What is crypto escrow?
DefinitionCrypto escrow is an arrangement in which a crypto payment is locked by a neutral party, often a smart contract, until the terms of a deal are met, and then released to the seller or refunded to the buyer. It lets two strangers trade without trusting each other first.
How escrow works
Classic escrow uses a trusted third party, such as a lawyer or an escrow company, to hold money until a deal closes. Crypto escrow does the same job, but the funds can sit in a smart contract on a blockchain instead of in someone’s bank account. The contract’s rules decide who can release the money, to whom and when.
- Lock: the paying side deposits funds into the escrow
- Deliver: the other side ships the goods, provides the service or sends the payment
- Release: once delivery is confirmed, the funds go to the seller
- Refund or dispute: if the deal fails, the funds go back, or an arbiter decides
Custodial escrow vs smart-contract escrow
With a custodial escrow service, a company holds the crypto in its own wallet, so you rely on its honesty and its security. With smart-contract escrow, the funds sit at a contract address you can check on a block explorer, and the code allows only the outcomes it was written for, such as release to the seller or a refund to the buyer.
A contract can’t see whether a parcel arrived or a bank transfer landed. That is why most designs add time windows, automatic outcomes when a window ends, and an arbiter for disputes.
What escrow can’t do
- It ties payment to delivery, but it can’t guarantee the quality of the goods or the honesty of the other side
- A bug in the contract code can lock funds or expose them
- An arbiter decides disputes, so read the dispute rules before you start
- Anything paid outside the escrow is not protected at all
Escrow in Waletifi
Waletifi uses on-chain escrow in two places. In P2P trades, the seller’s USDT is locked in an escrow contract before the buyer pays. On Raste, the in-app marketplace, each order is paid into its own escrow contract on TON and released when the buyer confirms receipt, with disputes settled by an arbiter and larger verdicts needing two admins. Waletifi never takes the payment into its own account.
