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Escrow tutorial

In this tutorial, you'll learn the following about escrow smart contracts:

  • How to utilize an escrow smart contract in a blockchain transaction.
  • Providing safety for all parties involved.
  • The process of an escrow smart contract (from the terms agreement to the automatic transfer of funds to the seller's digital wallet).

An escrow is a temporary arrangement where a third party holds the transaction's assets. These valuables remain in the third-party account until all parties meet the agreed-upon terms. Both parties benefit from added security by using an escrow model.

Escrow Diagram

Encoding an escrow smart contract within a blockchain allows for the secure execution of contracts, eliminating the need for conventional third-party involvement.

How an Escrow in Smart Contract Works​

  1. Agreement: First, the buyer and seller establish mutually agreed-upon escrow terms. The seller, wishing to sell an item, sets a price, and the buyer promptly pays it.
  2. Delivery and Holding: The seller delivers the product and securely holds the funds within the escrow smart contract. This safeguard persists until the buyer confirms receipt of the product and meets all escrow conditions.
  3. Approval and Transfer: When the Buyer expresses satisfaction with the product, the smart contract autonomously transfers the funds to the seller's digital wallet.