Escrow refers to a financial arrangement where a third party temporarily holds funds or assets on behalf of two parties involved in a transaction. In the context of digital currencies, escrow services are used to ensure trust and security during trades between buyers and sellers.When a transaction is initiated, the buyer sends the cryptocurrency to the escrow service instead of directly to the seller. This service verifies the transaction and holds the funds securely. Once both parties fulfill their agreed terms—like delivery of goods or services—the escrow releases the cryptocurrency to the seller.This process protects both buyer and seller. The buyer can be assured that their funds are safe until they receive what was promised. Meanwhile, the seller has the guarantee that payment is secured before they complete the transaction. Escrow services are especially useful in peer-to-peer exchanges and marketplaces where fraud or miscommunication could occur. By adding an extra layer of security, escrow helps facilitate smoother transactions and builds trust among users.