With the growth of cryptocurrencies, the concept of P2P exchanges has also gained considerable popularity. In the context of trading, P2P stands for peer-to-peer transactions where the exchange of assets occurs directly between two parties. The primary advantage of P2P decentralized exchange platforms is that the imperative authority of third parties is discarded. So, the buyer and seller can trade without the involvement of a third party (like banks).
Today P2P is increasingly the core of most crypto exchanges. But the lack of central authority has raised some other interesting questions. With safety in the crypto industry being a major concern, how do you ensure your money is safe in a transaction where there’s no arbitrator?
Escrow services seem like a plausible option. This post discusses how escrow services work in detail.
What is an escrow?
An escrow is a legal arrangement in which a trusted third party holds assets on behalf of the two parties (buyer and seller) who are involved in a transaction.
Escrows are not new; the concept exists in the traditional financial system as well. People might have come across escrow accounts during real estate transactions.
The main purpose of escrow is to provide security against bad actors in the middle of a transaction. By this, both the parties involved cannot indulge in any dishonest activities which the other suffer.
How does CryptoLocally’s Escrow work?
Firstly, an escrow service is typically provided by an independent third party who is impartial to both the buyer and the seller. Traditionally, escrow services have an independent third party in the middle of a transaction. This is how even many crypto escrow services operate too.
But to completely eliminate intermediaries, platforms like CryptoLocally use smart contracts to implement their escrows.
A smart contract is a computerized program that automatically executes if all the requirements in the terms of trade are met. Smart contracts are based on blockchain technology. They are publicly stored and can never be charged.
Using Cryptolocally’s escrow system is very intuitive. To start, Click here to open a Cryptolocally Account.
After setting up your account and surfing through the dashboard, it’s time to get started with CryptoLocally’s escrow system.
Step 1: Choose a cryptocurrency to sell.
Step 2: Click sell option on the top-left to begin the transaction
Step 3: Enter the cryptocurrencies amount to open the trade. Then, click on the “publish offer” button.
Step 4: When a buyer shows interest, you’ll have to chat and decide a payment method. Click on “Agree on Terms” to proceed further.
Step 5: As a seller, you need to fund the escrow. Deposit the agreed amount in the smart contract address provided. Then provide the memo for the same. Once you have funded the escrow, press “Mark as funded” button for further steps.
Step 6: Request payment from the buyer via the chat window.
Step 7: Once the buyer pays you, click the “Release escrow” button. By this, the escrow is suspended.
Note: Never release the escrow before you confirm the payment from the buyer.
Give feedback about the buyer and the process. Finish. The transaction is successful.
The process is relatively simple from the buyer’s end.
Step 1: Select the cryptocurrency to buy.
Step 2: Chat with the seller and agree to the trade terms and wait the seller to start funding.
Step 3: Once escrow is funded, you will receive a notification. Send payment to the seller via the decided payment mode.
Step 4: The seller will confirm your payment and release the escrow. Give feedback and the transaction is finished!
CryptoLocally is the world’s first fully decentralized P2P finance system. The advantages of using CryptoLocally include:
- Low transaction cost: There are no hidden expenses or fees and transaction costs are modest. See our fee page for more details.
- High security and privacy: No need to provide endless lists of documents to authenticate your identity. After all, the smart contract ensures that the entire process is impartial and protects all transactions. So, your transaction is highly secured and insulated.
- Easy and quick: You have 50+ payment methods and 20+ coins to choose from. Also, you can change the payment method, even just before the payment process. The entire transaction is instant and seamless.
When Are You Getting Started?
The process is simple, isn’t it? With top P2P platforms like Cryptolocally, you get maximum security against fraudulent practices.
There you go, you now know how escrow services work. Reliable escrow systems will remove uncertainties associated with crypto security. Consequently, P2P platforms will also win the trust and acceptance from more and more people.
Stay tuned to CryptoLocally blogs for more such pieces on decentralized exchanges and P2P platforms.