This feature could be revolutionary for crowdfunding platforms. In fact, a recent debacle in the gaming industry demonstrates how valuable backer insurance can be.

Shenmue III: The dream that turned into a nightmare

Image Credit: wccftech

A little over three years ago, the story of Shenmue 3 was a shining example of everything good about the crowdfunding industry.

Here’s a little history.

Way back in 1999, Shenmue 1 came out to a lot of fanfare. Back then, it was the most expensive game ever made with a budget ranging from $47 million to $70 million. Everything about the game was ahead of its time from its open world structure to its character designs. Two years later Shenmue 2 came out, which was also highly regarded and the game quickly garnered a cult following.

Even though the Shenmue games were popular, they were still, unfortunately, commercial failures. They weren’t able to break even and since then the game went to “development hell.” Director Yu Suzuki tried his best to revive the game, but all of his attempts failed. The fans petitioned to bring the game back but it didn’t seem like the game was going to see the light of day any time soon. That was when E3 2015 happened.

Revival and Kickstarter Campaign

During the E3, the biggest gaming conference, Suzuki made a surprise announcement that Shenmue 3 was coming back and they were looking for funds from fans via their Kickstarter campaign. The reaction to this announcement was overwhelming. Fans all over the world lost their minds.

Image Credit: GameTrailers live reaction to Shenmue 3

There is a 4-hour compilation video of people reacting to the Shenmue 3 announcement. As expected, the fan response was overwhelming.

Shenmue 3 became the fastest game to raise $1 million in crowdfunding, in an hour and 44 minutes, and the fastest to raise $2 million, in eight hours and 43 minutes. Finally, Shenmue 3 ended up with 69,320 backers and a little over $6.3 million on Kickstarter. Overall, they managed to make $7,179,510 from 81,087 backers across multiple platforms. Suzuki and his company Ys Net had the budget needed to start working on the project. However, things then took a bad turn.

The Steam debacle

As the game started gaining more hype, Ys Net partnered with the German publisher “Deep Silver” to publish Shenmue III globally. They then took a decision which completely blindsided their backers. Initially, the backers invested in the game knowing that it would be released on Steam, a popular video game digital distribution platform. However, Ys Net and Deep Silver announced that Shenmue 3 will only be released on Epic Game Stores (EGS), a rival platform, as an exclusive feature.

The backers felt that they were being cheated and started demanding refunds. A fan replied to their announcement:

“You owe backers a proper response and clarification to the backlash you knew was coming when you jumped to EGS. We’ve paid for a product on Steam that you’re no longer delivering and this is wrong. Are backers who chose Steam still getting Steam? Is the exclusivity for general retail? My surveys say Steam and still say steam, will this be changing without my notice? You don’t just drop an announcement like this with a fake smile and expect everyone to continue as if nothing happened.“

However, instead of giving a proper explanation, Ys Net made replied to fan queries by saying that there won’t be any refunds. Following repeated fan backlash, Deep Silver announced that while Shenmue 3 won’t launch on Steam, it will be available there sometime in the future.

Backers keeping the creators accountable

The sad thing about the whole Shenmue situation is that this is a project that the fans revived from the dead because they wanted to back something they loved. The backers have probably spent endless hours playing the games on their consoles, and they just wanted to fund something they were intensely passionate about. However, the sheer arrogance with which the creators handled the situation was a slap in the face of the backers. As one backer puts it:

“The Epic Games Store wasn’t even a thing when I backed the game (4 years ago)!

Heck, this is from an email you sent only six days ago (Update #101):
System Requirements for PC Version
(…) Requires Steam Client to activate.

So don’t tell me a Steam key wasn’t promised.

Deep Silver and Epic weren’t there at the beginning when the project really needed backing. The fans were… so don’t let us down.

”You still have time to make it right (for backers at least).”

This, unfortunately, is the biggest problem with the current crowdfunding platforms. Backers don’t know whether:

Their investment is going to be used in the right way.
The creators are going to deliver on their original promise.

This is where PledgeCamp can potentially change the game by leveraging smart contracts.

PledgeCamp: Backer Insurance and Smart Contracts

Smart contracts are self-executing, automated contracts between two parties. The key thing to remember about smart contracts is that they run on IF-THEN logic. This means that each statement of the smart contract will execute only if the preceding statement has been executed. The smart contract code must be executed in a sequence until completion or until a halting parameter is fulfilled (gas limits).

In Pledgecamp, the backers will enter into a smart contract with the creator. The backer will then give their funds, a percentage of which is held in an escrow within the contract. These funds will be released to the creator only when they meet certain milestones. These milestones are pre-defined before the funds are raised so that the expectations between creators and backers are clear from the beginning.

Backers will then verify the milestones through a democratic vote. If the milestones are not met, then the backer insurance is refunded to the backers. Otherwise, it is credited to the creator.

Conclusion

The Shenmue 3 gives us a somber reminder of both the positives and negatives of crowdfunding platforms. We saw a bunch of strangers from all around the world rallying together to fund a project that they believed in. A project that all the big companies had seemingly given up on. However, as the money and partners started rolling in, we saw a greedy creator who didn’t care about their backer’s sentiments.

PledgeCamp’s decentralized ecosystem will make sure that such a debacle will never take place ever again. In PledgeCamp, the creators are held accountable to their actions and will be given access to all of the backer’s funds only after they deliver on their promises.