1. High-Level System Interaction

The escrow service uses a two-party agreement protocol to enforce fair execution of trades. Each party deposits assets into a smart contract vault that cannot be altered unilaterally. The protocol ensures that assets remain locked until either the agreed terms are fulfilled, the escrow is canceled, or the agreement expires.

• Initiation: Party A deposits assets into escrow, creating a transaction identified by a unique UUID.
• Counterparty Assignment: Party B may be named at initiation, or becomes the first outside account to join by depositing assets.
• Two-Party Lock: Only Party A and Party B may deposit further assets into that escrow settlement vault identified by the UUID.

2. Supported Assets

The service supports ERC-20, ERC-721, and ERC-1155 tokens, enabling secure settlement of fungible tokens, NFTs, and multi-asset bundles under a single agreement framework.

3. Agreement Protocol Overview

At the heart of the escrow service is a two-bucket agreement protocol that ensures both parties reach consensus before any settlement occurs. This mechanism prevents unilateral changes, guarantees fairness, and provides a transparent path to resolution.

• Dynamic Buckets: Each escrow transaction maintains two “buckets” of assets — one for Party A and one for Party B. Both parties can add or remove assets from their respective buckets during the active period.
• Iterative Agreement: At any time, either party may signal that they agree to the current state of both buckets. However, if the other party changes their bucket afterward, the first party’s agreement is automatically revoked, restoring them to an unagreed state.
• Resolution: When both parties have simultaneously agreed to the same two buckets of assets, the escrow is marked as resolved. At this point, assets are automatically distributed as agreed.
• Base Terms: In addition to asset buckets, both parties may agree on a base set of terms that apply to the resolution. Examples include:
  • A 24-hour settlement delay following bilateral agreement, allowing for buyer’s remorse or cooling-off periods.
  • Delivery of assets on a specific future date, which could support agreed tax deferment strategies.
  • Custom terms submitted by one or both parties that extend the transaction beyond the smart contract, for example by referencing legal agreements or arbitration frameworks.
• Cancellation: Either party may cancel the escrow at any time within the 1-month agreement period. Upon cancellation, all assets are returned to their original owners.
• Safety Against Indefinite Lock-Up: If no resolution is reached and the escrow remains inactive, it may be cancelled within 1 month. Any unclaimed funds left after 1 year are marked as abandoned property, which can then be processed by the contract owner in accordance with jurisdictional requirements.

4. Escrow Lifecycle

• Completion: When agreement terms are satisfied, escrow closes and assets are released to the designated recipients.
• Cancellation: Within 1 month, either Party A or Party B may cancel the escrow, returning assets to their original owners.
• Abandonment: After 1 year, any funds not reclaimed by either party are treated as abandoned property. These may then be claimed from the contract and processed according to the jurisdiction governing the transaction.
• Finality: Once an escrow is completed, canceled, or marked abandoned, no further deposits may be made.

5. Contract Design

Each escrow is represented as a struct mapped to a unique UUID. This struct records Party A, Party B, deposited assets, and current status (active, completed, canceled, abandoned). By using a deterministic agreement protocol, the contract enforces predictable, tamper-proof execution across multiple concurrent escrows.

6. Risk Safeguards & Governance

• Agreement Protocol: Guarantees that both parties are bound by the same immutable contract terms.
• Asset Safety: Deposited tokens remain locked until outcome resolution.
• Abandoned Assets: A special function allows the contract owner to list and claim abandoned escrows after the 1-year period.
• Compliance Ready: Escrow can integrate AML/KYC checks when required in institutional contexts.

7. Participant Roles

• Party A: Initiates escrow with a deposit, optionally names Party B.
• Party B: Joins the escrow by contributing assets, activating the two-party lock.
• Contract Owner: Maintains oversight, lists abandoned assets, and processes them per jurisdictional requirements.

8. Institutional Relevance

The On-Chain Escrow Service provides a trustless settlement layer for OTC trades, asset swaps, and complex bilateral agreements. Its unique agreement protocol delivers predictable, auditable execution for institutions seeking to minimize counterparty risk.

This service eliminates the historic risks of bilateral exchanges. Long gone are the days when two parties would agree to an exchange of assets, only for one counterparty to fail to deliver their side of the bargain, leaving the other to pursue costly lawsuits or law enforcement remedies. Instead, the escrow contract enforces settlement automatically — ensuring that assets are only released once both parties have agreed to the same terms.

• Counterparty Risk Mitigation: Both parties deposit assets upfront, preventing default once locked in.
• Multi-Asset Flexibility: Supports fungible tokens, NFTs, and mixed asset classes in one agreement.
• Short-Term Resolution: One-month cancellation window plus one-year abandonment rule ensure clarity and prevent indefinite lock-up.
• Auditability: Escrow agreements and outcomes are recorded on-chain, ensuring institutional-grade transparency.
• Compliance Ready: AML/KYC checks can be enforced for both parties to meet regulatory requirements.
• Arbitration Support: Terms of service may establish when arbitration is appropriate, how it will take place, and who is responsible for costs — providing a clear legal framework for exceptional cases.