There are major issues with today’s top freelance platforms. This isn’t just the opinion of freelancers but also clients. While one solution is simply to not use freelance platforms altogether, this solves certain problems and creates new ones. Blockchain technology is empowering the mass adoption of a new generation of freelance platforms as well as crypto payments. Still, a few challenges must be addressed.

What Problems Does Blockchain Solve in Freelancing?

Admittedly, some of the reasons for using blockchain for freelance platforms are similar to the reasons why blockchain can power other use cases. Nonetheless, it’s important to highlight the potential improvements that this technology could bring to the gig economy.

Removing The Middleman

Using freelance platforms can be a good way to find remote work or hire talent. However, at the end of the day, platform fees of 10 to 20% going to Upwork, Fiverr, etc. for being a middleman are unjustifiable to many freelancers. On Upwork, the client also has to pay a 2.75% processing fee when agreeing to hire a freelancer. On Fiverr, the client has to pay $1 for processing of orders $20 or less or 5% on orders of more than $20.

Ultimately, it seems that most freelance platforms aren’t willing to lower fees. That’s because new competitors in this space have yet to gain enough user adoption to create the need to do so. However, blockchain-based freelance platforms generally aim to drastically reduce or even eliminate all platform fees. As a result, both freelancers and clients can gain a greater share of the value transfer.

No More Currency Exchange Fees

Even if freelance work isn’t done on freelance platforms, the problem of currency exchange can be an obstacle to working with international companies. While fintech companies like PayPal and TransferWise offer services for exchanging currencies, this often comes with costs. The exchange fee can also vary greatly depending on which fiat currencies the sender and recipient use. Just because the freelancer and client are located in the same country doesn’t necessarily eliminate the fee issue. There might still be a transaction fee in some cases. For example, if the sender decides to use PayPal and doesn’t mark the recipient as “friends or family”, the charge will be $0.30, plus 2.9% of the sent amount. Using cryptocurrencies means that the sender will only need to pay a small transaction fee for sending funds on a given blockchain. This amount is usually only a few cents, much lower than fiat payment processors require.

Transactions Completed In Seconds or Minutes, Not Days

While modern communication between two individuals is instantaneous, the process of sending money isn’t. For example, ACH or Swift transfers for fiat currencies can take as long as three days. Add the fact that many escrow systems on freelance platforms take several days to complete payments. This can bring unnecessary friction to a process that could easily be much more efficient. While fiat-based freelance platforms may take around a week or more to complete the value transfer process (along with high fees), blockchains are already capable of allowing transactions to be confirmed and sent from client to freelancer within seconds or minutes.

This chart shows the median blockchain confirmation times from August 2018 to August 2019. The peak median time was on November 20, 2018, and only took 16 minutes.

Upwork hourly contracts require a security period of six days before funds are deposited to freelancers. After that, there is typically a further 1–2 day delay for payment to be procesed by the bank.

Challenges To Success

User Adoption Is Minimal

In 2019, not too many people (freelancers or clients) are using blockchain-based freelance platforms. What is the cause of slow user adoption? It could be that people are just used to going with established platforms and keep doing so out of familiarity. Another reason could be that people simply don’t know that blockchain-based platforms for freelance work even exist. Because few jobs are posted, it appears that most freelancers aren’t interested in creating profiles specifically for these platforms. What, if anything, will serve as a catalyst for user adoption?

While Ethlance is one of the most well-known blockchain-based freelance platforms, the number of gigs available is still quite low.

Running Into Errors

Using blockchain-based platforms can sometimes be difficult. There are many decentralized applications (dApps) that are easy for anyone to use. However, occasional problems do arise. Even for someone who uses decentralized applications on a regular basis, it’s easy to run into head-scratchers. For example, I had issues receiving crypto funds as a freelancer on a blockchain-based platform called CanWork (see image below) in early 2019. Thankfully, I was able to chat with an admin who resolved my issue. Errors such as this are common across a variety of blockchain-based applications and not just this particular one. As more development goes into building blockchain-based freelance platforms, the quality of user experience is steadily improving.

It’s also noteworthy that CanWork’s native currency (CAN) has since started a migration from the Ethereum blockchain to the Binance blockchain.

Above is a part of a screenshot of my console. I sent this to an admin who worked to resolve my issue.

Trustlessness of Freelance Contracts Is Difficult To Achieve

One of the coolest aspects of smart contracts is the fact that they can be used to create a trustless transaction. For instance, Party A doesn’t have to necessarily know or trust Party B in order to ensure that a contract is fulfilled to its agreed-upon terms. Smart contracts use code to verify that conditions are met. However, one of the potential challenges that freelance platforms using smart contracts face is the human subjectivity of work. For example, a client could say that the work wasn’t satisfactory and decide to not release payment to the freelancer. Who is ultimately responsible for determining this?

Because success or failure to produce satisfactory work brings into question the potential subjectivity of people, this is one area where it’s hard to completely eliminate the need for trust through a smart contract. Top freelance platforms typically have people working on their teams who determine whether or not a client should pay a freelancer in disputed cases. Emerging blockchain-based platforms will likely need to continue to have people in charge of this same review process.

The good news is that many blockchain-based freelance platforms do allow freelancers to view wallet balances of clients who are looking to hire them. This adds some transparency to hiring because freelancers can at least know whether clients have enough funds to cover the costs of a specific project before applying.