Escrow My Bits is a brand new service designed to handle several different kinds of Bitcoin escrow. I recently spoke to the service's creator, Josh, to learn more about what it is and how it works.
For those who are willing to place their full trust in Escrow My Bits, the company offers two types of traditional escrow, where they hold all of the users' funds. The first works exactly as you would expect. The service simply holds Bitcoin while two users work out a deal. If everything goes smoothly, the money is delivered to the intended recipient. If their is a dispute, Escrow My Bits or another user, chosen ahead of time, will function as an arbiter and will deliver the money to the party that they think most deserves it. The money can also be split between the parties if that seems necessary.
The second type of escrow functions similarly, but the transaction is pegged to a fiat currency with a service called Bitreserve. This means that the value of the Bitcoin delivered at the end of a deal will be exactly the same as it was at the beginning, even if the Bitcoin exchange rate changes during the escrow.
Multisignature escrow is also available for those who are less apt to place their trust in a third party. In this scenario, Escrow My Bits or the chosen arbiter only holds one of three keys, while two of the three are required to sign a transaction. This means that the money cannot be stolen while in escrow, because no one can move it unless one of the other users also signs the transaction. This is much more secure and is highly recommended for anyone dealing with large sums of money.
Josh also told me about a few other available features, such as the ability to release escrow in multiple stages. This allows, for instance, a user to release half of the escrow once half of the recipient's job is complete. Josh has also developed and is currently improving an API that allows other services to use Escrow My Bits for escrow. In the future, he hopes to enable contract escrows, where large groups of people can pool money together for things like group buys.
If you have listened to any interviews during our weekly podcast, you probably know that we always like to ask our guests about a more personal story related to Bitcoin. We've never tried to include the question during an off-air interview like this, but I thought it would be fun to try. Here is Josh's crazy story:
When I first got into mining I was looking into buying some hardware to mine with. So I found on Bitmit (before it closed) a guy selling a Butterfly Labs 60 GH/s unit. We spoke about the unit and worked out a deal. I made a deposit into escrow and he sent the unit.
After a week or so the unit shows up. I looked at what it was supposedly shipped in, a regular mailed envelope. I took a picture just to make sure Bitmit would know exactly what the guy sent me. I opened the envelope to find a piece of paper with the words "BFL 60 GH/s" or something along those lines. The seller then went on to argue with Bitmit that he was only selling a piece of paper that said, "BFL 60 GH/s," not a real miner.
Escrow My Bits will be launching in beta soon and Josh hopes to get it fully launched sometime in November. To keep track of updates, you can follow @EscrowMyBits on Twitter. You can also email [email protected] with any questions or comments.
If you still want to learn more, this video explains the service in under a minute: