bitcoin play in the “Retail Apocalypse”?
The retail apocalypse is a process of closing all retail shops because of the changed consumer behavior and unwillingness to go to the physical shopping malls. As for Bitcoin, as well as other digital methods of paying for goods like PayPal, it affects the way customers will behave in the future. For now, cryptocurrencies are not accepted in many stores (even online ones), so it is too early to talk about a complete transition in the world of online shopping.