I still remember when I got to my friend’s apartment and found him sitting on the sofa. Anger was etched all over his face. When I asked him if he was okay, he raised his head and looked at me with frenzied eyes. He mumbled something that I had already heard several times before: “I haven’t been paid”. My friend is a web designer. He is really good at what he does. Freelancing suits his independent character very well: working autonomously and in a flexible manner. He is one of 50m freelancers worldwide.
A changing environment
According to the survey “Freelance in America”, the freelance workforce has grown fast and will continue to do so until it constitutes the majority of the US workforce within 10 years. The transformation of the economy, driven by technological innovation, has contributed to the growth of the freelance market. Companies are constantly changing, merging, acquiring. This turbulent environment, couched in uncertainty and fueled by competition, forces companies to continuously readjust and adopt a more flexible approach, especially with regards to human resources management. This trend is also increasing due to changes in behavior, especially that of Millennials, who are more drawn by the promise of a life and work style based on freedom, autonomy and flexibility, where they choose when, how and with whom they work.
Current issues encountered by freelancers
Most freelancers today get their work via well-known freelancer platforms. These platforms have undoubtedly made their own contribution to the world of freelancers, enabling them to quickly and easily find an appropriate job in line with their skills and experience. However, today the use of such platforms brings its own issues.
- As my friend experienced several times, freelancers run the risk of not being paid or not being paid on time. This is actually pretty common in the freelance industry. 70% of freelancers in the UK have even been asked to work for free.
- Another mind-blowing factor is that most of these platforms charge the freelancers themselves a significant fee of up to 20%. Fees are often not split between clients and freelancers.
- Freelancers are also poorly protected if any sort of conflict (such as not being paid) arises with a client. Indeed, there is little fair and objective assessment if anything happens. The centralized platform will seldom get involved and protect the freelancer’s stake.
- Last but not least, the platform owns freelancers’ identity data. The platform can – without warning – close any account they want to. This issue is obviously not specific to freelancer platforms but the difference is that a freelancer’s main source of income comes from these platforms.
A decentralized freelancing platform
In a context where a new business model is shaping the future of work and people are increasingly freelancing by choice, the emergence of a new ecosystem that solves the issues of the current ‘traditional’ model is inevitable – a new model where freelancers are valued, protected and can also make themselves heard.
The future for freelancers will be much brighter. Many projects are currently emerging, building decentralized freelancing platforms based on blockchain technology. A decentralized platform is a peer to peer ecosystem which enables direct contracts between freelancers and clients, removing the third party (the centralized platform).
Most of the current projects are built on the Ethereum blockchain, which is today the most mature ecosystem, created by a worldwide community of developers and forming one of the most open, transparent and trust-free networks. There are already hundreds of decentralized applications that run on the Ethereum protocol. The Ethereum blockchain can fulfill a lot of the technological requirements to build a fully decentralized freelancing platform. Some challenges remain with regards to scalability and storage of data, however. Indeed, a fully decentralized platform requires a huge amount of data to be stored, which the Ethereum blockchain can’t fully handle on its own. Some central database or off-chain solutions are therefore needed, although this factor does not diminish the benefits that such ecosystems offer.
An ecosystem based on blockchain technology using smart contracts can definitely create value and solve a number of the issues encountered today.
- Fees charged by the platform are removed or at least significantly reduced as there is no more centralized platform. The decentralized freelancing platform takes from 1% to 3% of the employment contract’s price in fees. Some platforms do not take any fees but the access to specific features, such as access to a freelancer’s skills or heavy database queries, are charged to the clients.
- Deposits and payments are secure through a smart contract. The client’s funds are frozen in an escrow deposit. Once the job is completed by the freelancer, the transaction is automatically executed. Thus, freelancers no longer run the risk of not getting paid.
- The Ethereum blockchain-based smart contracts enable a token to be issued through an ICO. In a decentralized freelancing platform tokens can allow clients to make payments and deposits, or use specific features of the platform. Tokens enable freelancers to be paid, rewarded, incentivized and also to participate in the community and vote.
- Transactions and data are stored on the blockchain. Some decentralized platforms give freelancers ownership of their data, with exclusive access, and without any risk of censorship or having their account deleted. This increases trust in the ecosystem, giving freelancers more security. Depending on which functionalities are implemented, freelancers can, for example, have the option of selling their data to any future client instead of giving it away for free.
- A decentralized platform can serve as a freelancer’s tribunal, which will arbitrate any dispute between a client and a freelancer. Eligibility of members is based on the freelancer’s reputation and profile ranking within the platform. This process guarantees a fairer settlement, while also taking into consideration the interests of the freelancer. Freelancers’ work will be assessed more objectively, evaluating all discrepancies in opinions.
There are currently many competing projects aiming to build a decentralized freelancing ecosystem. They have all recently launched an Initial Coin Offering in 2017 and 2018. However, their business models differ in many ways, targeting different industries and skill sets, and integrating distinctive features and functionalities. It remains to be seen which of them will stand out from the rest. Either way, the outcome will be favorable for freelancers, freeing them from all the present burdens.
In case you are interested in exploring the current projects that are building decentralized freelancing platforms, please feel free to access the following links. This is not an exhaustive list:
 A smart contract is a computer protocol built on the blockchain and intended to facilitate, verify and then execute the terms of the contract automatically. Smart contracts enable parties to deal with each other on terms that have been specified previously in a digital form without the need for third parties or written documentation.
This is a guest post/opinion piece and should not be construed as financial advice.