An escrow service provides safer transactions especially since bitcoin transactions are irreversible. It holds the buyer’s coins in escrow and releases them after the satisfaction of both the parties. Escrow protects sellers from fraudulent buyers and likewise, buyers are protected if the seller turns out to be a scammer and doesn’t deliver the goods.
Multisig aka Multi-signature is a technology that takes care of bitcoin wallet address. The basic principle is very simple: more than one person must sign the transaction in order for it to be valid. Bitcoin has a built-in feature that lets you choose as many signatures as you like, and then choose how many signatures in total must be provided for a valid transaction.
How to Use Multisig to Escrow Bitcoin?
The most common use of Multisig would have to be bitcoin multi-sig escrow. Multi-sig escrow provides consumer protection without the need of a central escrow provider to hold the coins on your behalf. Instead, an address is created which requires ‘2 of 3’ signatures from the buyer, seller and a third person who provides arbitration in case there is any disagreement. This address holds the payment until the product or service is delivered, and then can be used to pay the seller or refund the buyer.
Multisig can strongly benefit both individuals and organizations in improving security, establishing access controls, and enabling the delegation of partial trust. The additional signature proves that the transaction process is complete when both parties are aware that the terms of the transaction have met.
Bitcoin Escrow- Specialized Services
There are some specific platforms present for providing bitcoin escrow service to bitcoin users. When you use one of these services, you are able to choose a third-party arbitrator from a list. If this list isn’t available in the event of a disagreement, they will act as a mediator.
- Bitrated- Costumers choose from a list of independent arbitrators registered on a platform. After confirmation, the buyer secures bitcoins into a multi-signature address and the payment is secure until two of the participants agree to release them.
- Escrow My Bits- This Bitcoin escrow service charges 1% escrow fees which provides possible dispute resolution. Storing your funds in a secure 2 of 3 multi-signature transactions where they hold one key.
- StrongCoin- It’s an online wallet with built-in escrow with 1% fee on bitcoin cryptography. Use this service to buy items as they are able to offer escrow where no single party holds bitcoins. They hold one vote and to release the coins, you require two votes.
While in escrow, coins cannot be stolen unless two of the users also sign the transaction. This is much more secure and is highly recommended for anyone dealing with a large number of bitcoins.