One of the most powerful financial instruments the world will soon adopt through Chainge is without a shadow of a doubt the decentralized escrow contract. With infinite implementation potential, escrows will soon replace various types of traditional contracts and open up a new transactional era when it comes to crypto OTC, services, product sales, long distance collaborations, betting and more. Why? Because right now, the Crypto sphere is most definitely in need of a safe and efficient way for users to buy, sell, and swap without the risk of losing money to online scams and fraud.
The main advantage virtually anyone can benefit from will be security. No one will ever have to doubt the safety of an agreement and will be able to do business with complete strangers in a safe, decentralized environment — which is a huge step towards an ideal, secure financial ecosystem.
Another notable perk is indisputably the low service cost. Unlike any other escrow service provider, Chainge will add a mere 0.5% and let’s face it, that’s pretty much close to nothing, compared to the 5%, 10% (or above) which are considered to be the best deals around at the moment.
Speed is already self-implied. Just like all other Chainge functionalities, everything will be done in the blink of an eye with minimal effort on the users’ part. You’ll be able to handle complex transactions with anyone anywhere in the world, without meeting or knowing each other, while having the certainty that all contractual conditions will be met.
Just to make sure you get a clear idea of how many instances will be quickly resolved with an escrow contract, we prepared a few (video) case studies you can check out below:
Let’s say for example you want to make an OTC crypto transaction directly with a user from another part of the world. You need to buy BTC from him but need the assurance that he will deliver the BTC to you. After reaching an agreement with him outside of the Chainge app, all you have to do is initiate an escrow smart contract, add the collateral, the specifics of your deal and the performance bonds if the case and you can then wait for the counterparty to deposit the BTC. Once the BTC has been deposited you release the funds (aka the collateral) and all done.
Or maybe you want to buy bulk products from a seller that’s on the other side of the world. Some problems will definitely arise; such as: the lack of common banks, money transfer procedures, timing and safety. The best way to make sure you can trust your seller will be to initiate a smart contract between the two of you. Then once you deposit the collateral, no one can touch it until you get your product. This way you’re both safe, there’s no need for tedious paperwork or endless red tape. As long as you both agree to some basic terms, you’re good to go.
The same scenario applies when it comes to providing or receiving any type of online freelance services or even buying/selling web domains. Not to mention, freelance platforms apply fees as high as 30% which is straight out ridiculous.
Now, let’s go through a step by step approach to the escrow contract completion process:
1. The party who wants to place the assets (collateral) in the escrow initiates the escrow contract. (usually the buyer but not necessarily)
2. The contract initiator sets the contract parameters, including the type and amount of assets to be placed in the escrow contract
3. The contract initiator sets the type and amount of performance bond(s) that he/she and/or the counter-party is required to place
4. At the time of contract initiation, the initiator will simultaneously place the assets to be deposited in the contract and the possible performance bond that he/she needs to add into the contract at one time.
5. After the initiator has successfully initiated the contract, and before the counter-party accepts the contract, the initiator can withdraw the funds placed at any time by cancelling. When the initiator initiates a contract that requires the counter-party to add a performance bond, the performance margin will be placed in the contract when the counter-party accepts it. If the counter-party does not have enough assets to put into the contract, the acceptance cannot be completed successfully.
6. When the counter-party accepts, the escrow contract will have the “in progress” status
7. When a contract is “in progress”, both the initiator and the counter-party have the right to initiate the cancelation of the contract. When one party initiates cancelation and both parties agree, the assets and performance bond placed in the contract by the initiator will be returned to the initiator and the performance bond (if any) placed in the contract by the counter-party will be returned to the counter-party. If the escrow is successfully completed, the performance bond(s) go back to the parties and the collateral is released by the buyer to the seller.
8. For contracts that are “in progress”: 99.5% of the assets held in the escrow will be given to the counter-party as long as the originator chooses to release the funds, and the performance bond will be returned to the originator while the counter-party’s performance bond (if any) will be returned to the counter-party
9. 0.5% of the assets collateralised represent the Chainge service fee for the completion of the entire transaction.
The Performance bond
Given the flow above, please take into account the following important info so that you can successfully complete an escrow smart contract deal with both parties 100% satisfied:
- the performance bond acts as additional insurance for one or both parties involved in the escrow contract. When a performance bond is placed by party A, then party B cannot cancel the escrow without party A’s consent and vice-versa. In this case it’s in both parties’ best interest to come to an agreement or the assets (collateral + performance bonds) will stay put in the smart contract until they do.
- The collateral and performance bond(s) to be placed in the contract can only be spot assets.
- If BOTH parties use CHNG as a performance bond, then you will benefit from a 40% discount applied on the 0.5% service fee, thus reducing the service fee to 0.3%
- In this first version of the Escrow module, Chainge n’or any other third party won’t have the power to mediate or release the funds if the parties don’t come to an agreement on their own. We are not in any way liable for the rare cases where users categorically refuse to reach an understanding.
All in all, the decentralized escrow module is a big first step to building a free, secure future of online transactions. Which can very well serve as a financial system for the upcoming Metaverse. A virtual ecosystem where you’ll be able to buy or sell anything without worrying about trust, is now possible.
So, sellers, buyers & business owners it’s time to forget about insecure, lengthy, tedious contracts and prepare to grow your transactional efficiency to 1000% percent with the upcoming Chainge Decentralised Escrow solution.
Very soon, the decentralised escrow will be launched and we’ll be back with app walkthroughs, more info on this revolutionary new feature and a dedicated Q&A with DJ Qian.