Escrow

Decentralized escrow securing blockchain transactions between untrusted parties

Escrow

V2 - Looking for V1 documentation? See Escrow V1 (Legacy).

Kleros Escrow is a decentralized escrow platform that secures blockchain transactions between untrusted parties. It combines smart contract automation with Kleros’ decentralized arbitration system to provide trustless transaction security for digital commerce.

Traditional online transactions require trust between strangers, creating opportunities for fraud and disputes. Kleros Escrow eliminates this trust requirement by securing funds in smart contracts, allowing structured settlement negotiations, and delivering decentralized arbitration through Kleros Court when agreements fail.

---

Key Capabilities

Smart Contract Security

Funds secured in smart contracts before service delivery

Settlement Negotiation

Structured negotiation process for partial disputes

Multi-Token Support

Pay with ETH, USDC, USDT, DAI, or any ERC20 token

Decentralized Arbitration

Kleros Court resolves disputes when agreements fail

Zero Platform Fees

Completely free to use—only pay network gas fees

Automatic Enforcement

Smart contracts automatically execute rulings

---

How It Works

1. Creation

   Buyer creates escrow transaction specifying seller, amount, deadline, and terms.

2. Fund Locking

   Payment is secured in the smart contract using ETH or chosen token.

3. Delivery Period

   Seller provides agreed service/product before the specified deadline.

4. Resolution

   Transaction concludes through payment, settlement, manual deadline execution, or arbitration.

---

Resolution Mechanisms

Kleros Escrow V2 provides multiple ways to resolve transactions:

Direct Payment

When parties fully agree

• Full Payment: Buyer releases entire amount to seller when satisfied
• Full Refund: Seller returns entire amount to buyer if unable to deliver
• Partial Transactions: Either party can process partial amounts for completed portions

Settlement

When parties partially disagree

The structured negotiation process:

1. Proposal: Either party proposes a settlement amount
2. Counter-Proposal: Other party can propose a different amount
3. Agreement: When one party accepts, funds distribute automatically
4. Escalation: If no agreement after timeout, either party can raise a dispute

Proposing a settlement does NOT transfer funds. Money only moves when one party explicitly accepts the other party’s proposal.

Deadline Execution

When deadline passes

After the deadline, anyone can trigger execution to transfer remaining funds to the seller if:

• No active disputes exist
• No settlement negotiations are pending
• The deadline has elapsed

This requires a manual transaction call—it is NOT automatic. Any address can trigger it once conditions are met.

Dispute Resolution

When settlement fails

1. Fee Payment: Both parties pay arbitration fees within timeout
2. Evidence Submission: Parties submit supporting evidence
3. Jury Selection: Kleros randomly selects impartial jurors
4. Ruling: Jury decides outcome based on evidence
5. Enforcement: Smart contract automatically executes ruling

Arbitration fees are reimbursed to the winning party. If one party fails to pay fees within the timeout, the paying party wins automatically.

---

V2 Improvements

Feature	Description
Universal Token Support	ETH, popular tokens (USDC, USDT, DAI), or any ERC20 token
Automatic Safety Checks	System validates token compatibility
Structured Settlement	Formal proposal/acceptance with clear transfer rules
Settlement Protection	Timeout period prevents rushed arbitration
Streamlined Disputes	Automatic refunds for overpayment, clear timeout logic

Token Selection

1. Choose Payment Type

   Select ETH, pick from popular tokens, or enter a custom token address

2. Verification

   System verifies the token works with Escrow

3. Set Amount

   Enter your amount and proceed with the transaction

Token transactions may have maximum amount caps set by governance for risk management.

---

Use Cases

Service Contracting

A marketing agency and client use escrow for a social media campaign. If the client is partially satisfied, they can propose a settlement amount. The agency can accept, counter-propose, or proceed to dispute resolution.

Cryptocurrency Trading

Traders exchanging ETH for assets on other blockchains use escrow for security. One party locks ETH while the other transfers external assets. If issues arise, parties can negotiate or use dispute resolution.

Freelance Projects

A company hires a developer for a web application. The developer works knowing payment is secured, while the company can test the deliverable and release payment, negotiate, or dispute if necessary.

Physical Product Sales

An artist sells custom artwork to a collector through escrow. The buyer has until the deadline to inspect. If there are quality concerns, the buyer can propose partial payment or raise a dispute.

---

Cost Structure

Cost Type	Amount
Platform Fees	Free - Kleros Escrow V2 has no platform fees
Network Fees	Standard blockchain gas fees for transactions
Dispute Costs	Arbitration fees only if you raise a dispute (refunded if you win)

The settlement negotiation feature often prevents disputes entirely by enabling parties to reach partial agreements, saving on potential arbitration costs.

---

Benefits

For Buyers

• Payment Protection: Funds remain secure until delivery confirmation
• Quality Assurance: Clear recourse for non-delivery or substandard work
• Flexible Resolution: Settlement negotiation for partial completion
• Fair Arbitration: Access to impartial Kleros Court
• Partial Payments: Release funds incrementally as work progresses

For Sellers

• Payment Guarantee: Verified fund availability before work begins
• Deadline Execution: Trigger payment release after deadline passes
• Dispute Fairness: Equal standing with evidence-based decisions
• Settlement Rights: Equal ability to propose settlement amounts
• Partial Payments: Negotiate compensation for completed portions

For Ecosystem

• Trust Infrastructure: Enables commerce between unknown parties globally
• Fraud Reduction: Smart contract security deters scammers
• Decentralized Arbitration: Reduces reliance on centralized services
• Market Efficiency: Lower barriers for digital commerce
• Transparency: Open-source contracts and public dispute records

---

Best Practices

For Buyers

• Set realistic deadlines (execution requires manual triggering)
• Define clear deliverables
• Keep communication records for potential disputes
• Consider milestone payments for large projects

For Sellers

• Verify escrow funding before starting work
• Document progress and communications
• Communicate proactively about delays
• Understand deadline implications

For Both Parties:

• Use detailed descriptions with clear terms and success criteria
• Keep all communication records as evidence
• Understand that settlement proposals don’t transfer funds until accepted
• Consider settlement before escalating to disputes

---

Getting Started

1. Connect Wallet

   Use MetaMask, Rabby, or any compatible Web3 wallet

2. Choose Payment

   Select ETH or your preferred token

3. Create Transaction

   Specify counterparty, amount, terms, and realistic deadline

4. Fund Escrow

   Transfer payment to the secure smart contract

5. Track & Resolve

   Monitor status, then release payment, negotiate settlement, or dispute

---

What’s Next?

Create Escrow

Start a new escrow transaction

Integration Guide

Build escrow into your application

Dispute Resolution

Learn how Kleros Court works

---

Quick Links

Launch Escrow

Open the Escrow application

Contract Addresses

Escrow V2 deployment addresses