Escrow Contracts

When DAOs get Real

Escrow contracts are commonly used when two or more parties are involved in a transaction, and a third party is needed to hold the funds until certain conditions are met. Here's an example of how to use an escrow contract:

Let's say that Alice wants to buy a car from Bob, and they don't trust each other enough to send payment or release the vehicle without some form of guarantee. They agree to use an escrow contract to facilitate the transaction.

1. Alice and Bob each send the agreed-upon funds to the escrow contract.

2. The contract holds the funds until the conditions for releasing them are met. For example, the contract might require Alice to inspect the car and confirm its condition before releasing the funds to Bob.

3. Once the conditions are met, the contract releases the funds to the appropriate party. In this case, if Alice confirms that the car is in good condition, the funds are released to Bob, who can deliver the vehicle to Alice.

What can a DAO as a legal entity do?

Many powerful real-world patterns can be replicated and intermediaries removed using “smart contracts” like an escrow pattern. Each escrow pattern IRL comes with an intermediary (lawyer, broker, agent) that is often expensive and not user-friendly. They go on vacation, sleep, and dare to retire. Perhaps in the world of Turing complete blockchain, these intermediaries are an unnecessary friction cost. The FreelancoDAO smart contract has powerful features, including the ability to lock funds or NFTs into a smart contract until performance is completed. This pattern is peer-to-peer between Bob and Alice, with the additional safeguard of having a “resolver” if the deal goes haywire. In other words, if Bob and Alice can’t agree, they decide to bring in a 3rd party to resolve the dispute, similar to an arbitration proceeding.

FreelancoDAO is a non-custodial platform that enables trustless transactions between clients and freelancers. By leveraging smart contracts, we can ensure that payments are made only when the agreed-upon deliverables are met. This provides a transparent and secure way to conduct business without intermediaries.

Other perks, besides being noncustodial by a 3rd party, is that certain funds locked in the escrow can earn yield while the escrow is in place using the FreelancoDAO vault protocol developed by UniSwap. Money never sleeps.