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.

5 thoughts on “How does escrow work when trading bitcoins?”

  • I have a question, if I have payment from two buyer for same trade, how this case handle

    I mean my BTC goes to one buyer and for another do I need to reverse payment?

    please replay.

    • That can’t happen on any reputable escrow service that we know of. Your BTC is locked in escrow to the first buyer so there is no way a second person can buy it

  • I have invested some amount in BTC and bought one coin and sold later when the price increased. But when asked to pay the
    Profit I came to know to know that fund is locked in escrow account and cannot release unless I fund the BTC
    How can I withdraw my money without funding any more.

    • Unfortunately it sounds like you made a mistake dealing with someone else but you don’t mention the name of the company. In the future you can buy or sell your cryptocurrencies with us.

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