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What is Escrow?
Imagine you want to buy a brand new, beautiful toy, but the seller is far away and you're a little afraid he won't send you the toy.
And the salesman is a little afraid of you, thinking you won't pay him for the toy.
or
The parties do not know or trust each other.
The parties cannot physically meet or do not have a secure way to conduct the transaction.
The parties are commercial companies and want to expedite the transaction.
As such, Escrow is a fair arbitrator between the two of you.
How does it work?
- You give the money to the referee (that's the Escrow) and tell him:
"Až mi prodavač pošle hračku, dej mu peníze."- The seller again tells the referee:
"Až dostanu peníze, pošlu tu hračku."- The referee then waits for everything to happen, and then gives you the toy and the money to the seller.
Obchod skončí úspěšně.– in the world of cryptocurrencies, this can be represented by a signature, but more on that later.
Why is Escrow important?
- Safety
Thanks to Escrow, you know you won't get a fake toy and the seller knows they'll get paid.- Confidence
Escrow helps build trust between the buyer and seller, even if they don't know each other.- protection
If something goes wrong, the referee (Escrow) will sort it out.
Why it is not common in our financial world
Escrow he is like a fair referee who makes sure everyone is satisfied.
In our current environment, this intermediary is represented by banks.
If a transaction takes place between two entities, it is better to have an intermediary for greater trust.
In the Czech Republic, Česká Spořitelna attempted to do this, but the project was unsuccessful. (dohodnuto.cz)
And what is it like in the world of Pi Network?
Coinskro – an application ready for mainnet, running on testnet, but fully functional outside of the pi browser for implementing Escrow transactions.
Third party – you can basically ask anyone who is trusted by both parties to perform a mediated transfer of Pi for the participants.
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