Escrow
An arrangement where an asset is held by a neutral third party or smart contract until predetermined conditions are met, at which point it's released to the appropriate party.
Escrow is an arrangement in which an asset is held by a neutral third party, or increasingly in crypto by a smart contract itself, until a predetermined set of conditions is met, at which point the held asset is released to whichever party the conditions specify. This protects both sides of a transaction from the other failing to follow through, since neither party gains control of the asset until the agreed conditions are actually satisfied and verified.
In crypto, escrow is commonly implemented directly as smart contract logic rather than through a trusted human or institutional intermediary, letting the release conditions be enforced automatically and transparently based on verifiable on-chain data, without needing to trust a third party to act honestly. This smart-contract-based approach underlies many crypto-native applications, including certain peer-to-peer trading arrangements, conditional payment structures, and dispute-resolution mechanisms that release funds based on a predefined, automatically verifiable outcome.
Examples
- A peer-to-peer crypto trade might use a smart contract escrow to hold one party's funds until the other party confirms delivery of their side of the trade, protecting both participants.
- Smart contract escrow removes the need to trust a human or institutional intermediary, since the release conditions are enforced automatically based on verifiable on-chain data.