Escrow is a service that acts as a third party between the buyer and seller to ensure that the goods and payment are exchanged safely.
- When a buyer purchases a product, the escrow service operator takes the purchase price from the buyer and prompts the seller to deliver the product.
- As soon as the escrow operator confirms that the buyer has received the goods, the escrow operator hands over the payment to the seller.
- If the product is defective, the escrow service will refund the money.
In the case of Bitcoin, a cryptocurrency, multi-signature technology (multi-sig) is used to provide a smooth and secure escrow service.
Bitcoin’s multi-signature escrow service uses three “secret keys”. The purchaser, the seller, and the escrow service each have one private key.
When each of them signs the private key, the transfer is completed successfully.