Escrow refers to the cryptocurrency being held by LocalCoinSwap or secured on a blockchain on behalf of the buyer and seller while the trade is being completed.
So how does this work in a practical sense? It is relatively simple:
- Two users agree to trade with each other. One user is buying cryptocurrency (crypto) from a seller.
- The seller “funds escrow” (locks their crypto into escrow).
- The seller provides the local currency payment details and the buyer pays the seller directly. This may be through a variety of payment methods including bank transfer, cash deposit, Western Union, and more.
- Once the seller receives the local currency, they release the crypto from escrow to the buyer
This process provides a secure way for users to buy and sell with a significantly reduced risk of fraud.
Once escrow has been funded, the seller cannot withdraw their money from escrow. So the buyer can be sure that if they make the correct payment, they will receive the crypto.
If the buyer does not make the correct payment or the seller doesn't release after receiving payment, either trader can “raise a dispute” and a LocalCoinSwap staff member will investigate and release the crypto to the correct trader.