Best Bitcoin Escrow Services – A Beginner’s Guide
By: Ofir Beigel | Last updated: 5/4/20
Using a 3rd party escrow service to handle a Bitcoin payment is a good idea when transacting with an untrusted party. This post will cover the different services out there and what to look out for.
Bitcoin Escrow Summary
A Bitcoin escrow service is a mediator service that keeps the money for a transaction between strangers in safekeeping until the Bitcoins (or goods) are handed over.
There aren’t a lot of reputable escrow services to choose from today. An alternative to Bitcoin escrow service is Bitrated, which is a multisig wallet designed to facilitate transactions between strangers.
That’s Bitcoin escrow in a nutshell. If you want a more detailed review keep on reading, here’s what I’ll cover:
- What is a Bitcoin Escrow Service?
- The Problem with Escrow Services
- Bitcoin Escrow Services Review
- Escrow Agents
An escrow service is a mediator service that keeps the money for a transaction in safekeeping until the Bitcoins are handed over.
Escrow protects buyers from fraudulent sellers by requiring the Bitcoin to be deposited up front, before any money changes hands. In the event of a dispute, the escrow service will act as the arbitrator and determine who should ultimately receive the Bitcoins.
In the past I’ve made a few large Bitcoin related purchases with people whom I’ve never met before. This, of course, required me to use some sort of escrow service to conduct the transaction.
When doing my research about the different services available, I’ve encountered two major problems:
You’re (still) sending your money to a stranger
When you’re using Bitcoin escrow services you don’t actually solve the original problem you’re dealing with, which is not to send your money to strangers.
You have no idea who is behind the escrow site, so why should you trust them with your money more than you trust the person you’re buying from?
Lack of Reputable Bitcoin Escrow Services
Unfortunately, you can’t find many well known Bitcoin escrow websites. All of the Bitcoin escrow sites I could find don’t have any reputation (good or bad) and they haven’t been around long enough to be considered as reliable. Bottom line, there’s no way of knowing if they’re legit, other than trying out their service.
The following two services are the only ones I could find that seem to have a somewhat satisfactory reputation to be considered as a reliable service.
IBC Group is a blockchain fundraising service that also supplies a Bitcoin escrow service. From their website, it seems that they deal with larger transactions. While it’s unclear how reputable the company is, its members are stated clearly in the “about” page, which is a good start.
If you don’t like the options presented above, not all is lost. There are still some viable options that will allow you to conduct a Bitcoin transaction through escrow.
First, you can check out the escrow thread on BitcoinTalk which has multiple users that supply escrow services. These users all have extremely high trust rankings, and will probably not scam you (use at your own risk, this is just my own advice).
Another option, which I personally prefer, is using a multisig service like Bitrated. Bitrated isn’t an escrow service, it’s a multisig wallet which means it requires a certain amount of signatures in order to transfer funds from it.
For example, the wallet can be shared by 3 people and when any 2 out of the 3 decide to send the money, the order is executed.
Bitrated is basically a platform which introduces buyers and sellers with arbitrators. It then creates a multisig wallet shared by all three parties, that requires only two signatures to release the funds.
If both the seller and buyer agree that the transaction is complete, the arbitrator isn’t needed. If the seller or the buyer believes a dispute resolution needs to be made, then the arbitrator’s job is to decide where to send the money.
Arbitrators usually charge a fee for their services, but it’s usually a very decent one. The fees change, depending on whether the arbitration is ultimately needed or not. The platform itself does not take any fee.
The system also supplies a very basic feedback mechanism that allows you to see who are the top rated users and arbitrators on the site.
One last thing to keep in mind is that the system is set up so that the seller will always be the one who pays the arbitration fees.
The major upside of Bitrated is that you’re not sending your money to strangers; you’re just depositing it inside a multisig wallet which you have certain control over. Bitrated itself doesn’t hold the private key to the wallet and can not steal the funds.
My personal lesson from Bitrated…
Not too long ago I conducted a large Bitcoin transaction through Bitrated. I have to say that even though the system is lacking some basic functions (e.g. edit a trade, message users, etc) it works pretty smooth. The only issue I had was that I actually lost my 2fA password for the account (but that’s just me being stupid).
Since Bitrated has no way of accessing the multisig wallet, I had to use the arbitrator’s service in order to release the money to the seller. Fortunately, everything went pretty smooth. All in all, I can say I was pretty impressed with Bitrated’s service.
There aren’t many options for Bitcoin escrow services, yet there are still a handful of services you can use. While not an escrow service per-se, Bitrated is definitely my personal choice, as you don’t actually transfer control of your coins to a third party and you get to choose the arbitrator.
Have you had any experience with Bitcoin escrow services? Do you know of a reputable service I haven’t mentioned? I’d love to hear about it in the comments section below.