With the rise of the freelance economy, how does the blockchain drive the trillion-dollar blue ocean market?

The freelance economy has taken the world by storm. In less than 10 years, the number of freelancers in the United States may exceed that of full-time authors. This growth is largely driven by technology, such as projects hosted by free intermediary exchanges such as Upwork, Fiverr or Toptal, with total annual budgets of up to billions of dollars.

Although these are popular, they find it difficult to solve several pressing problems. Facts have proved that it is a difficult task to quickly and efficiently pay millions of freelancers in hundreds of different countries. Ensuring the quality of work done for clients is another headache, as is helping new freelancers start their own work.

However, the new technological revolution is expected to completely change the industry and provide solutions to these problems. Blockchain-based alternatives bring a bright future for both freelancers and customers, with low fees, fast payments, and new incentives to improve everyone’s experience. Let’s see how realistic these promises are and whether they are enough to attract customers and freelancers into a new, decentralized business model.


The current state of the freelance market

In the United States alone, 57 million freelancers earn $1.4 trillion a year. A large survey conducted by Payoneer found that 70% of freelancers are looking for online communication jobs. This is a huge market, constantly growing, and eager for new ways of communication.

What do these freelancers do?

A quick search on Upwork, the largest online freelance platform, will get the following results:

  1. 33%-software and application development for web and mobile platforms
  2. 18%-design and creativity
  3. 15%-sales and marketing
  4. 11%-text
  5. 8%-management and support
  6. 15%-other

Platform type

There are hundreds of job search websites on the Internet that offer a variety of job opportunities. But these platforms can be divided into the following categories:

Websites like Upwork -offer any job, including hourly jobs, projects, and even full-time or part-time jobs. Users can even create their own teams or organizations. They are fully functional platforms. Freelancer.com is a good example of this type of platform.

Websites like Fiverr are used for small projects with a budget of about $5, and the name of the website is derived from this. These are simple types of jobs that do not require special skills. GigBucks has a similar structure.

Sites like Toptal serve highly qualified freelancers. These platforms have strict screening procedures for freelancers who wish to register.

Sites like Codeable -used to find specific frameworks. Freelancers are selected by website operators to ensure that they have skills in a particular field.

How are profits distributed on these platforms?

Today’s centralized freelance platforms have a simple payment structure. These platforms charge commissions for all payments. Some companies have a uniform rate for all transactions, while other companies have different rates depending on the type of job. Here is a quick overview of commissions on large platforms:

  • Upwork: 20% up to 500 USD, 10% up to 10,000 USD, 5% of each customer exceeding 10,000 USD
  • Codeable: 15%
  • Fiverr: 20% ($1 less for orders over $5)
  • Freelancer.com: 13% (3% from customers, 10% from freelancers)
  • TopTal: High hourly salary not reported-$65-200

These costs may increase rapidly. A small freelance project on Upwork charges $500 and the commission is $100, plus a PayPal commission. For a large Codeable project of USD 100,000, the commission will be USD 15,000.

The payment methods on all platforms are similar: most accept credit cards, PayPal or bank transfers, and pay freelancers via PayPal, Payoneer and bank transfers. There are currently no major platforms that accept or pay for cryptocurrencies. There are some small startups that accept cryptocurrency payments, such as XBTFreelancer, which is a freelance platform that is 100% driven by Bitcoin. But these projects have not gained enough momentum: in all categories, only a few projects are released every day.

How does blockchain make a breakthrough in this market?

Blockchain technology has disrupted banking, remittances, and healthcare, so what about the freelancer market? Blockchain promises to improve the services currently provided to freelancers and clients in three main areas:

  • Faster and more efficient cryptocurrency payments
  • Cancel intermediary commission
  • Use tokens and smart contracts to get new rewards and a better user experience

Cryptocurrency payment

16% of freelancers want to get paid faster. This is understandable, because online payments may cause serious concerns. In the case of Upwork, the user needs to wait for the customer to confirm the payment, and then wait another 5 days until the funds enter their account, and then wait for the bank to process the payment. This is likely to take a few weeks.

Cryptocurrency payments are instant, even between different countries. This is useful for freelancers because cryptocurrencies can be easily traded and funds can be withdrawn and used immediately after confirmation.

Cryptocurrency also provides opportunities for 39% of the world’s unbanked population. Billions of people can now use the Internet, but not banks. The cryptocurrency market completely eliminates the need for banks.

Reduce intermediary commission

Blockchain applications threaten intermediaries in various economic fields. When users can interact directly through agreements rather than through centralized services, the value of intermediaries will rapidly decline. We have seen this in international remittances and online advertising.

New incentive tokens and smart contracts

Perhaps the most interesting development is the ability to tag anything using blockchain applications. On today’s platforms, one of the biggest challenges facing clients and freelancers is trust. Some clients and freelancers acted dishonestly, which had a negative impact on the entire system.

By using crypto tokens and smart contracts, everyone can be motivated to act honestly and professionally at all times. Ethearnal tokenizes reputation and gives it real market value on the freelance platform. Negative reputation will hurt users’ wallets. This is a win-win situation for clients and freelancers who want to use this platform honestly.

Decentralization also means more fair and distributed dispute resolution, which leads to better performance, more accurate ratings and less centralized control.

Benefits for freelancers

Freelancers benefit from all of the above.

  1. Money enters the wallet faster
  2. Lower commissions mean that profits can be increased or interest rates can be lowered to improve competitiveness
  3. Billions of people without access to banking can start participating in the freelance economy
  4. Tokenized reputation means reputation = money, and customers have a stake
  5. Less centralized control means business and income are safer and will not be unfairly deprived

Customer benefits

Some of the key benefits did not directly affect customers. For them, the speed at which freelancers are paid is not important. If freelancers decide to increase profits by lowering their commissions, they will not save anything. If the centralized authority decides to change or intervene, the customer’s risk will also be smaller. In addition, paying with cryptocurrencies can be inconvenient—at least until they gain widespread popularity.

However, there are some indirect benefits. In the case of a 15-20% reduction in commissions, freelancers may lower their rates to stay competitive, thereby significantly reducing service costs. In addition, if blockchain platforms are significantly better for freelancers, they will attract the best talent.

If a platform that uses blockchain, smart contracts, and token incentives works more efficiently, then this will bring clear benefits to customers. If implemented properly, this will reduce employment risks and improve the quality of work.

Isn’t it difficult to move to a new platform?

It is difficult to say whether migrating to a new platform will be difficult, because mature blockchain applications for freelancers do not yet exist. But if done well, this transition will be easier than ever, especially for freelancers. First of all, large projects like Ethearnal and Canya put practicality as one of the primary considerations, and their added benefit is the ability to learn from the latest generation of freelance platforms.

But there is a bigger incentive. Every freelancer faces the question of whether to have the chicken or the egg when starting to work on a new platform. To get an order, you need a reputation, but to get a reputation, you need an order. No one wants to work with a person with zero reputation because if there is dishonesty, that person has nothing to lose. This is a long-standing problem, and there is no simple solution yet. Projects like Bh.network are trying to solve this problem by making freelancers open to everyone.

Tokenization of reputation means that reputation can have real monetary value, just as it should. Freelancers and well-meaning clients can invest real money for their reputation in advance, and sell and buy this reputation or use it in projects.

Problems to be solved

We know that the use of smart contracts and ICO can solve the problem of escrow payment, issuing tokens and collecting funds. All of this has been done. However, blockchain technology is still immature, and availability is a key issue. Decentralized applications are slower and more difficult to use than centralized applications. Developers need to find a way to solve this problem.

Other challenges faced by new blockchain applications are somewhat more subjective. The correct use of economic incentives is extremely difficult, especially because many of these incentives have not been studied before. There is also the issue of community activities and the scale of the network.

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