The global freelance economy is thriving but legacy payment infrastructure has not kept pace.
Freelancing is the future of work. Every year growing numbers embrace the office-optional world. From the flexible gig economy to long-term engagements, each ‘brand of one’ microentrepreneur searches and finds their space in the new world of work and reward. Employers no longer need to restrict their hiring options to a set radius, or face the trade-off between running offices in high-cost cities versus bribing key talent to relocate.
Thankfully, pursuit of work that aligns with a personal mission is no longer restricted to local regional boundaries. Individual talent and purpose can be fulfilled with wide-ranging opportunities. And yet, a problem persists: freelance workers suffer due to antiquated issues with fiat currencies.
We believe stablecoins will transform access to online work.
While the international freelance economy is thriving and explosively growing, the legacy infrastructure which underpins how valuable work is bought and sold has not kept pace. The world is crying out for a better way of bringing parties together in a fair and trustless marketplace.
Currently, international payments made to online workers incur astronomical fees which often make the payment of smaller sums non-viable, or leave workers waiting to accumulate larger amounts to be worth cashing out. This is on top of administrative delays caused by simply transferring funds. In markets where the financial need is greatest, the costs and delays tend to be the highest.
These inequalities stretch outside the bounds of just work to the access of money itself. Money has structural inequalities which are easy to overlook if you are lucky enough to take financial enablement for granted. Simply opening a bank account is a right denied to many, from those with damaged credit to those who happen to be female in certain countries. This not only excludes multitudes from the marketplace of work simply due to accident of birth, but it also consequently keeps market-makers from being able to access their valuable talents and enthusiasms. It’s the opposite of fair.
Cryptocurrencies have been seen as a means to address these issues, but to date have remained highly impractical as a payment form mostly due to the wild fluctuations in price. A task hired for today at one Bitcoin, and delivered 30 days from now, is likely to have a very different earnings outcome than originally expected.
For freelancers in unstable economies, that might be a viable trade-off. Already we see the fastest-growing adoption of crypto in places like Venezuela and Argentina, where hyperinflation have taken hold (In Venezuela to the tune of 80,000% inflation of the Venezuelan Bolivar in 2018 alone). Here, cryptocurrencies like bitcoin and dash look pretty good compared with their native sovereign coin.
However, the price of cryptocurrency must be valued on receipt and then repriced when used for purchases or exchanged. This is when price fluctuation can easily cause a loss of value. Even with reduced transaction fees and a 30 day volatility of Bitcoin of less than 8% since 2018, the downside exposure risk with cryptocurrencies is too great for many workers and employers to contemplate. Many simply want payment in a stable currency such as USD - which fluctuates less than 0.8% monthly.
Therefore one of the most important trends in the crypto ecosystem, and a complete game-changer for freelancing, is the emergence of a growing breed of stablecoins.
Stablecoins are designed to do what the name implies, to maintain a stable value over time.
For example, the USDC stablecoin maintains a 1:1 exchange with the US dollar. USDC is an Ethereum-based stablecoin which offers no-fee instant transfers from your blockchain account to dollars on your credit card; whilst also handling internationally mandated Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures.
With USDC, transfers between accounts cost around $0.03 cents paid to the Ethereum blockchain by the employer regardless of the amount of USDC being transferred. The transfer between USDC blockchain accounts takes about 20 seconds. In contrast, sending $100 bank transfer to a worker in South Africa could easily cost $17.00 in inbound, outbound, exchange, and fixed fees. It’s also likely to take 3 to 14 days.
If the future of work is freelance, the future of payment is stable cryptocurrency.
Stablecoins provide nearly everything that freelancers and hirers covet in remuneration structure - speed, low-fees and universal access. A bank account isn’t even required. With a value anchored to the everyday prices for daily living and business, stablecoins make freelance work accessible, trustworthy and frictionless for both parties.
The past year has seen an explosion, not only of new coins, but of increasingly sophisticated means of anchoring their stability. Usually this involves real-world asset collateralization of some kind, such as being backed by a local fiat currency, or a commodity like real-estate or precious metals. For example Paxos, who offers a USD tethered stable coin called PAX, also plans to roll out a stable coin tethered to precious metals including gold.
Interestingly, stable coins can also be underpinned by algorithmic mechanisms to stabilize fluctuations - such as the triggering buy-back-and-burn smart contracts which activate if price on the open market exceeds specified parameters. Maker is a seemingly miraculous example of a stablecoin collateralized with cryptocurrency with a value pegged to the US dollar. Even with the post ICO crypto winter of 2018, backed only by the Ether cryptocurrency, the value of Maker hovered like a superconducting magnet to near 1:1 trading of USD through all of 2018. Wow. Maker plans to expand its collateral include to tokenized physical assets like Harbor’s tokenized real estate tokens. Including collateralization with real world assets is intended to help mitigate ‘black swan’ market events. In addition Maker is subject to decentralized governance and public transparency on the blockchain.
With or without fiat currency backing, stablecoins create a money transfer user experience which is about as seamless as it gets for worker and employer. Removing the risks of arbitrage and price volatility, the costs of currency conversions, and the delays in receiving payment, adds up to a payments revolution for international workers and employers.
But let’s talk about the future. Stablecoins also simplify increasingly complex payment agreements by using smart contracts and real-time oracle data. Global instant payment of dividends, royalties, affiliate commissions, and microtask rewards all become possible in ways which simply would not have been viable with traditional international remittances. Being truly programmable money - in which code, conditions and instructions can be embedded - smart contract enabled cryptocurrencies are an evolution of money itself. Fixing payment unit value relative to fiat currency still leaves unprecedented flexibility and power in their application.
For example, a freelancer might create a digital product for a client and receive tokenized dividends based on its success in the market rather than an agreed work-for-hire price. Or the worker could balance bills and possible future upside with a combination of the cash upfront and dividends. In the past the freelancer may have been very wary of this kind of unenforceable future-based agreement. However, with a smart contract in place to trigger a micropayment every time the product is downloaded and licensed, both parties can commit to the success of the product wholeheartedly and be mutually motivated to see it succeed.
To sum it up, stablecoins ensure fair compensation at stable agreed-upon prices or even an actual stake in the finished work - through the magically programmable money of smart contracts. Stablecoins remove the constraints and headaches of traditional fiat transfers, allowing a future cohort of digital freelancers to grow personally and professionally, travel or work from home and show by example how life can be lived well. Imagine a future where everyone can do work which inspires them, on terms which are trusted and transparent. That’s a mission we can all champion.
