An escrow transaction (in English, Escrow) is a mechanism for protecting funds during an operation between parties who do not directly trust each other. The point is that the buyer's money is not handed over to the seller right away, but is temporarily held by a third party — the guarantor of the transaction. The funds are unlocked and transferred to the seller only after the buyer confirms that the agreed conditions have been fulfilled, for example the receipt of a product or service.

Let us consider a typical scenario. A seller and a buyer want to make an exchange but are not sure of each other's good faith. They turn to a trusted intermediary: the buyer transfers the funds to them, and the seller then sends the goods. When the buyer receives the order and confirms it, the intermediary hands the money over to the seller. If a dispute arises, the guarantor helps resolve the situation according to pre-agreed rules.

Escrow in cryptocurrencies

In the blockchain, the role of the independent intermediary is often played by a smart contract. It automatically holds the funds and releases them when the specified conditions occur, which reduces the influence of the human factor and makes the process transparent. Multisignature schemes are also used, where a transfer requires the consent of several participants. This approach is widely used in P2P trading, freelancing, and transactions with digital assets so that both parties are protected from deception.