When the platform officially launches in Q1 2018, there will be Milestone-Based Payments with Refund option using Smart Contracts in the etheruem blockchain.
At FYN, one of the key features is fraud protection for backers. Currently, there is no existing crowdfunding platform that offers any form of protection for backers against failed projects.
We are solving 2 major roadblocks that traditional crowdfunding platforms face when they try to implement milestone based payments:
- Regulated financial entities that provide escrow services to hold funds raised by a company typically charge a high flat fee plus 1%–5% of the funds held on a yearly basis. Obviously, this will not make sense for a huge majority of projects that raise less than 100k due to the cost. We are using Smart Contracts as a trustless, transparent escrow, where creators can only withdraw crypto-currency after they reach certain targets promised to backers. The cost to do so is relatively cheap compared to traditional escrow options.
- Cost of processing refunds is extremely high with fiat currency. Wire transfer and administrative processing fees could easily run up to 50 USD or more. Most donations on Kickstarter range anywhere between $10–$200, and it is likely that the refund costs might even cost more than the remaining backed amount. With blockchain technology, the fees can be reduced to less than $1 which makes refunds practical.
Besides outright scams, many projects also fail because of poor business decisions, lack of talented staff, lack of communications etc., which results in the projects not being able to deliver on their promises. We believe with this milestone system, creators will be held accountable and provide proper updates to backers, who have the power to withhold or terminate payment throughout the entire project lifecycle.
For more information, please read how fundYourselfnow is improving crowdfunding via blockchain.