Blockchain and the Freelance Marketplace: how the technology will disrupt the middleman platform
The freelance marketplace is growing and becoming lucrative with each passing day. Statistics reveal that in 2014, one out of three Americans had some freelance work in the previous year.
The projection for the freelance marketplace in the U.S. alone is 40%. A study by Intuit in 2010 revealed that by 2020, more than 60 million Americans will join the contingent workers category. Moreover, with the escalating numbers, the country could have more freelancers than full-time employees in just less than ten years.
Nevertheless, not only the U.S. experiences the spurted growth in the freelance marketplace. The freelance economy is thriving worldwide with more companies involved in outsourcing services. The internet is a major player in this sector, enabling middlemen platforms such as Upwork, Freelancer, and Fiverr to host the biggest chunk of freelance gigs every year.
A unique twist in the freelance industry
Even with the growing popularity, the freelance marketplace struggles with numerous ongoing problems. With millions of freelancers in different locations worldwide, the companies involved cannot make prompt and efficient payments at all times. Other notable challenges include verifying the quality of work, helping new members to join the platforms, and controlling fraudulent activities.
The blockchain technology and the freelance sector
With the introduction of the blockchain technology, major changes are set to happen in the freelance market. Blockchain-based alternatives will bring solutions to the problems facing the sector by benefiting both freelancers and employers. Once fully integrated in the freelance marketplace, the technology will lead to low fees, faster payment processing, and incentives that will boost user experience.
Freelance Market Overview
In 2014 alone, Upwork recorded $941 million in freelance revenue. In the same year, the entire freelance market generated $3.2 billion. With the growing population and the gradual increase in internet literacy, the freelance market is set to grow further. Analysts believe that the market could grow to ten billion dollars every year in the next six years.
In addition, the U.S. alone has 57 million freelancers, pumping in more than 1.4 trillion dollars every year. A survey by Payoneer revealed that 70% of freelancers utilize online platforms such as Upwork to find work. Precisely, it’s a huge market that’s just getting bigger and better.
The following are major services available in the freelance marketplace:
- Web, mobile, and software development—33%
- Design and creative—18%
- Sales and marketing—15%
- Writing—11%
- Administration and support—8%
- Others—15%
Freelance Market Categories
The flourishing freelance marketplace has given birth to hundreds of digital job sites offering all sorts of niches. However, a few platforms are notable:
Upwork-like platforms
These platforms offer any kind of online gig from hourly and project-based to part-time or full-time positions. The platform allows their members to set up their own teams and agencies. Freelancer.com falls into this category.
Fiverr-like platforms
These platforms offer small, simple, low-skilled jobs starting from $5. An example of this platform is GigBucks.
TopTal-like platforms
These avenues are for advanced freelancers. They offer a rigorous screening process for members. Contena is a typical example.
Codeable-like freelance platforms
Codeable-related platforms specialize in particular niches. They handpick their members through the site operators to make sure that they choose the right skills for a specific niche.
The benefits and downsides of each platform
Upwork is the world’s largest online marketplace, packed with all types of features. This makes it the biggest catchment community for millions of freelancers worldwide. Besides, each freelancer must have an updated profile, which makes it easier for employers to locate the exact skill they need for specific tasks. Since millions of freelancers compete for the same gigs, employers often go for the lowest bids. Upwork also offers extra features that help companies find the right talent for their tasks. For freelancers, they receive a continuous and an updated database of the jobs they need, which saves them time and money they could spend to advertise their services.
Despite the benefits, Upwork has its share of challenges. Among its litany of freelancers are some who provide poor quality services and employers are on the receiving end. Even with seemingly bright work profiles, it’s still difficult to know whether the profile will match the quality of work delivered. On the part of the freelancers, the profiles are at the mercy of a central authority, which is the platform itself. This could lead to unfair treatment of freelancers.
Just as Upwork, Fiverr, TopTal, and Codeable each have their own share of benefits and downsides. For example, when it comes to profit distribution, all the platforms take a percentage of their members’ earnings. After deducting PayPal fees, you realize that a tangible share of the freelancers’ earnings is gone.
How does the Blockchain come in?
The blockchain technology is already working with various sectors including healthcare, banking, agribusiness, money transfer, and more. In the same way, the technology promises to disrupt the freelance marketplace in three major ways:
- The use of cryptocurrencies will lead to faster and efficient payments
- It will eliminate middleman fees
- With tokens and smart contracts, users will have new incentives for a better experience
Crypto payments to freelancers
According to a Payoneer survey, 16% of freelancers want faster payments from their employers. However, on Upwork, freelancers have to allow five days for a client to approve a payment and another five days for the funds to be available in their accounts. Even after the funds are available in the Upwork accounts, freelancers have to wait for some time before their respective bank accounts process the funds. The entire process could easily turn into weeks.
Payments with cryptocurrencies are instant, even across different countries. Digital currencies can be exchanged easily for other currencies or fiat money, which is a big advantage to freelancers. With that method, freelancers would be able to withdraw and use their funds immediately after client’s approval. In addition, the use of cryptocurrency will facilitate seamless transactions even for freelancers without bank accounts.
Reduced middleman fees
One of the prime advantages of the blockchain technology is the elimination of intermediaries. When freelancers and employers interact directly with each other through a smart contract rather than via a centralized service, the value of the intermediary will drop. This is already evident in the companies that have embraced the blockchain technology
Tokens and Smart contracts will create new incentives
With a blockchain application, you can tokenize anything. It is one of the marvels of the technology, which freelancers and employers will enjoy in the freelance marketplace. Currently, one of the major problems for freelancers and their employers is trust. Sometimes there is unfair treatment between the two parties, which drags the entire system.
Using crypto-tokens and smart contracts is a clever way to reward everyone in the freelance marketplace, which encourages them to act fairly and professionally always. Once on the platform, both freelancers and their employers would want to safeguard their reputation, which is a win-win for both parties. With a decentralized system, there will be better dispute resolution, more accurate ratings, and less authoritarian control.
Final thoughts
New blockchain-based initiatives are already in the offing, targeting the freelance marketplace. As more people adopt the blockchain technology and cryptocurrency, it is only a matter of time before we see a major disruption, which will address the major inefficiencies of the freelance sector.
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Author info
Tony is a writer for the crypto space. He presents cryptocurrency and blockchain topics to the public in a way that he only can. While carefully researched, this article should not be taken as an express investment guide. Do your own research and consult a financial advisor before you invest in cryptocurrency.
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