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I'm wondering if there could be a block chain approach to selling goods and putting money in an escrow-like state until the goods are received.

I'm envisioning the following scenario.

1) Buyer puts money into escrow with seller and adds it to the block chain. In this state the buyer can no longer spend the money, but neither can the Seller.

2) Once seller sees the money in escrow on the blockchain associated with their account, they release the goods to the buyer.

3) Once the buyer receives goods they approve the escrow.

4) The seller takes ownership of the funds.

I think this helps to protect buyers who get ripped off by sellers promising goods, accepting funds then never handing over the goods.

Obviously in this situation a buyer could decide not to approve the escrow, but they would have no reason to do that because the money is not spendable by them anyway.

So my question is, is there something like this or could something like this be created?

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I would think it has been asked several times, but not in this detail. The way to use escrow would be a „2 of 3 multisig“ transaction. A search in the forum reveals a lot of links. Also very useful is the wiki and of course the bitcoin.org webpage. There are even wallets providing multisig functions. But still it is not „an easy usecase“. Data has to be exchanged between the parties, and as far as I know, there is no protocol specified. So it is still possible to make errors and loose funds :-(

Oh, and then there is Andreas‘ book „Mastering Bitcoin“, which explains even more escrow (3 of 5 combination). Worthwhile to read, and also online available.

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Using a multi-signature transaction is a way to escrow; there is also a way to split-key pair a transaction.

But to be honest; Bitcoin, was and still is designed by nature to be used without a trusted 3rd party. So much so it is the central focus of Satoshi Nakamoto's White Paper. I would consider the "Lack of a Third Party" to be the leit motif of his piece.

This also ring's true to the very eary days of eBay, where there was no "Seller Protection", or "Buyer Protection", except by means of their credit card agreement and contesting charges. Many thought eBay was a ridiculous idea for that very reason. And yes fraud happened, and yes now there are 3rd party protections in place.

However Bitcoin in general is not "3rd Party Friendly" by itself. You can use the methods I listed above, there are also escrow services available which will act as a financial intermediary for a fee.

If you're shipping something to someone and expect payment, how can you prove differently when the buyer complains you shipped him a cinder-block wrapped in bubble wrap.

For this reason, even multi-sig transactions or a split key option is not advisable if you have reason to not trust the 2nd party.

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  • Right, the buyer could claim that the seller sent a brick just as if the buyer paid upfront. The difference is in what I'm purposing, the buyer wouldn't be able to get the money back without both parties closing the escrow. So the money would be unspendable by both parties until they came to an agreement. Sure the buyer could keep the money in escrow just to spite the seller, but why? And wouldn't this be better than what we have?
    – MikeSchem
    Sep 6, 2018 at 23:01
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This question might be better for the Ethereum Stack Exchange. ETH developers have created a variety of escrow contracts (eg. this or this). I don't see any reason why your idea couldn't be implemented.

(note: I wanted to post this as comment, but I don't have enough points here.)

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