“Escrow” started being, essentially, a word to indicate middlemen (centralization) in a transaction between parties that don’t trust each other. It’s a financial arrangement where a trusted third party temporarily holds funds or assets on behalf of two parties engaged in a transaction. The funds are released to the seller once the buyer confirms receipt or fulfillment of the agreed-upon goods or services, ensuring a secure and fair exchange. So, what's a “decentralized” escrow? We can define it as a cryptocurrency-based system that eliminates the need for a central authority or intermediary to hold and release funds in online transactions. , ensuring trust and security in peer-to-peer (P2P) negotiations. Smart contracts automatically execute the release of funds when predefined conditions are met So, essentially, the trusted third party to handle the escrow is a smart contract —a piece of code. It may sound wonderful in a way, but that depends on the platform used for it. Also, you may wonder what’s wrong with centralized escrow services. Why do we need them to be decentralized? Centralized Escrow The first thing to say about this is that your funds will be held in custody by an intermediary. This intermediary is often a company with a whole fee structure and their own terms and privacy practices. Here's how they typically operate, along with approximate resolution times and fee structures: When two parties (a buyer and a seller) engage in an online transaction, they agree to use a centralized escrow service, such as Escrow.com or Safe Escrow, to safeguard their interests. The seller is then notified that the funds are in escrow. The seller should proceed to ship the goods or provide the agreed-upon services to the buyer. Next, the buyer submits payment to the escrow service (the company), which holds the funds securely. Afterward, the buyer has a specific period to inspect the received goods or services and ensure they meet the agreed-upon terms. If there are disputes, the escrow service may mediate and investigate the issue, requesting evidence from both parties. This process can vary but generally takes anywhere from a few days to several weeks, depending on the complexity of the dispute. More fees and steps Once a resolution is reached or the inspection period expires without dispute, the escrow service releases the funds to the seller, minus their fees. Centralized escrow services typically charge a percentage of the transaction amount. For example, charges about 2% (in Kenia), while (in North America, part of Europe, and Australia) charges a variable fee based on the transaction amount and complexity (from 3.5% and a standard fee starting at $10). Safe Escrow Escrow.com These fees can vary depending on the service provider and the specifics of the transaction. Not to mention all the documents and requirements involved. So, to answer the previous question about decentralized escrow services: they can be used from anywhere in the world, and there are almost no requirements or red tape in the middle for the parties. they eliminate the need for expensive (and local) middlemen, your funds would be safe in a smart contract, Let’s start then with some decentralized escrow services and their features. Uniscrow Founded in 2021 as a startup in Italy by a group of entrepreneurs, Uniscrow provides escrow services with smart contracts based on Ethereum or Polygon. They also have a financial license to exchange cryptocurrencies for EUR, but fiat isn’t accepted in escrow. The process goes as usual: sellers initiate escrows with offer details and invite customers to participate. Buyers, in turn, accept the terms and deposit funds, which are securely stored within smart contracts. Sellers can notify the completion of delivery or milestones within the Uniscrow platform. Buyers then have a 14-day window to approve the deliverable, request revisions, or open disputes. These funds are protected by private keys controlled by users. Once approved, the funds are automatically unlocked and transferred to the seller, finalizing the transaction. In case of disputes, starts a cost-free mediation between parties, but it doesn’t have a lot of power over the results. Instead, if necessary, the parties must go to legal arbitration under the Rules of the International Chamber of Arbitration of Milan, and the process must be placed in that city. Users would need to cover additional fees. Uniscrow Additional gas or transaction fees would be added depending on the used cryptocurrency. The platform, itself, takes fees ranging from 1% to 1.8%, depending on transaction volume. Descrow (by Catecoin) Catecoin was released in 2021 by an anonymous team, and it’s considered a memecoin. Currently, besides the parody element, they offer liquidity mining, NFTs, staking, and Play-to-Earn (P2E) tools. And, in late March 2023, they also —a decentralized escrow platform. acquired Descrow The process here involves the buyer placing funds into a contract to create an escrow arrangement. This is done by providing the seller's email address and their Ethereum (ERC-20) or BNB Chain (BEP-20) payment address. Using the same wallet, the seller then logs in and begins the delivery process. When the buyer gives their approval for the transaction, the funds are released to the seller from the escrow contract. If the contract does expire, the funds will be released to the seller automatically. In case of disputes, that a community of escrow agents intervene and vote to solve the issue before the contract expires. it’s expected However, the terms and conditions aren’t fully detailed on the website, and it seems like anyone can become an escrow agent, experienced in the field or not. Specific fees aren’t clear either, just mentioned as “low.” The platform is currently in beta (testing phase). Cryptegrity Escrow This one was released in January 2023 by an entrepreneur simply known as “ ” He’s also the founder of the crowdfunding platform GoCryptoMe and BlockStubs, a decentralized event ticketing hub. All three projects have native tokens specifically created for sale, as in an Initial Coin Offering (ICO). That’s their way of funding —and they’re not available for US residents. Jonas. The process begins with buyers and sellers agreeing on terms through milestones. Buyers deposit funds into the contract, and sellers provide proof of goods or services visible to the buyer. works on BNB Chain and Ethereum and offers escrow contracts for goods, services, NFTs, source code, and gambling. Cryptegrity Buyers approve each milestone's proof, and upon approval, funds within the smart contract are released to the seller. Cryptegrity also introduces the $ESCROW token and a DAO (Decentralized Autonomous Organization). When disputes arise, both parties can submit their cases to the Cryptegrity DAO for resolution. This mechanism assures judgment from ESCROW token holders who participate (they can be anyone, with or without legal expertise), and they are rewarded with $ESCROW tokens for their involvement. We need to mention that, . The service fee is 3% per contract, and it could be paid by the seller or the buyer. since anyone who buys ESCROW tokens can be an arbiter, their investigation or performance in the role could be called into question More terms and privacy policies aren’t provided, and that’s not ideal to offer trust. FlexSmart FlexSmart is a platform that offers templates for smart contract creation without code, in BNB Chain and Ethereum. It was released in 2021 by the developer Nate Zapata. Among their services, users can access a decentralized escrow smart contract template to add their own payment addresses, terms, and data. is similar to other platforms. Once approved, the funds are released to the seller, who can withdraw them as needed. Registration on the platform is required, though. The process Buyers pay the agreed amount, and funds are held in the escrow smart contract until all conditions are fulfilled and the buyer confirms receipt. It's also possible to add an arbiter to the contract to solve potential disputes. However, the parties must find that arbiter themselves, by their own means and knowledge. Of course, this arbiter would charge them an additional fee for their service. Beyond this, the fees of the platform itself aren’t clear. They’re in the beta phase for now. Arbstore (by Obyte) Arbstore is a platform that facilitates decentralized escrow through the use of smart contracts powered by Obyte. It was officially launched in 2023 by a group of entrepreneurs and lawyers to provide a secure way for businesses or individuals to engage in trustless transactions —especially in international trade. with arbitration from the same wallet. Users only need to download the , acquire some cryptocurrencies, select a professional arbiter, and deploy the human-readable contract Obyte wallet app Unlike other services, provides a list of (human) independent arbiters who must verify their identity and qualifications before signing up on the platform. All of them are experts in their fields (Law, Businesses, IT, Collectibles, etc.) and charge different fees for their services, often ranging between 2% and 5% —only in case of dispute. If the trade ends without a dispute between parties, the arbiter won’t even know about the contract. Arbstore Even Arbstore itself remains unaware of the contract's details. Dispute resolution is carried out solely by the arbiter, who, after studying the evidence, releases the funds from the contract to the winning party, in a process that only takes a few hours or days. The only fixed charge is 0.75% for each contract facilitated. Arbstore's decentralized escrow offers global reach, operates without intermediaries (only the users have their private keys), and is built on a secure, permissionless cryptocurrency platform. Arbstore ensures privacy by allowing only the parties involved to know the content of the contract. The product has already been tested, and the Obyte platform has been running since 2016. Arbstore has its own public , , , and . Terms of Service Privacy Policy Arbiter Listing Criteria Code of Conduct That’s why we can say that, so far, Arbstore seems to be the most reliable, fastest, and inexpensive solution for decentralized escrow (or online escrow, in general). If you’re looking to trust strangers for online transactions, is your platform! Arbstore Featured Vector Image by vector4stock / Freepik
