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A new use case of smart contracts in 21st century capitalism

Author: LB 2021-02-14 614

If we were to trace our technological advancement back to a few centuries ago, we would have to investigate the scientific achievements of Schrödinger who laid down the theoretical fundamentals of modern semiconductor industry. It was not long after wavefunction theory emerged when large-scale semiconductor based chip manufacturing exploded and markets were flooded with multi purpose integrated circuits. Then personal computers were invented and it was a straightforward idea to connect these machines with a cable to form a network and enable these machines to communicate with each other. In retrospect, this kind of evolution is kind of self-explanatory, but the consequences are very hard to anticipate even for the near future. Whatever the case may be, we have to get ready for the upcoming 21st century capitalism. Doubtless, cryptocurrencies will play a very significant role in the new economies. What kind of implications will this level of digitalization bring to us? Let’s think about it a little bit.

Seemingly new trends on our labour markets are not that new at all. The Internet itself enabled humans to work in a highly interconnected way and this caused significant disruptions in the leading economies of the world. Phrases like outsourcing, freelancing or contracting need no introduction. These trends are usually triggered and driven by financial interests. When it’s cheaper to have something done in Mumbai, than in Tokyo, then it’s obvious that Japanese companies will start looking for office spaces in India and in a few years a large proportion of the work will be done in developing countries. This leads to severe inequalities in the target country, and it moves the entire world economy towards a more balanced state.

Globalization leading to inequalities

The target country suffers acutely, because while a thin layer of its society grows richer, the rest of the population stays has to live on the same amount of income as before globalization. This creates extreme inequalities in the country and no surprise that there will be more and more dissatisfied citizens as globalization progresses. There is very little we can do against this, because the global economy is always moving towards equilibrium and if Japanese wages are much higher than the wages in India, then the process will continue.

What we learn from this is that an individual, especially in a developing country is advised to allocate a significant amount of time of personal development, and individual skills in these new economies will be much more important than before. Furthermore, borders between countries continue to lose meaning, because as long as people understand each other, and if both parties speak for example English they can always do business online.

Humanity has learnt a lot about doing things online during the coronavirus crisis and telecommunication technologies are still advancing rapidly to cater to the needs of the post-covid economies.

All of the above mentioned factors aid the boom of the freelancing economy. As long as you can speak English and you have at least one valuable skill that is very likely to be appreciated on the global market, you’re a perfect freelancer candidate. There is not much you have to do. You just have to find a suitable platform like Upwork or Fiverr and once you open an account you’re ready to accept orders from employees. Some of the users don't even speak English and if you target a local market, speaking one certain language usually suffices. So for example if you are doing social media marketing in French for French clients, you don’t need English. And of course, you can be in Mozambique or in Moscow too.

Modern freelancing platforms and their problems

Some freelancing platforms don’t even require strict user identification and you can register with a single email address and a phone number. Clearly, the easier it is to register to such a platform the more users it will have so platform operators introduce the least amount of red tape.

Well, at first sight this might seem safe and sound, however there are some tiny imperfections in these freelancing systems. The complexity of the tasks you’re required to do can vary, because sometimes you’re required to do easy things and sometimes the client wants you to do more exotic things. The compensation system is pretty straightforward, because once you submit your work, you get paid by the platform and they collect the money from the client when he places an order. Whenever an order is placed the client’s money levitates somewhere between you and the client. If there is no disagreement between you and the client the money gets transferred to you and everybody is happy. So if the task was to design a logo in 24 hours, the freelancer designs the logo and the client is satisfied with the end product, there is no dispute. And even if there is a dispute between the client and the freelancer, it’s easy to decide who is trying to deceive the other. There are two possible options. Either the freelancer has submitted a work of poor quality or the client is trying to save money by not paying for the delivered work. In such a situation the platform’s operator shall intervene and act as a placatory player between the two users. Making decisions in such situations is not easy and whatever the final decision is, one of the parties usually leaves unsatisfied.

The solution

The main issue here which causes the problem is how we define a given task. The conditions that shall be satisfied upon delivery must be clearly stated by the client and the freelancer should agree on these once he undertakes the task. I think this is an excellent use case for a de-fi (decentralized finance) application with a smart contract. As long as my limited knowledge allows me to make bold statements, current freelancing platforms are not smart contract based. This might be a good direction to proceed in when one wants to contribute to the evolution of the globalized labor market. Such a solution would alleviate the responsibility of platform operators and order deliveries could be done in a much smoother manner.

Author: LB


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