Imagining Blockwork: A Blockchain-Enabled Upwork

How might blockchain-enabled platforms work in the gig economy...

This article is from the new Workforce Futurist Newsletter and asks some key questions for workforce futurists.

Upwork, an existing disrupter in the gig economy formerly known as Elance-oDesk, currently has fourteen million registered freelancers and five million registered clients. Three million jobs are posted annually, worth a total of one billion dollars, making it the world’s largest freelancer marketplace.

In the Upwork model, someone with a work project posts the job on the platform and reviews the pitches and fees from freelancers around the world. Freelancers such as web developers, designers, writers, or accountants who subscribe to the platform are rated — as travel destinations are rated on TripAdvisor — and so employers have a pretty good idea of the reputation of the workers. The hiring person can review profiles of freelancers, interview short-listed candidates, and then offer a contract. Once the freelancer has completed work to the employer’s satisfaction, payment goes through the Upwork platform; Upwork takes a 10 percent fee, plus a 2.75 percent fee to a financial intermediary (e.g., Mastercard or PayPal). Upwork also charges the freelancers fees from five to 20 percent of total contract fees.

There are pros and cons to this model for all parties. Employers with a specific project can tap into a global marketplace and compare skills, feedback, and fees. This platform may be ideal for a discrete, low risk project. Complex projects involving access to data and customer information present a higher risk. The model works well for freelancers with positive project reviews located in areas with a low cost of living. However, critics argue that platforms like Upwork fuel a “race to the bottom”: those willing to work for the lowest fees will get the jobs, bringing down the average wages paid for projects across the board.

There is a limit to the scale and complexity of the projects undertaken for many reasons, the most important of which is trust. Many projects undertaken are between people who will never actually meet in person.

What if we implemented the best aspects of the Upwork model on a blockchain and called it Blockwork? We could crowdfund the development and launch of Blockwork by issuing our own cryptotoken on the Ethereum blockchain. Each tokenholder would be, in effect, a shareholder in our new platform. Freelancers and employers could both hold stakes in our new venture.

Our Blockwork would provide a similar matching platform with freelancers pitching for projects, but ours would use smart contract technology. Freelancers would receive payment almost immediately in cryptotokens and avoid the usurious fees paid to intermediaries. Credentials for identity and project performance would be verified on a block. An employer with a project would also have verified credentials for identity and payment performance for projects.

When the specifications of a job matched the qualifications and financial requirements of a freelancer, the parties would agree on terms and form a smart contract specifying the conditions for the work, including the checkpoints, deadlines, and fees to be paid. When the freelancer has successfully met the conditions, the client would create a hash on the blockchain, thereby authorizing automatic payment in a cryptocurrency.

Although the freelancer and the client would both be utilizing the blockchain platform, they would effectively contract directly with each other. They would pay a nominal fee to the platform as a percentage of contract value. Since both freelancers and job posters could hold stakes in the platform, they would have incentive to build and maintain a large, robust network. By cutting the fees (estimated at 18–38% of contract value), freelancers would realize higher pay rates and receive payment almost immediately via tokens. Because the capabilities of the workers would be more robust, the projects would require less time and could save the job posters costs.

Because credentials of freelancers could be reliably validated, hiring firms could post more complex, valuable projects to the platform. The skills procured could gradually move up the skills and talent value chain. In the market for business advice, if competent teams of freelancers could form to solve complex business problems, they could disrupt the consulting industry.

Blockwork could support the growing trend in certain markets for full-time employees to choose shorter-term work contracts. One benefit of blockchain comes from cutting out fees to brokers, creating a new ownership model, and incentivizing the network to grow the platform. Organizations would need to learn to manage a Blockwork model as an important part of their talent ecosystem, not as a supply chain to obtain the cheapest cost per output.

There could be variations of Blockwork operating in different geographies and industry sectors for specific types of projects. There could also be various ownership models — from network owned, to shareholders, and even public bodies.

Our Blockwork would likely have a rocky trajectory as rules of the market adjust and successful platforms gain market share. However, the principle behind Blockwork could solve some of the more persistent problems in the labor market.

*This article is from a research report originally published by the Blockchain Research Institute, and is available as a PDF download from this link ->

“Blockchain and the Chief Human Resources Officer”

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Disclosure — I work as a strategic advisor, writer, speaker, coach on workforce transformation programmes. I keep my memberships, advisory positions, affiliations etc updated on my LinkedIn profile.