Multisig vs Escrow vs Finalize Early, and what they mean.
What is Multisig and how it works:
Multisignature allows the creation of 2-of-3 escrow services. For example: when Buyer wants to pay the Vendor, buyer sends a transaction to a multisignature address, which requires at least two signatures from the group “Buyer, Vendor and Admin” to redeem the money. If Buyer and Vendor disagree on who should get the money (Buyer wants a refund, whilst Vendor believes he fulfilled his obligations and demands the payment), they can appeal to Admin. Admin grants his signature to Buyer or Vendor, so one of them can redeem the funds.
Multisignature scheme is also implemented in other non-bitcoin-based cryptocurrencies. Usually it replicates the same functionality via several distinct signatures.
What is Escrow and it’s disadvantages against multisig:
Escrow refers to funds held by marketplace on behalf of transacting parties. If Buyer and Vendor disagree on who should get the funds, the admin or moderator of the marketplace steps in and decides who should get the funds based on the situation.
Escrow model contains flaws. For example, marketplace could run away with users funds anytime they want, as ‘Agora’ and some other marketplaces did.
About Finalize Early and when should You use it:
Finalize Early is a process where Vendor receives Buyers funds immediately. You should never use Finalize Early with new or untrustworthy vendors, always read reviews about the vendor you’re dealing with!