Fairer Freelancing. Can Blockchain Stop Payment Problems?
Freelancing may be a growing trend, but it is still like the Wild West when it comes to getting paid for your work. Late payments are a common problem faced by front end developers, writers, UX designers, blockchain developers, and everyone else — as someone who has worked remotely for four years, I know this all too well. But compared to the number of people struggling to get paid at all, late payments are nothing.
Jorge’s Story
My friend Jorge, a freelance graphic designer, is desperately trying to get paid for six weeks of his work. A year ago he was hired by a large reputable company — at first everything worked fine, the company had a lot of design work and was paying regularly, so Jorge gradually dropped his other clients to focus on this one. Several months later, the manager who hired Jorge suddenly stopped replying to his emails. That month no payment arrived for Jorge. Jorge became stressed but continued working on his tasks for another two weeks, as he believed he had a good working relationship with the company. Eventually, Jorge found out that the manager he worked with was fired, the company was going through difficult times and no one seemed to be going to pay him for his work, or even contact him. As soon as the company faced internal problems, they immediately forgot about the freelancers working for them. Unfortunately, this happens a lot in the gig economy as employers don’t seem to take freelance work seriously.
Wait, Don’t they have a Contract?
Now you may be curious as to why Jorge can’t take the company to court in order to receive his payment. But Jorge is from Egypt and the company that hired him is in the EU, which is a typical situation in freelancing. The court trial, in this case, is something not worth the money and time. Realistically, there is not much he can do to protect himself. It is very common for freelancers to have draft contracts that only offer an outline of the terms as it doesn’t make sense to create a thorough contract for each gig. Quite often, all I need is a precise job description to make sure both parties know what to expect. I don’t bother to make a contract at all, as it is clear in advance that should things go wrong, suing the client won’t make sense for me economically.
The real size of the Problem
Things like this also happen to remote workers a lot. A recent PayPal study revealed that 58% of freelancers in Asia have not received monetary compensation for their work on at least one occasion. Another study showed that even in the US, 50% of freelancers have had trouble getting paid for their work.
On the other side, there are freelancers failing their deadlines and delivering low quality work. When it comes to hiring remote workers, there is a lot of fraud and frustration for all parties. So what can you do, other than try to convince your counter-party via email to be diligent?
Are Freelance Marketplaces Effective?
There are traditional freelance platforms, such as Upwork or freelancer.com, that already offer intermediary and settlement services, but with up to 20% commission fees combined with a several weeks holding period until the funds are released to a freelancer, this experience can become expensive and inconvenient. Since I don’t look for clients on Upwork, bringing people to the platform and sharing one-fifth of my income with the platform is not something I am eager to do.
Is Blockchain the Answer?
Blockchain seems to be a perfect technology to solve this problem, with its smart contracts, transparency and fraud protection. Payment can be placed in escrow and released only when certain conditions of the contract are met — all without requiring human participation. Former employment history for a freelancer and hiring history for the client can be immediately visible and verifiable, again through blockchain. Not to mention that crypto payments are instant.
I looked around for blockchain startups that can be a better option, and here is what I found:
ethlance.com — this blockchain-based platform is commission-free and it offers the same services as a traditional freelance marketplace. Freelancers can browse job ads and apply, while employers can browse the database of freelancers. The platform has already been launched and has some freelancers, but very few job offers. Freelancers need to send invoices to clients to get paid for their work (done through the platform) and can send as many as they wish. Ethlance allows feedback to be left for both client and freelancer but holds no responsibility for resolving disputes, plus as an ETH-based platform, it requires a MetaMask browser to be downloaded in order to operate.
nodal.com — a UK-based blockchain startup that attempts to bring order to both freelancers and employers. Nodal charges 8% of a freelancer’s daily rate, but promises to automate the invoicing process and simplify the job application process. For employers, it combines invoices from all freelancers into a single payment and keeps all info about hired freelancers together.
blocklancer.com — seems to be a blockchain-based Fiverr alternative. Blocklancer charges a 3%-commission but allows you to register anonymously without disclosing a real name and work without connecting a bank account. No settlement services are offered, but either of the parties can apply to the public Token Holder Tribunal to review a case. Most gigs on Blocklancer are currently related to blockchain and crypto.
cryptotask.org — this platform has not launched yet but looks very promising. Their unusual dispute resolution mechanism has caught my attention. When there is an issue both a client and a freelancer need to put 10% of the contract value in escrow. The case is then offered for review to other platform users, who can vote for one of the parties. The reviewers can’t see other votes until the claim is settled. In the end, the losing party pays 10% which is used as compensation for the voters, while the winning party gets the 10% held in escrow back. Cryptotask promises to reduce standard freelance marketplace commission by 90%, but I couldn’t find the exact rate they are going to charge anywhere.
Conclusion
I’m not sure if any of these platforms is powerful enough to completely end freelance fraud. It seems that the ultimate solution has not been developed yet, probably because it will take some trial and error. If not blockchain, then we may need some sort of global authority that will stand for freelancers’ rights, although for me it is hard to imagine what that could be. Until this happens, Jorge and many other people like him will have to keep sending emails begging irresponsible employers to pay them, without any guarantees that it will happen.
According to Intuit research, the number of freelancers is growing by almost 20% per year and may reach 7.5 million by 2020 in the US alone, yet a lot of us don’t have the means to protect ourselves. That is why raising awareness about freelance fraud and the available measures against it is so important. By simply spreading the word and bringing this topic to the attention of others, we can speed up the development of blockchain-based platforms or possibly even invent a better solution together.
P.S. If you have ever struggled with getting paid as a freelancer, I encourage you to share this story to help spread the word about the problem. Share your stories in the comments or send me a link — I will also share it with my network.
