Why using the escrow is important

Why using the escrow is important.

In traditional terms, an escrow is a financial arrangement where a third trusted party holds and manages two transacting parties’ funds until certain contractual agreements are met.

Escrow arrangements guarantee that the terms and conditions of the specific transactional agreement are met before the money, property, or anything of value can safely change hands.

It is important to emphasize that escrows are particularly suitable (sometimes even necessary) for online peer-to-peer payments where the transacting parties don’t usually know or trust each other - a typical scenario in crypto.

Trusting a third party in crypto, however reputable, to custody cryptocurrency funds is blasphemy. This creates a bit of a hiccup when it comes to escrow arrangements; on the one hand, we want to transact in a direct and trustless manner - on the other, we want to do it safely and securely.

The fact that crypto transactions are final while fiat payments are reversible allows buyers to abuse the lenient chargeback system even after money has changed hands and scam the sellers out of their cryptocurrency. The only way to mitigate this risk is to use escrow.

Luckily for you, LocalCryptos solved this problem entirely. Our on-chain escrow service is non-custodial, meaning that you’re not trusting us or anyone else with your money when you deposit cryptocurrency in the escrow, but rather interacting directly with a smart contract on the blockchain.

Using the escrow on LocalCryptos is critical because it’s the only thing that guarantees that both parties hold up to their end of the bargain.

All trades on LocalCryptos are private and peer-to-peer, meaning that we’re not a party to any transaction, and we can’t impose any rules or trigger any actions on the on-chain escrow contract. The only time we can interfere is in the case of an open dispute where, assuming the role of an unbiased arbitrator, we can direct the funds in the escrow to either party.

When the cryptocurrency from the escrow is released, the transaction is final.


LocalCryptos is a peer-to-peer crypto marketplace with more than 100,000 users worldwide with traders in 100+ countries (Venezuela being #1). It’s the most popular non-custodial fiat on/off-ramp.