Escrow
A neutral holding arrangement where funds are held by a trusted third party until predetermined conditions are met.
Full Definition
Escrow is a financial arrangement where a third party holds and regulates payment of funds required for two parties in a transaction. The funds are released only when all conditions of the agreement are satisfied. In securities offerings, escrow protects investor funds until specified milestones (like reaching a soft cap) are achieved.
Why It Matters
On Sails.to, investor funds are held in escrow during the fundraising period. If the soft cap isn't reached, funds are returned automatically. Once the threshold is met, funds are released to the issuer and securities tokens are distributed to investors.
This mechanism provides crucial protection: investors know their capital won't be deployed into underfunded ventures, and issuers gain credibility by demonstrating proper fund management practices.
Sails uses smart contract-based escrow for on-chain transactions, providing transparent, auditable, and automated fund management.
Related Terms
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