Blockchain, universally hailed for offering robust security, is now increasingly being used beyond cryptocurrencies, to ensure the high-end safety of financial transactions.
One of the most interesting uses of blockchain is in escrow services.
The escrow system was traditionally used in financial transactions involving massive amounts. Escrow ensures that the entire transaction is carried out certainly and fairly, i.e., the purchaser gets what they have bought, and the seller receives their due amount.
Escrow is also used for intellectual property and real estate transactions, internet payments, mergers and acquisitions, etc. However, incidents of fraudulence and scams involving escrow are not uncommon nowadays, which necessitates the implementation of technology to protect payments from fraud.
This is where blockchain-based escrow comes into the picture.
Blockchain escrow: what is it?
Blockchain escrow is essentially decentralized escrow, i.e., it is not governed by any intermediary or specific authority. It involves an escrow platform that employs a blockchain network that functions as per instructions fed to it in the form of programming code, not human instructions. Blockchain escrow is used to protect payments in a mutually agreed deal, and then it directs the payment to a specific account.
The use of blockchain for escrow is a major step in safeguarding financial transactions from cyber criminals. Safety is ensured by the immutable code of smart contracts in the blockchain. So it is mention-worthy that only blockchains that support smart contracts can be employed for escrow methods.
How does a blockchain escrow function?
Smart contracts, once implemented on a blockchain, are irreversible. So when an escrow user requests to release or receive payment, it needs to be approved by several nodes in a blockchain network. This multi-step approval acts as an additional layer of verification and security ensuring that the contract is executed as per coded instructions and no suspicious activity is involved.
The entire communication between the user, smart contract, and blockchain is executed through codes, wherein the smart contracts call (execute) predefined functions in the code corresponding to specific user actions. It can be quickly conceptualized by the following steps:
- A user action triggers a smart contract which in turn executes a specific function in the code
- Nodes in the blockchain network receive the instruction and confirm the execution
- The function carries out the predefined operation and fetches the end results for the user
Blockchain escrow apps like Uniscrow are available to users to carry out the necessary actions in a transaction; these apps connect to an underlying blockchain network.
What are the benefits of using blockchain in escrow?
- Security: Smart contracts in a blockchain escrow minimizes the hazards of scam by playing the role of a neutral party and safeguarding the right flow of underlying logic execution.
- Transparency: Operations taking place in the blockchain system are absolutely transparent and accessible to participants on the blockchain network.
- Efficiency: Blockchain excludes the requirement for third parties for approval, which helps optimize the costs of transaction and also increase the efficiency of the service.
Use cases
- Escrow platforms like Uniscrow can be used by businesses to streamline their financial transactions and simplify the payment process. Small businesses can create payment campaigns on Uniscrow to collect payments from their customers or clients. Whether it’s for products, services, or invoices, the platform provides a secure and convenient way for businesses to receive payments.
- It can be utilized by businesses as a platform for secure and efficient B2B payments. Small businesses can leverage Uniscrow to streamline their payment processes by creating payment requests for their clients and partners.
Final words
Escrow services are meant for secure and transparent financial transactions with solid blockchain technology. It holds onto funds or assets until the conditions specified in the Escrow agreement are fulfilled.
We designed Uniscrow as a platform that businesses can use for secure and efficient payments. It offers businesses the opportunity to simplify their payment procedures with high-level security.
If you are ready to eliminate risks and uncertainties in your transactions? Uniscrow is your trusted partner. Reach us to get a free consultation.