Buying and selling
Protection fund
A reserve, funded from a share of every sale, that pays buyer claims after escrow has released.
Because held funds must be released to makers within a fixed period, a guarantee that lasts longer than the hold cannot be paid from the maker's money. It has to be paid from ours.
A percentage of every transaction accrues to the reserve from the first sale, which is what makes the guarantee a commitment rather than a claim.
Why it matters
A guarantee with no reserve behind it is marketing. This is the difference.
The mistake everyone makes
Assuming any marketplace guarantee is insured. Most are promises. Ask what is behind it.
Related terms
See Protection fund on a real listing
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