The Blockchain-Powered Job Marketplaces Of The Future

The concepts of freelancing, gig-based work, work from home and hybrid work are gradually becoming the new normal. A recent survey indicates that more than one-third of the American working population, amounting to roughly around 56 million people, is part of the gig economy. These numbers go even higher in emerging economies, especially Southeast Asian, African and Latin American countries.

Millennials and Generation Z now comprise the majority of the global workforce. When compared to previous generations, these labor force participants are most likely to choose freelance opportunities over full-time, nine-to-five jobs. Hundreds of job marketplaces have emerged over the last few years to cater to this budding segment of service providers. Some of the most popular platforms, in no particular order, include Freelancer, Fiverr, Upwork and Toptal, among others.

These marketplaces have gained immense popularity over the past decade, primarily because they emerged as full-fledged ecosystems that streamline the entire work model: hiring, globally accessible talent pool, communication and collaboration solution, escrow services, as well as payroll services to an extent.

However, despite their popularity, existing marketplaces exhibit several pressing concerns.

For starters, making payments quickly and efficiently to millions of freelancers across the globe has always been a tricky task for these platforms. The reason underpinning this reality is straightforward: Most of the existing freelance and gig marketplaces rely on third-party payment service providers to facilitate payments.

Payments are often delayed, especially for international transfers. Since the entire centralized payment system is riddled with bureaucracy like know your customer (KYC) and anti-money laundering (AML) compliance checks, some service providers can end up waiting weeks for the payments to reflect in their native accounts.

Most pressing, especially for service providers, is that each platform charges a percentage (commission) on all payments. Some assess a flat rate, while others use varying rates depending on the type of work. For example, Upwork charges each client around 20% of a $500 gig, 10% on a $10,000 gig, and 5% for all gigs above $10,000. Add to it the payment processing charges via PayPal, Wise, Payoneer, bank transfers or whichever method is used, and the costs keep rising.

Inclusivity is also not a guarantee on these platforms. Some implement a "bidding" system, granting paid members better visibility and features than others, meaning they don't necessarily provide equal opportunities for all service providers. Access to special privileges, such as the ability to send a chat request to the client directly and special bids, among others, defeats the purpose of a global resource talent pool.

Blockchain To The Rescue

In the last couple of years, blockchain-based alternatives have emerged, showcasing the promising potential to overcome the shortcomings of traditional job marketplaces. These marketplaces leverage blockchain's inherent advantages to deliver decentralization, transparency, immutability and most importantly, near-instantaneous low-cost payments.

Despite being in their early stages, blockchain-powered freelance marketplaces like Ethlance, LaborX, Blocklancer, Bounties Network and Mentat have successfully laid the foundation for futuristic marketplaces that operate without any centralized control or intermediaries.

Blockchain's distributed ledger technology (DLT) — its immutability, decentralization and transparency — has the potential to change the freelance and gig marketplaces, benefitting both service providers and consumers alike.

In contrast to centralized job marketplaces, blockchain-powered job marketplaces don't require any centralized intermediary to operate. Much of the interaction is managed by smart contracts (pre-written instructions that automatically execute when the instructions are met). Essentially, these smart contracts act as "escrow services" between counterparties, which not only reduces bureaucracy and redundancy but also accelerates the entire work process.

Imagine that the underlying smart contract says A will pay $50 to B if B submits the assignment on or before May 10. In this case, A is the requestor and B is the service provider. Once both parties agree to the terms, the smart contract will hold $50 from A's account and keep it in an escrow account. Once B submits the assignment, the contract will check if all terms are met and disburse the $50 from the escrow account to B's account accordingly.

Throughout the process, it's the smart contract doing the heavy lifting. Hence, there aren't multiple levels of commissions, charges and fees involved, which makes it cost-efficient for both parties. Additionally, payment settlement times are faster than centralized models because as soon as the preset conditions are met, the smart contract triggers the payment mechanism.

Although nascent, blockchain technology is gradually making its way into the freelancing and gig industries. Recently, Human Protocol showcased its blockchain-powered infrastructure designed to support distributed and decentralized marketplaces.

Human Protocol's infrastructure can be customized by both entities and individuals, from building full-fledged but decentralized freelance marketplaces like Upwork and Fiverr or gig-based marketplaces like Amazon MTurk. It can also be used to develop new part-time and full-time earning models that cater to larger populations, not solely skilled workers.

The protocol employs blockchain-based features to ensure transparency and equal opportunity for all market participants alongside fast transaction settlement without special favors or benefits for paid participants. From launching new jobs, breaking down jobs into simpler tasks, connecting workers with the tasks, compiling the submissions, quality checking and validation to compensating workers — the entire end-to-end process is driven by smart contracts.

Powering The Future Of Work

If recent trends have anything to say, the gig-based economy still has serious room to grow. Yet, the proliferation of centralized labor marketplaces comes at a steep price. By acting as gatekeepers, existing marketplaces can extract immense value without behaving transparently or in the best interests of workers.

Decentralization via blockchain can change this equation for the workforce, bringing more inclusivity, transparency and efficiency across freelance and gig marketplaces, while creating ecosystems that ultimately become a part of the decentralized internet (Web3).

When looking ahead at the future of work and the labor economy, blockchain technology can play a crucial role in complementing existing freelance and gig marketplaces. By offering a fresher take on decentralized marketplaces and supporting the accompanying infrastructure, blockchain can help the freelance and gig economies achieve more widespread accessibility, lower overheads and near-instant transactions.

(Reuben Jackson is a blockchain security consultant & crypto writer.)