The Benefits of OTC Bitcoin Escrow

Education, FinTech, Innovation | December 29, 2018 By:

  Traditional escrow is designed to give piece of mind, and protection, to sellers and buyers who exchange large sums of money.  But in 2017, that protection was threatened by nearly $1 billion in escrow fraud[1].  For consumers who’ve relied on escrow in past transactions, the increasing instability is troublesome.  How can they continue to make large purchases safely and securely?  The answer lies in over-the-counter (OTC) Bitcoin escrow.

What is Bitcoin escrow?

Many bitcoin transactions happen via bitcoin marketplaces.  These marketplaces often have strong reputations and name recognition, but business is conducted in the open, robbing the buyer and seller of any privacy.  OTC Bitcoin transactions are a more discreet alternative, allowing buyers and sellers to interact directly with one another outside of designated marketplaces.  OTC Bitcoin escrow steps in to ensure these off-market transactions are still secure.

Similar to traditional escrow, bitcoin escrow[2] acts a neutral third party and facilitates transactions between a seller and buyer.  The buyer is protected from losing money to scams, and the seller is protected from losing property or goods in fraudulent sales.  There’s an extra layer of security despite conducting business outside of Bitcoin marketplaces.

Why trust Bitcoin escrow?

Some skeptics are reluctant to trust bitcoin escrow services.  This is primarily because the bulk of traditional escrow fraud happens online[3].

Time and time again, buyers wire large sums of money to unvetted escrow services.  These services often use fake websites and URLS modeled after more reputable companies.  Buyers contact the fraudulent service and receive instructions about how to wire money to the seller.  They send it to the service’s account, and it’s immediately withdrawn.  The thief ceases communication, and the money is simply lost.  In these cases, it’s difficult to recoup funds or even track down the people behind the fraud.

Those fears aren’t immediately assuaged by OTC Bitcoin escrow services.  Enlisting an OTC Bitcoin escrow company still means sending money to a stranger.  This is relatively new territory, and it’s difficult to learn about the history and reputation of the service.  Additionally, there aren’t a lot of reputable services[4] on the market.  Thus, for those buyers leery of traditional escrow scams, OTC Bitcoin escrow still presents some risk.

The benefits of OTC Bitcoin escrow

However, unlike traditional escrow, OTC Bitcoin escrow adds in several additional layers of security.  In most cases, you’re depositing your funds into an account that’s protected by a vetted multi-signature bitcoin broker, and your deposit is either pegged to an asset value or placed in cold storage.  In short, it isn’t easy to maneuver around these protections without leaving a digital footprint.  So, not only are you protected from a potentially dishonest seller, but you’re also protected against the escrow service.

When it comes to selecting the right escrow service, there are a few key options on the market:

  • Escrow My Bits – Escrow My Bits offers four different types of escrow (regular escrow, regular escrow pegged to an exchange rate, multi-signature escrow, and multi-signature escrow pegged to fiat values). The transaction fee sits at 1%. There are plenty of options here, but if you’re looking for a streamlined service, the different types of escrow can be overwhelming.
  • BitcoinEscrowLtd – BitcoinEscrowLtd allows both the seller and buyer to pre-agree on a fixed escrow period and allows both parties to split the transaction fee. But as a con, the transaction fee is not clearly stated upfront, which means it could be variable and thus, costly.
  • Anaiv Capital – At Anaiv Capital, security is a plus: all funds are placed in a highly secured Escrow wallet and kept in cold storage, escrow services are supervised by an AML Self-regulatory body, and the team has over 30 years of experience working with traditional escrow. As a bonus, Anaiv’s transaction fees are 0.5%

When choosing an OTC Bitcoin escrow service, it’s important to weigh each firm against your criteria. But ultimately, experience, security, and low fees should rank high on your priority list.

[1] McPherson, Marian. (2017, November 8). Escrow scams have grown by $950M in 2017. Retrieved from: iman.com.

[2] Hartmann, Torsten. (2018, January 13). Best Bitcoin Escrow Services Currently Available. Retrieved from: captainaltcoin.com.

[3] Campisi, Natalie. (2018, October 31). Mortgage escrow fraud is a $1 billion cyber threat – here’s what homebuyers need to know. Retrieved from: bankrate.com.

[4] Beigel, Ofir. (2018, January 2). Best Bitcoin Escrow Services. Retrieved from: 99bitcoins.com.