It is probably safe to say that freelancing is one of the pillars of modern society. Many on-demand services would not exist if was it not for freelancers. Freelancing and on-demand services allow micromanagement of time and resources, which lead to tremendous savings. They allow us to get the job done when we need it, and focus our efforts on accomplishing exactly that. For this reason, we can operate much more efficiently and achieve goals that seemed implausible before.
But the burden of this efficiency lies on the shoulders of the freelancers, as they face job insecurity and poor rewards. According to a report from Deloitte, those who take the gig economy route tend to earn less than their employed counterparts do. Uber claimed in late 2014 that NYC cab drivers were making a median salary of almost $91,000 annually, but a survey from Ridester found out that Uber drivers earned a median net income of $14.73 per hour, including tips. Yet, freelancing is growing.
The state of freelancing
Former U.S. Secretary of Labor Robert Reich estimates that within a few years, 40 percent of the U.S. workforce will be comprised of independent contractors and within a decade, most of the workforce will fit in that category. In fact, a report by Upwork and Freelancers Union suggests that by 2027, the majority of the workforce in the US will be freelancers.
Freelancing offers career professionals the flexibility to work anywhere and have clients from anywhere too. Earning something in your spare time is always nice and for others, it is just their only alternative to unemployment. Some are forced down that path since they need flexible working hours, while others enjoy the freedom of being their own boss.
But this freedom comes at a cost. You have to pay your own Social Security taxes, fully fund your own retirement and find your own health insurance. If you are injured or sick, there is no compensation or paid leave, not to mention vacation pay. Depending on the job and the clients, some freelancers are even forced to work on odd hours, just to keep the client “satisfied” and their ratings high. Their working hours can be on both sides of the pendulum: they either have to sacrifice their family time, or just have to sit idle until a new request comes in.
Being a freelancer essentially means you have to do your own marketing, manage your contracts with the clients and carry out the implementation – and only get paid for the latter part, as the first two are mostly overlooked and the freelancer might even lack the skills for them.
For that reason, freelancers often find themselves at the mercy of their clients when payment is due. According to estimates, freelancers lose an average of $6,000 a year due to lack of payments. Pursuing the legal path would not even be worth it for all the time and money it requires –and freelancers are short of both.
For this reason, freelancing platforms like Upwork and Fiverr have come to existence. They make the job easier not just for job-seekers, but also for employers. Clients can pick from the pool of skills and talents from a single location, with a relative guarantee that their work will be done with the desired quality as they have means to control and evaluate the freelancer. They also have access to the dispute services offered by the platform, should things go horribly wrong. On the other hand, freelancers also receive relative protection from spam clients, or people unwilling to pay for finished work. Also, their marketing efforts are greatly reduced.
But these platforms present their own problems. They have control of most of the freelancing market, so individual freelancers stand little chance unless they have some highly unique skill that’s not available on any of these platforms. On the other hand, the platforms tend to side mostly with the clients rather than the freelancers – because the clients are the ones who bring money to the platform. Furthermore, they charge fees as high as 20%, plus some extra for other “gigs” the freelancers purchase. There are also transaction costs on top of that.
These problems have a root cause: “the concentration of power and decision-making in a centralized system” according to Will Lee, CEO of Blue Whale Foundation which focuses on a blockchain-based platform for freelancing. “When Uber decides to raise commissions, and thereby cut into the profits of the sellers on the platform, it forces everyone to work longer to make the same amount as they did before. None of the affected parties were consulted about this, much less consented to it. There was no community debate, no transparency, no bargaining to ensure a fair outcome for all.”
As the gig economy grows, freelancers need to be considered as employees and receive official support. There has been some progress in this field: In October 2016, a tribunal ruled that two Uber drivers are “workers”, not “self-employed contractors.” This rule paved the way for all of Uber’s 40,000 drivers in the UK to send claims. Uber also lost the appeal.
While the legal battle continues, blockchain projects have stepped forward to alleviate some of these pains:
Fairness: blockchain creates a decentralized platform that is fair to all parties. The rules are transparent, and cannot be biased towards a specific party.
Lower cuts: since there are no intermediaries, there will not be huge cuts of the freelancers’ earnings. Also, the transaction costs are much less than traditional banks.
Faster returns: blockchain transactions are much faster than banks, especially when dealing with remote work which is very common in the freelancing space
The above-mentioned points are the general benefits blockchain brings to just about any project, but they have a special meaning in the freelancing world where we are dealing with hard work, low payments and connecting people from all over the world. Several testimonials on Blocklancer tell the story of freelancers who had to deal with numerous regulations that would either squeeze their income or simply make payment unavailable for their region, and this has been a decisive factor for them to switch to blockchain. The “simplicity,” they say, allows them to “delve right into the world of freelancing and earn some great money.”
However, some projects are taking this yet one step further.
Blue Whale seeks to solve the problem of sick pay or paid time off. It offers a reward bank and takes the full cycle of freelancing into account, including marketing. By broadening the perspective, Blue Whale can offer more incentives to reward the freelancers.
CryptoTask is another freelancing platform, which offers an interesting solution for disputes. Since there is no central body, dispute cases are randomly delegated to members of the network who can vote in favor of one of the parties. The reviewers are independent and unaware of each other’s votes. The votes are cryptographically signed and only revealed when everyone has committed their votes. This way, the decision-making is greatly distanced from individuals in a centralized system with biased motives.
“[The] dispute mechanism is at the heart of a freelancing market,” says Vedran Kajic, CEO of CryptoTask. For this reason, CryptoTask offers a monetary reward to reviewers, which is crucial both for orchestrating the platform and for increasing the project adoption rate. The client and the freelancer both need to put aside 10% of the value, which will be rewarded to the reviewers based on who lost the dispute. This also prevents either party from abusing the system.
Blockchain is not a silver bullet to all freelancing problems. Regulation, as well as general culture and respect for freelancers, must also progress in parallel to technological achievements. But with blockchain, we build on a foundation that is designed to give power to the masses.