How To Use The Escrow Service
The on-chain escrow on LocalCryptos is non-custodial, meaning that any funds you deposit into the escrow aren’t stored on our platform, but rather you’re interacting directly with a smart contract on the blockchain.
Considering that Bitcoin, Dash, Ethereum, Litecoin, and Bitcoin Cash are all cryptocurrencies running on blockchains with different smart contracting capabilities, LocalCryptos created multiple integrations to allow escrowing each cryptocurrency directly on their respective blockchain.
The way you interact with LocalCryptos' on-chain escrow is super simple and only varies slightly depending on whether you're buying or selling cryptocurrency.
Using the on-chain escrow for buyers
If you're buying cryptocurrency on LocalCryptos, then your interaction with the on-chain escrow is relatively passive. All you'll essentially be doing is making sure the seller has deposited the right amount of cryptocurrency to the escrow.
Your first contact with the escrow begins when the seller deposits the agreed-upon amount of cryptocurrency to the smart contract. When that happens, a countdown timer window will pop up on your screen, telling you how much time you have left to make the payment.
When you make the payment, your next step is clicking on the "mark as paid" button in the window. This action locks the cryptocurrency in the escrow so the seller can no longer cancel the trade and signals to the seller that you’ve completed your end of the agreement, and they can safely release the funds from the escrow. When the buyer releases the funds, the cryptocurrency goes straight to your wallet, and the transaction is officially complete.
Suppose, for whatever reason, the seller doesn't release the funds in a timely fashion. In that case, your next step should be clicking on the "open dispute" button in the window, which immediately calls upon a third-party arbitrator that will assist both parties to resolve the issue.
When the "open dispute" action is triggered, LocalCryptos' arbitrator will step in, analyze the issue, ask for evidence such as proof of payment from the buyer. Depending on the dispute's circumstances, it may take the arbitrator anywhere from a few hours to a few days to reach a decision, but rest assured - the dispute will eventually be resolved.
Using the escrow for sellers
If you're selling cryptocurrency on LocalCryptos, then your interaction with the on-chain escrow is more proactive.
The on-chain escrow is here to guarantee peace of mind for both parties. However, as the seller, you'll be the one making the first move by depositing the agreed-upon amount of cryptocurrency to the escrow.
While the actual mechanics of how the on-chain escrow works in the background varies with different cryptocurrencies — the goals and outcomes are identical, and from a user experience perspective, everything stays the same.
To deposit cryptocurrency to the escrow, you need to click the "deposit" button. This triggers a transaction that takes cryptocurrency from your wallet and transfers it to the escrow smart contract on the blockchain. It is important to note here that making the deposit will set you back the regular network or transaction fee that isn't determined or charged by LocalCrypto's, but rather by the miners processing your transaction on the blockchain. Think of this as the cost of doing business in crypto.
Moving on, as soon as the cryptocurrency is escrowed, a payment window countdown will begin. Again, this is the time the buyer has to make the payment outside LocalCryptos. If the buyer doesn't manage to pay in time, you'll be able to cancel the escrow and get the cryptocurrency (minus the fee) back in your possession.
If the buyer clicks on the “mark as paid” button instead, your next step should be checking whether the right amount of money was indeed deposited in your account. If the money is there, it’s now your turn to release the funds from the escrow and send them on their way to the buyer. If the buyer has marked the transaction as paid, but you still haven’t received any money, then you’ll need to open a dispute and go through the third-party arbitration process described above. However, before doing so, you should consider that some payment methods may take time before the money finally arrives, so it’s always a good practice to check in with the buyer first before opening up a dispute.
Last but not least, using the escrow on LocalCryptos is critical because it's the only thing that guarantees that both parties hold up to their end of the bargain.