Escrow

Escrow is the practice of holding funds in a neutral arrangement until specific conditions are met. In Bitcoin, escrow can be implemented either by trusting a third party (custodial escrow) or by using cryptographic primitives to make the escrow trustless (script-based or HTLC-based escrow).

The Bitcoin-native escrow patterns:

• 2-of-3 multisig. Buyer, seller, and a trusted arbitrator each hold one key. Funds release with any two signatures. In the normal happy path, buyer + seller sign together to release to seller. If there's a dispute, the arbitrator takes a side. This is the canonical Bitcoin escrow setup; widely used in peer-to-peer Bitcoin trading platforms like Bisq and HodlHodl.
• HTLC-based escrow. Funds are released by revealing a preimage. The seller holds the preimage; they reveal it after delivering the goods. If they don't reveal it by a deadline, funds refund to the buyer. Used in atomic swaps and submarine swaps.
• ZKCP. For trading digital data, where the seller proves cryptographically that they have what they claim before payment releases.
• Time-locked escrow. Funds release automatically to a specific party after a deadline if no other action is taken. Useful for deadlines and dead-man's-switch patterns.

Why script-based escrow beats trusted-party escrow:

• No third party can run off with the money. With a 2-of-3, the arbitrator only ever has 1 signature - never enough to spend alone.
• No custodial liability. The escrow agent never custodies the funds; they just hold a signing key.
• Auditability. The escrow conditions are on-chain script logic, not contract language interpreted by a court.
• Lower cost. No escrow-as-a-service fees beyond the small Bitcoin transaction fees.

Real-world Bitcoin escrow services in 2026: Bisq, HodlHodl, Robosats (Lightning-based), and various smaller peer-to-peer marketplaces. Most reputable Bitcoin trading happens through some form of trustless escrow rather than custodial intermediaries.

See HTLC for the primitive underlying Lightning-based escrow and Hierarchical Multisig for the multisig patterns underlying on-chain escrow.