Meet Your Seller: How Bitcoin Escrows Use Innovative Ideas
Bitcoin escrows is a rapidly growing business where the competition is high and so far there’s no clear leader.
Bitcoin escrows is a rapidly growing business where the competition is high and so far there’s no clear leader. The market is defined by razor-thin profit margins and so the companies who offer their services first, have an advantage.
One of Bitcoin’s primary advantages is the freedom with which it can be transferred. Without a central authority in place to authorize payments or impose arbitrary fees and limits, a user can send their Bitcoins to any other user in the world, at any time, without regard for national borders, distance, or regulation.
Unfortunately, this lack of regulation is both a blessing and a curse - a great many people have become victims to all kinds of scams, fraud and hacker attacks. One does not need to dig deep to find plenty of such stories. Someone in the community has even taken time to compile a list of the largest cases.
Whenever someone trades Bitcoin for fiat money, or some sort of goods or services there is no guarantee that the other party will meet their end of the bargain, as there is no default third-party to ensure that the exchange is fulfilled.
Such state of affairs cannot go unaddressed for long, and soon enough, a response came in the form of different escrow services.
Reputations on the line
Escrow is a trusted third-party, which takes Bitcoins from one side, and whatever they are traded for from the other, and sees that they are faithfully exchanged. The earliest examples of escrows were really straightforward: it was a person, or a company, who placed their reputation as an intermediary on the line, and asked for a commission from each trade in return.
Bitcointalk, the most popular forum dedicated to Bitcoin and cryptocurrencies, has become a platform for entrepreneurial escrows working solo, who had to compete with each other for every single trade to make a living.
Dedicated websites were also set up, operating in a similar manner, but on a larger scale. Examples of these include LocalBitcoins, where users can exchange Bitcoins for fiat currencies with buyers and sellers from their local area, and bitify, a Bitcoin marketplace with inbuilt escrow system. The market of escrows is defined by razor-thin profit margins and their success is mostly dependent on their reputation and user base volume; hence, the ones who were the first to offer their services, tend to have the largest, unbeatable advantage.
Rapidly developing market
But offering lower fees and working for years to build your reputation is not the only way to compete, and there are more recent services on the market, which are a testament to that. By offering new advantages, they bring real value to their users, and in the process carve out a larger slice of the market.
One good example of that is Waterhole, a mobile OTC trading and escrow platform. The developers have experience in both hacking and security fields, and they take the underlying idea of ensuring the safety of funds seriously, by going one step further in almost every direction security-wise.
For instance, they allow an optional three-step verification for the users, consisting of ID, photo and video verification. Several sellers have tested the escrow service at their own discretion and found that the process of selling and buying Bitcoin through Waterhole's service is quite fast compared to other current methods. Waterhole’s most important innovation is that it allows searching for sellers based on your location, which means that you can meet them in person to conclude the deal. Having a physical contact with your counterparty decreases the chances of getting scammed out of your money exponentially, which means that Waterhole is one of the safest solutions for Bitcoin trading on the market.
Another prominent contender is Raistone. Although the project is still in development, they are going to try and apply the Blockchain technology itself to the business of escrow, in order to decentralize it and eliminate the need for a central custodian entity.
All in all, Bitcoin escrow is a rapidly developing market. Even more so, as there is no clear leader at the moment. Security remains a critical issue for cryptocurrency users, and in the coming years we should see some great companies taking the lead and solving this problem.