What is Escrow? We explain the term and how to use it

Escrow is widely used and by no means new. In addition to traditional business fields, the term is now also used in many technological application areas. We explain what it is all about.

Controlling entity: Escrow is about escrow services for transactions.

Transaction security is a particularly important issue on the Internet. The importance of escrow is therefore only logical.

What is escrow - and what is the benefit?

Escrow is a type of security mechanism in which a third party is supposed to guarantee transaction processing between two parties.

• This corresponds to the escrow principle - not without reason are the two terms often used synonymously. The comparison with a notary is also common.
• The term has existed for many years and is used, for example, in the real estate or finance industry.
• In addition, escrow is also used in cutting-edge areas, such as the darknet, but there often for illegal transactions. For example, a customer may buy illegal items from a merchant; escrow ensures that the seller must ship the goods before receiving the money. In this way, attempts at fraud are not completely ruled out, but the risk is greatly minimized.
• Another, but completely legal example, is software escrow. Here, for example, a documentation or source code is deposited with a neutral third party.

Because of the adaptation of the escrow mechanism in the digital world, the term is familiar to more and more Internet users.