Non-Custodial Escrow

Non-custodial escrow is a mechanism where assets are held by a smart contract rather than a central entity, ensuring that neither the buyer nor the seller can unilaterally access the funds until specific conditions are met. This is fundamental to decentralized derivatives, as it removes the need for a trusted clearinghouse.

The smart contract acts as an automated judge, releasing collateral based on predefined outcomes, such as price targets or expiration dates. Because the assets remain on-chain and under the control of the contract, the risk of custodian bankruptcy or theft is eliminated.

This model is essential for building trustless financial products.