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How Escrow Services Work in Crypto

Escrow services play a critical role in cryptocurrency, acting as trusted intermediaries to protect both buyers and sellers. By holding assets until transaction terms are fulfilled, escrow reduces fraud risks and builds trust in digital transactions.

Smart contracts automate the process, ensuring that transactions execute without a central authority once conditions are met. This offers a secure, decentralized solution for digital assets.

How Bitcoin Escrow works:

1. Agreement: Both parties agree on the terms.
2. Deposit: Buyer transfers Bitcoin to the escrow account.
3. Delivery: Seller provides the agreed goods or services.
4. Verification: Buyer confirms the delivery.
5. Release: Escrow releases the Bitcoin to the seller.

In case of disputes, the escrow agent mediates, ensuring a fair resolution. Though some centralization risk exists, the added security makes escrow essential for high-value crypto transactions.