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Blockchain Is Triggering Disruption in the Sharing Economy

 5 min read / 

Technology gave rise to the sharing economy, which is characterised by the popularity of short-term contracts and freelancing instead of permanent, full-time employment. The rapid development of technology in recent years made it easier than ever for professionals to peddle their craft online and on their own terms, rather than working in the traditional office environment.

While the benefits of freelancing include schedule flexibility and mobility, it is not without its share of problems. Freelancers are faced with income instability and a complete lack of benefits. Freelancers also sometimes accept projects only to find the client is a scammer, who takes their work and runs. Additionally, clients pay the price when they are taken advantage of online, with disreputable individuals asking for payment before rendering services, and then disappearing. These problems exist because there are not enough regulations protecting freelancers and their clients, and no one knows exactly where they stand.

Every Market Is Different

When trying to uncover trends regarding freelancing laws, the task is made incredibly difficult by the fact that every state (and country) operates differently. For example, California recently passed a ruling that makes it very difficult for companies like Lyft and Uber to classify their workers as independent contractors. This is not a federal ruling and acts purely at the state level. Everyone treats independent workers a little differently.

Right now, it seems like no one knows quite how to classify freelancers, and freelancers themselves struggle to figure out where they stand in various facets of the law. For example, how to classify their employment status with the authorities, and how exactly to work with their taxes.

Cryptocurrencies are on the verge of regulation, and it is easy to draw parallels between cryptocurrency and freelancers, as neither of these things has been simple for authorities to figure out how to manage and control effectively yet. One prediction that can be made, however, is that the more successful the freelancing model becomes, the more authorities will want (and need!) to regulate it.

For many markets right now, regulations may be a bit of a knee-jerk reaction. This is because authorities have realised that some level of control is necessary regarding freelancers, but they do not really know exactly what these regulations need to be. However, as time goes on, authorities will learn to understand just how freelancing works and can develop more balanced regulations that will work for freelancers, their clients, and the economy as a whole.

How the Sharing Economy and Freelancing Are Evolving

Regulations have not kept up with the development of technology and its effect on the marketplace and the economy. There has not been enough attention paid to the protection of the freelancer and their client, or their impact on the economy.

A problem facing many freelancers is compensation. Seventy-six per cent of freelancers surveyed stated that they have had issues collecting money owed to them. According to the Freelancers Union, in 2014, lack of payment cost freelancers almost $6,000 each.

Steps have been taken to rectify this problem. In 2016, New York City Mayor Bill de Blasio signed the Freelance Isn’t Free Act into law. This legislation gives freelancers the right to full, timely payment and a written contract; it also protects them from retaliation from clients.

Slowly but surely, change is happening. It is a change that is necessary in order for freelancers to flourish, and also for their clients to understand exactly what is expected of them when they hire a freelancer.

Blockchain’s Role in the Disruption of the Sharing Economy

Blockchain is becoming popular because of its decentralised nature. Too often, when authority is centralised, it is abused. With the development of blockchain-based systems on the rise, it is slowly becoming easier for freelancers to cut out the middleman (for example, platforms such as Upwork and Fiverr), and find clients seeking their skills by themselves (thus, saving them money on intermediary fees).

Blockchain can take the sharing economy to the next level in a variety of ways. Firstly, blockchain-based systems can begin to solve the problem of clients not paying freelancers, and freelancers not completing tasks that they have been paid to do. It is very much a two-way street, and protection extends further than just the freelancer.

Since blockchain was designed to support cryptocurrencies, and as a secure method for financial transactions, ensuring that payment is completed is one of blockchain’s more foundational functions in the sharing economy. Payments are entered into blocks, with fees being so low as to be negligible (saving both parties money). Payment is also guaranteed because since smart contracts on blockchain-based systems are self-executing, freelancers and clients do not need to rely on a central authority to carry out payment.

Blockchain could potentially also protect clients from freelancers who might want to embellish their credentials and skills. The use of blockchain to verify freelancers’ stated skills is being explored and will save clients the stress of trying to figure out whether a resume is true or not, leading to better hiring outcomes.

Ready to Take the Sharing Economy by Storm

The sharing economy is poised for disruption, and it is coming soon. Freelancers and their clients seek better, fairer regulations to protect themselves in this diversified marketplace. The laws have not caught up with the newly developing market, and those in non-traditional jobs need better representation. Blockchain can help with protecting them by guaranteeing payment as long as services are rendered and keeps freelancers from falsifying their credentials. This will lead to more seamless, less stressful relationships between freelancers and their clients.

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