How does escrow work when trading bitcoins?

Escrow is when bitcoin is held by a trusted third party. It is only released once certain conditions are met by both the buyer and the seller.

How does escrow work?

1) Someone starts a trade and and the 3rd party takes the bitcoin from the seller’s wallet and places it in a wallet only the 3rd party has access to called “escrow”.
2) The buyer sends the agreed payment
3) The seller verifies the payment is good and tells the 3rd party to release the coin
4) The 3rd party puts the bitcoin directly into the buyer’s wallet


Here are the most common questions about escrow when trading bitcoins

1) What happens if things go bad? How does escrow protect me?
If payment has been made and the  buyer or seller dispute the trade for any reason, the 3rd party steps in and mediates the trade. This is why its important to send all messages through the escrow system

2) How long does it take the bitcoin to be transferred?
First escrow has to be “funded”. That means the coins are taken out of the seller’s wallet and put into the escrow wallet. Once released it takes seconds to be deducted from the escrow wallet and to transfer into the buyer’s wallet.

3) Can the seller cancel escrow after I have made payment?
No, once you have marked that payment is made (typically by pressing a button labeled “Payment Made”) the trade can only be canceled by the buyer. Just make sure escrow is funded before making payment.

4) What should I do if a trade goes bad?
Contact the website/3rd party directly and file a dispute.

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