How “Backer Insurance” Works on Pledgecamp
After a quick glance around the crowdfunding landscape, and you’ll find that there is a trust problem. Trust is an abstract concept but it’s vitable to how the internet operates today, whether you’re looking to hire a freelancer online, buy consumer packaged goods from an ecommerce site, or back an entrepreneur on a crowdfunding platform.
The core problem is a technical one: the internet was never designed to be a trusted system. It was designed to be a hyper-efficient way to send information, via packets, from one place to another. For example, your internet browser can just as easily access a safe, trusted site (Microsoft’s website) as it can access someone impersonating a trusted agent in order to scam you. If you mistype a URL by one letter, you are on your own.
Why We Started Pledgecamp
We started Pledgecamp to revolutionize crowdfunding. Crowdfunding has been around for nearly a decade, with popular sites allowing people to back projects or donate funds to those in need. The technologies being employed are standard: a website, an HTTPS connection, a PCI-compliant payment processor, and a healthy dose of faith that all actors will act fairly.
But we think there’s a better way to do things, building from the ground up. Pledgecamp is different because our platform is built on top of blockchain technology, allowing for transparency and borderless participation of funders and backers.
Furthermore, we’re always innovating and creating new features to align the interests of both backers and creators. One such feature is called “Backer Insurance”.
Introducing Backer Insurance
Backer Insurance is a concept that allows a project creator to decide to withhold 0–50% of their funds until milestones are hit. To incentivize people to use this feature, we have decided to lower the platform fees charged for those projects that use Backer Insurance. The larger the amount withheld, the lower the platform fee goes.
To ensure compliance, we create a smart contract with terms that cannot be changed. This immutable contract serves as a line in the sand — both the backers and the creators know what constitutes completion of the milestone and how much money is “unlocked” by reaching the milestone.
There are several reasons why Backer Insurance is helpful. First, it creates a level of transparency in the project. If a creator is not willing to withhold even a small amount of the proceeds, should I trust them? We can imagine a social convention where backers insist that new creators use Backer Insurance.
Second, it motivates creators to work towards completing their project. Delays are nothing new in the world of crowdfunding but this system provides a clear monetary reward for making progress and shipping products.
And third, Backer Insurance incentives creators to provide clear updates to backers. Communication once a campaign has ended is key, and Backer Insurance provides a “carrot and stick”. Importantly, backers can decide to revoke the remaining balance in the smart contract if they feel that the creators are not being honest or straightforward.
Note, projects that do not reach their funding goal will not be funded at all, so Backer Insurance will not come into play.
Conclusion
At Pledgecamp, we are working to make crowdfunding more secure, seamless, and accessible. There are opportunities for hundreds of millions to participate in this new economic activity — those who are currently excluded due to high transaction fees, lack of a bank account, language barriers, or more.
Leveraging the power of the blockchain, we’re building a decentralized crowdfunding platform that allows users to pay in fiat or crypto, have an immutable record of transactions, and enter into binding smart contracts that reduce spam and fraud.
As we approach our launch date, we will continue to share more information about the Pledgecamp team, platform, and our unique features.
Want to learn more? Please visit our website or official Telegram group:
