Blockchain Storms the Freelance World: 6 Startups to Watch
Freelancing presents an interesting case study for the impact of technology on the evolution of a highly active and entrepreneurial microcosm within the grand professional workforce.
A decade ago, freelancing was seen as somewhat of an island of misfit toys – where people who were otherwise barred from the larger corporate workforce either by job qualifications, geographic location, or discriminations such as tattoo sleeves ended up.
Today, the blossomed freelancing ecosystem has shaken up the traditional professional itinerary.
Instead of working at the local restaurant or bar, college students are opting to monetize their nascent professional skills by writing web content or coding for $20-$45 an hour. It’s no shocker that many in their early 20s are jumping on the digital nomad rocketship and traveling the world and making a full year’s salary at their own pace and hours.
A 2017 study by Upwork and Freelancers Union estimates that 57.3 million Americans (roughly 36% of the U.S. workforce) are freelancing in some capacity, and add $1.4 trillion to the economy every year, a jump of nearly 30% since 2016.
Extrapolating this current growth rate puts the majority of the U.S. into the freelance spectrum by 2027.
Skilled professionals are entering the freelance economy to soften the blows of of post-gentrified San Francisco and New York City rent, if not to at least make a few extra dollars at $65-$150+/hour.
Internet-savvy labor-seekers all over the world are also able to earn a much higher wage in comparison to their native wages. Take this writer’s motherland of Bulgaria, where the monthly minimum wage is about $290 USD (235.20 EUR). A simple web content gig that averages around $15/hour at a typical 8 hour workday puts this employee at 12x the minimum wage line at $3,600/month (2,900 EUR). That’s a lot of shkembe chorba and Kamenitza beer.
63% of freelancers stated they freelance by choice, an 18% jump from 2014 to 2017. Additionally, 63% freelancers noted that they prefer the security of a diversified portfolio of clients rather than a single employer.
The rise of the freelance economy and the seismic shift of talent gave birth to intermediaries that are able to make an absolute killing connecting freelancers and clients.
Intermediaries such as Upwork, Toptal, and Fiverr act as talent marketplaces, escrow agents to release payment when the freelancers and clients mutually agree on the completion of work, and as a sort of search engine to place the “Top Rated” freelancers at the top of the new job listing suggestions.
Upwork: Target Practice for Blockchain Startups
To put this opportunity in perspective, let’s take a look at Upwork, one of the world’s most popular freelancing platforms.
Upwork as we know it today was born in 2015 as a rebranding from the merge of Elance (founded 1999) and Odesk (founded 2003). With an estimated over 9 million registered users (much fewer active) in 180 countries with over $1 billion in annual freelancer billings, Upwork is largely regarded as a pioneer of the freelance economy.
Upwork makes for excellent target practice for blockchain startups because it has been able to accomplish what few freelance platforms have failed to do: create a trusted platform with a bustling ecosystem of active and satisfied users. For every Upwork, there are dozens of terrible and scammy platforms charging higher fees without offering nearly the same experience as Upwork.
Upwork acts as an intermediary and escrow agent and charges freelancers a fee on every transaction (20% up to $500, 10% from $500 to $10,000, 5% $10,000+, and clients a payment processing fee of 2.75%.) Upwork earns an estimated revenue of around $68,826,417 per year, the majority of which comes from these fees.
A single user making $65,000/year from multiple clients on the Upwork is making Upwork anywhere from $3,250 to $13,000 every year with very little upkeep – not too shabby for an algorithm!
Whatever human upkeep required for mediation and customer support happens via chat through Upwork’s support staff, which is most likely a network of inexpensive scripted virtual assistants from around the world.
Thousands of full-time freelancers with active rosters of clients and steady streams of work will happily express gratitude to Upwork for getting them started on their journey. The platform presents utopia for ambitious skilled talent with a penchant for taking full agency of their livelihood, setting their own hours and contract terms, and working wherever they choose – whether that be on a beach in Thailand or the coffee shop down the street from Mom’s house.
Unfortunately, all that glitters is not gold. Thousands of freelancers that put the full weight of their subsistence on the platform have complained of having the floor pulled from underneath them by unfair account freezes, reputation-shattering negative feedback from bad apple clients, as well as notoriously bad customer support.
Even a pleasant experience with Upwork doesn’t guarantee loyalty. Freelancing is not without its expenses. Rent, food, health insurance, co-working spaces, plane tickets, and the vices that come with an essentially self-ostracizing career path add up.
With freelancing also comes the imminent threat of one of your core clients falling through, leaving you staring down mounting fixed expenses and scrambling to make up the difference.
At some point, freelancers need to make the business decision of whether having 10% to 20% of their paychecks going to an intermediary is worth it. That 10% to 20% could be the difference between a new car, a down payment on a home, or health insurance.
High fees are a huge reason why freelancing platforms like Upwork are seeing an exodus of their otherwise loyal users into off-site agreements where trust is hardly a factor with long-term clients they have become familiar with and from whom they can reliably expect work.
Without a need for Upwork’s core value proposition of trust, freelancers can shift their entire business to Gmail/Skype and Paypal or crypto. Clients also don’t mind using their own preferred methods of communication and saving on the 2.75% payment processing fee.
What attracts millions of freelancers and clients to the platform is the concept of trust and the enforcement of it, a value proposition that has become existentially threatened by a “trustless” blockchain.
While freelancing platforms are already caught in a vice with their user retention dilemma, dozens of blockchain-based competitors offering a smart-contract solution have come out guns-blazing.
The overhanging threat of disruption looms over any intermediary in a post-blockchain world, and the high traffic and easily monetizable freelancing economy is ripe for the taking.
Canya.io is the closest upcoming platform to Upwork. This blockchain-powered marketplace of services raised over $12m AUD in their November 2017 ICO and claims to have over 7600 users and 3,400 service providers.
CanYa will offer essentially the same services as traditional freelance platforms with fees set around 1% carried out in the native utility token CanYaCoin. The CanYaCoin is used to power the network of transactions as well as incentivizing platform growth and user behavior.
What sets CanYa apart from online freelancer platforms (other than the advantages of blockchain and a decentralized network) is that it also aims to provide in-home services, such as hiring a plumber.
Although Steemit isn’t necessarily a platform for freelancers to connect with clients, it leapfrogs past the need for clients by offering content producers a means of monetizing their content.
The typical engagement between web content freelancers and is as follows:
The traditional content monetization model involves leveraging content for traffic in hopes of generating advertising revenue or affiliate commission. Digital marketing savvy entrepreneurs with an understanding of what sorts of content performs well, how it should be written, how it should be optimized for search engines, etc. hire freelancers to create the content.
Freelancers receive a contract for something like “24 Benefits of CBD Oil to Cure Your Hangovers” and submit the article to the client for approval. If approved, the article goes live, and the clients utilize their skills to drive traffic to the content (or they hire someone that can). Hundreds or thousands of interested users read the article. The site owner gets paid by the advertising revenue from AdWords, a commission from the affiliate links on the site, or other sorts of partnership deals.
Steemit essentially cuts out the need for the intermediary client and allows freelancers to post their content on https://steemit.com/, where users will read, comment, and engage with the content.
The content creators are then rewarded in Steem in proportion to the amount of people reading and engaging with it based on the amount of “Steem Power Units” of that particular user.
The Steemit platform is architected to generate new units of “Steem” in order to keep the network running so that there will never be a need for third-party advertising or affiliate marketing to keep the lights on.
Ethearnal (Currently in ICO)
Ethearnal is a blockchain-based freelance platform that primarily focuses on tokenizing reputation as its main differentiator. It also provides the same money escrow and moderation services.
The reputation of freelancers is calculated based on how much ERT they have. Freelancers then “stake” an amount of ERT set by a client in order to enter into the particular smart contract.
Employers must stake ERT to hire freelancers, and moderators must stake ERT to solve disputes.
Whenever a contract finishes without the need of arbitrage, the Ethearnal platform uses `$ of the contract to purchase ERT tokens on the open market to reward both the employer and freelancer with 0.5%, allowing them to receive reputation boosting tokens in proportion to the contract value.
The Origin Protocol seeks to decentralize the entire sharing economy and has the likes of Uber, AirBnB, Fiverr, and Getaround in its crosshairs. Although the scope of its mission is broader than the laser-focused freelancer model , it plays an arguably larger role in the conspiracy to undermine the entire sharing economy, which is estimated to grow to $335 billion by 2025.
By using the Origin Protocol, businesses or individuals can conduct their operations on the decentralized web. CanYa, for example, is building their marketplace of services for the gig economy on the Origin Protocol.
OpenBazaar is the world’s largest decentralized marketplace and charges no platform fees.
Spun out of the winning idea of a darknet marketplace of a Toronto hackathon in 2014, OpenBazaar was made to be completely peer-to-peer with no central controlling organization.
The founders then started a company called OB1 with $1 million of venture capital investments from Union Square Ventures and Andreessen Horowitz. OB1 received a second round of investment for $3 million in the fall of 2016.
OpenBazaar functions as a sort of global Craigslist that also allows freelancers to connect with new clients.
Users are able to pay with over 50 cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Zcash, and Fash, and sellers are able to receive payment in Bitcoin, Bitcoin Cash, or Zcash.
To find out more, check out the OpenBazaar site.
Moneo is a blockchain-based freelancer platform that vets and verifies its freelancers with a primary goal of providing an array blockchain experts for hire.
Blockchain Out the Woodwork
Soon after the popularization of the awareness of blockchain’s potential came a near commoditization of blockchain-based platforms.
Iterations upon iterations on the “blockchain-based smart contract freelance platform” concept started rolling out en masse with names that aren’t necessarily trying to compete in the Creativity Olympics.
Blocklancer is offering a Distributed Autonomous Job Marketplace (DAJ) run on the Ethereum blockchain. This platform aims to be entirely self-regulatory with minimal fees and a decentralized tribunal system to guarantee fair dispute settlements and minimize fraud.
Coinlancer does the same thing and is hardly anything more than a smart contract platform draped with a user-friendly experience.
As is in the traditional Silicon Valley tech entrepreneur world, countless companies will start seeking a product-market fit in a monetizable niche, but this time with blockchain as a competitive advantage over the old guard.
Theoretically, a trustless blockchain appears to hold the keys to freelancer emancipation, or at the very least potentially an impetus to a substantial restructuring of the current king’s ransom high fee structure imposed by intermediaries.
However, the keyword is theoretically.
Platforms like Upwork have spent millions in simplifying the user interface and user experience for all parties, as well as educating the general population on the ease of use and benefit of the freelancer economy.
Sure, a startup can reverse engineer of the UI/UX of the reigning platforms, but the challenge of branding is real.
The lowest hanging fruit for new platforms is users who have the time, flexibility, and patience to test new options, which isn’t necessarily a large demographic.
Blockchain startups certainly have their work cut out for them on the user acquisition front, especially now since Facebook and Google have both taken hard stances against cryptocurrency advertising. And even then, these startups need to jump over the next hurdle of building a two-sided community that competes with the activity of digital metropolises like Upwork.
On the other hand, the incumbent freelance platforms are mired in their own problems. The leading solution to the problem of high fees, blockchain, requires the surrender of the intermediary’s core value proposition and surrender of its main source of revenue.
Should a platform like Upwork pivot to blockchain to reduce fees, they’d be gutting their near (estimated) $70 million in annual revenue. That might make meeting payroll for their 250+ employees a tad difficult.
So, the narratives being to reveal themselves.
Will small, nimble, and adequately funded post-ICO blockchain-based startups be able to successfully onboard massive amounts of freelancers and clients and create a self-sustaining ecosystem or will they prematurely exhaust and doom themselves to a tiny esoteric circle of cryptocurrency aficionados?
Will ailing old-guard platforms be able to stop the drain of their most valuable cash cows talented freelancers, or will they become another set of relics antiquated by the raging tide of technological innovation?
Only time will tell.
However, one certainty has started to manifest: the booming freelance economy has yet another avenue to exercise optionality when it comes to monetizing experiences, skills, and labor, as well as connecting ambitious talent with potentially civilization-advancing projects.
CoinCentral's owners, writers, and/or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on CoinCentral is investment advice nor is it a replacement for advice from a certified financial planner.