Fee Structures That Build Trust: Lessons from Traditional Escrow

Escrow has always been about trust. In the traditional world, trust comes from well-known banks, lawyers, or title companies charging hefty fees to stand in the middle. In the smart escrow world, we think carefully about how fee design itself can help build trust between buyers and sellers.

No fixed fees — only a percentage that scales down

Unlike traditional providers that add flat fees on top of every transaction, SmarTrust charges only a percentage of the transaction value, and that percentage decreases as the value increases.

• This keeps micro-transactions viable (no fixed $5 fee eating up a $3 payment).
• Larger deals enjoy lower marginal fees, rewarding scale.

The design ensures everyone can use escrow — from a small freelancer gig to a high-value B2B agreement.

Incentive alignment: forfeited platform fee in disputes

Here’s a unique difference: if a transaction goes to adjudication, our platform fee is forfeited.

• Why? Because we want to align our incentives with yours.
• Our ideal outcome is always a clean completion, not a messy dispute.
• You’ll still see an adjudication fee (significant, to cover the arbitrator’s work), but our own cut disappears once conflict arises.

This structure motivates us to make standard transactions as smooth and low-cost as possible.

Why this matters

Most competitors simply charge more across the board, baking arbitration costs into every transaction. We flipped the model:

• Normal escrow: cheaper, faster, lower fees.
• Disputes: higher cost, but only when required, with clear rules.

That way, everyday use stays affordable.

Adjudication fee options

We provide several ways to handle arbitration fees, drawing inspiration from both traditional escrow practice and game theory:

1. Split pre-pay: Buyer and seller each deposit half upfront. Fair and balanced.
2. Full pre-pay with reimbursement: Each side pre-pays the full adjudication fee; the winner gets their fee back. This discourages frivolous disputes and is often the fairest model.
3. Post-pay: If requested, adjudication can be paid afterward. This is less ideal — it introduces game-theory issues (risk of non-payment or tactical delay) — but we support it for flexibility.

Lessons carried forward

• Traditional escrow taught us: people are willing to pay for safety, but fairness depends on proportional fees.
• Our approach:
  • Percentage-only, scaling down with deal size.
  • Incentives aligned — we don’t profit when disputes escalate.
  • Flexible adjudication fee structures, with strong defaults that encourage good faith.

Bottom line: By combining lessons from traditional escrow with blockchain transparency, SmarTrust’s fee model makes everyday trust cheaper and more accessible — while still supporting robust adjudication when needed.