With the evolution of technology, the blockchain has redefined itself into a boon for the industries. This shared ledger promises decentralization, transparency and immutability, which open new realms of possibilities for sharing and exchanging value.
Smart Contract
A Smart Contract is the substitution of the intermediaries involved in the execution of contracts such as escrow.
It is a computer program which is a set of codes created through Solidity programming language to automate the exchange of value between two parties according to the agreed-upon conditions. Besides eradicating the need for third-party for verification of transactions, it is responsible for eliminating the ambiguity in the whole process
A blockchain network is a perfect platform for Smart Contracts to exist as it provides decentralization and immutability, which consequently makes the amalgamation much more reliable and credible.
Escrow
An escrow account ususally involves two parties that are conducting trade that set up the account with a third party. This third party then receives a list of instructions that dictate when and how money relating to the transaction is collected and released. By using the escrow account, both parties are satisfied knowing that a failsafe exists, and the other party cannot default on payments.
Escrow accounts have tons of utility of for everyday online transactions. If two people from different parts of the world wish to exchange products or services, an escrow account helps facilitate these transactions without them ever having met, or building trust that one will not default on payment or delivery.
To Sum Up
Blockchain has smart contracts, which in this case play the same role as conventional Escrow. Smart contracts help when it comes to the execution of agreements. Unlike conventional Escrow, smart contracts do not act as third parties
but facilitate direct transactions between parties to the agreement. And the contract is only executed once specified conditions are met.
With smart contracts instead of third parties you are assured of;
Faster transaction capabilities because it is automatic and directly between parties
Cost effective because it does not involve any third party that will require fees for service rendered
No human error because of the computational feature of the smart contracts