Basic Of Escrow System; Q&A by Satoshi

[Igebotz]

How much do you know about Escrow system? The word escrow is one of the most used in the forum especially the service board, and most of the crypto newbies don't really know how this works and the mechanism behind the process. Escrow service was introduced to reduce the rate of frausters in the crypto business transactions system, where a third party is introduced to witness a smooth exchange between buyer and a seller.



Escrow processes by Satoshi

The buyer commits a payment to escrow. The seller receives a transaction with the money in escrow, but he can’t spend it until the buyer unlocks it. The buyer can release the payment at any time after that, which could be never. This does not allow the buyer to take the money back, but it does give him the option to burn the money out of spite by never releasing it. The seller has the option to release the money back to the buyer.While this system does not guarantee the parties against loss, it takes the profit out of cheating.If the seller doesn’t send the goods, he doesn’t get paid. The buyer would still be out the money, but at least the seller has no monetary motivation to stiff him.The buyer can’t benefit by failing to pay. He can’t get the escrow money back. He can’t fail to pay due to lack of funds. The seller can see that the funds are committed to his key and can’t be sent to anyone else. Now, an economist would say that a fraudulent seller could start negotiating, such as “release the money and I’ll give you half of it back”, but at that point, there would be so little trust and so much spite that negotiation is unlikely. Why on earth would the fraudster keep his word and send you half if he’s already breaking his word to steal it? I think for modest amounts, almost everyone would refuse on principle alone

Questions concerning Escrow

Questions

But the money burning solution, while great at preventing
economically viable fraud, does nothing to prevent revenge and actually makes everyone loose if one side is dishonest. I would certainly not endorse that.?

Answer by Satoshi

Then you must also be against the common system of payment up front, where the customer loses. Payment up front: customer loses, and the thief gets the money.Simple escrow: customer loses, but the thief doesn’t get the money either. Are you guys saying payment up front is better, because at least the thief gets the money, so at least someone gets it? Imagine someone stole something from you. You can’t get it back, but if you could, if it had a kill switch that could be remote triggered, would you do it? Would it be a good thing for thieves to know that everything you own has a kill switch and if they steal it, it’ll be useless to them, although you still lose it too? If they give it back, you can re-activate it.Imagine if gold turned to lead when stolen. If the thief gives it back, it turns to gold again.It still seems to me the problem may be one of presenting it the right way. For one thing, not being so blunt about “money burning” for the purposes of game theory discussion. The money is never truly burned. You have the option to release it at any time forever

Source

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[SquirrelJulietGarden]

The original source is Escrow, not the article in that institute. It mentions the original topic as External link.

Escrow can not protect you. The level of protection depends on the quality of Escrow service. If you use a scam Escrow service, it will steal your bitcoin, not your trade partner.

[ranochigo]

The escrow system that Satoshi mentioned here is not like the escrow system that we have here. Most of the escrow services has the intermediary holding full control of the funds and becoming a mediator in the event that something goes wrong. What Satoshi described was just a rough idea of how P2SH or by extension, Multisig currently works but in a 2-of-2 manner. A correct system would be whereby there is a 2-of-3 multisig where a trusted party holds onto the third key as a mediator if something goes wrong. This is only effective if the third party is trusted by both and also neutral to both of the parties involved in transaction.

Escrow existed before Bitcoin.

[Husires]

All escrow systems need a third party to send the money and in bitcoin the trust moved from one or tow paries to the community and Miners.
The model that Satoshi told is the concept of multi-signatures and some may try to update the thought social recovery wallets

Satoshi didnot modulate bitcointalk

[OgNasty]

satoshi’s view on escrow was a sign of the times back then. Before this community became incredibly toxic, the idea a buyer wouldn’t release payment and would instead choose to burn the BTC out of spite would have been unheard of. Today, his view on escrow is laughed at, and rightfully so as buyers would routinely not be paid for their goods or services if this process model were followed by the community.

[Igebotz]

Escrow can not protect you.

Yeah, but it somewhat give the seller some level of confidence seeing the money being put in an escrow.

The escrow system that Satoshi mentioned here is not like the escrow system that we have here. Most of the escrow services has the intermediary holding full control of the funds and becoming a mediator in the event that something goes wrong.

This was not Satoshi's idea of bitcoin escrow as crypto transactions are not traceable, giving the third party full control right over the escrow fund is still as risky as doing a 2x2 transactions method where one party might choose not to obey the terms of agreements. This is the reason there are fraudulent escrow services offering lower percentages.

[Oshosondy]

satoshi’s view on escrow was a sign of the times back then. Before this community became incredibly toxic, the idea a buyer wouldn’t release payment and would instead choose to burn the BTC out of spite would have been unheard of. Today, his view on escrow is laughed at, and rightfully so as buyers would routinely not be paid for their goods or services if this process model were followed by the community.

satoshi explained how escrow can be without any third party, what I think is that what if the seller did not sell after the buyer has put bitcoin on escrow, some people can be so wicked in a way they will manipulate and not sell anything, even if the buyer did not release money from escrow, that means the buyer will lose and the bitcoin will burn out. But there are cases but few where people can be so wicked.mand result to burned bitcoin. But having a central body to make sure both the buyer and the seller did not cheat makes it better, if the seller did not sell anything, the bitcoin will automatically leave escrow when certain period is over and back to buyers account, or in the case someone provide the escrow, he will know who cheats and make sure no one lose, but using reputed escrow service is very important.

[ranochigo]

This was not Satoshi's idea of bitcoin escrow as crypto transactions are not traceable, giving the third party full control right over the escrow fund is still as risky as doing a 2x2 transactions method where one party might choose not to obey the terms of agreements. This is the reason there are fraudulent escrow services offering lower percentages.

Yes. I know, I said Satoshi's idea was 2-of-2.

No. Giving a third party that is trusted by both the full control of the coin is far safer than 2-of-2 multisig escrow. It's far more plausible for scammers to hold the coins hostage in this case as they'll have nothing to lose while the escrow is putting his reputation on the line. 2-of-3 could be better provided if the thirdparty is not colluding with either of them, if they are then self escrow would make it as good as a third party holding it.

[Oshosondy]

No. Giving a third party that is trusted by both the full control of the coin is far safer than 2-of-2 multisig escrow. It's far more plausible for scammers to hold the coins hostage in this case as they'll have nothing to lose while the escrow is putting his reputation on the line. 2-of-3 could be better provided if the thirdparty is not colluding with either of them, if they are then self escrow would make it as good as a third party holding it.

Definitely there must be a middle man for escrow, if no middle man like I have explained, it will be difficult, there will be some people that will just want to wicked someone. There are some stupid people that will just want to make someone cry and depressed, they can even accept a request that they want to sell but of which having nothing, all they want is to make sure the buyer lose, the buyer will lock the bitcoin in escrow, the fake seller will only be happy the buyer has lost. Someone you know but which its identity not linked can do such a thing to wicked someone. The advantage of 2-of-3 is when seller has sold, the third party will be able to release the bitcoin if the buyer fail to release the coin, while the buyer will not release the coin if the seller do not sell anything. But, it still has disadvantage, if the buyer already have the bitcoin in escrow, while the seller do not sell anything, the coin will still burn in 2-of-3 while the buyer will lose, in this case, the seller can plan with the third party that he is not sending anything, that if he release the bitcoin, that he will give him certain percentage, although, the third party may not release the bitcoin as he know the seller will also scam him, but the buyer already lose as the coin will be burned which makes it not perfect enough.

[kevinovecka]

The original source is Escrow, not the article in that institute. It mentions the original topic as External link.

Escrow can not protect you. The level of protection depends on the quality of Escrow service. If you use a scam Escrow service, it will steal your bitcoin, not your trade partner.

That is true but escrow is amazing solution it is pitty that many scams discredited such useful things by exit scams etc...
It is important to have 3rd neutral vote and even it is very hard to judge by evidence provided from both sides it is best solution ever because you cant get more justice without trust and not sure if you ever will and trust me I have been scammed so many times and wish I had more power to get justice.
That is why I sticked to 2 of 3 and will make announcement about my service after "How to video" for beginners is done

[uchegod-21]

SATOSHI SOLVE A PROBLEM AND LEFT A PROBLEM.
Satoshi say that bitcoin will make a buyer not cheat a seller. If I buy from you and pay you digital money. You will be sure that the money will not reverse back to me. This is a problem bitcoin solve. Traditional institution did not solve it. They need 3rd party.
Satoshi said for seller not to cheat buyer a escrow should be used. Which is to trust a third party. This is a problem to bitcoin decentralization.
Let us get to work and find solution better than escrow.