In cryptocurrency, Escrow refers to a financial arrangement where a trusted third party holds and regulates payment of funds between two parties involved in a transaction. The funds are held by the escrow service until the recipient of the goods or services has fulfilled its obligations in the transaction. This helps to reduce the risk of fraud by ensuring that both parties fulfill their end of the deal.
When a buyer and seller engage in a transaction, they can agree to have an escrow service hold the funds until the terms of the transaction are met. Once the terms are satisfied, the funds are released to the appropriate party. This provides a level of security for both the buyer and seller, as it ensures that the terms of the transaction are met before funds are released.
Escrow is commonly used in cryptocurrency transactions to provide a level of trust and security between parties who may not know or trust each other. By using an escrow service, both parties can have confidence that the transaction will be completed as agreed upon.
