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How the Technology Developed for Bitcoin is Changing the World of Work
It remains to be seen how Blockchain, which favors direct transactions between individuals, can serve workers rather than undermine the power of collective action.
Research & Commentary
March 16, 2018
In a world based on contracts, online networks using blockchain technology have the potential to revolutionize the way we make those transactions, whether it is exchanging money, buying goods, assets, data, or anything that has value, including labor.
Whether it is job placement, headhunting, or securing part-time or full-time work, blockchain offers opportunities as well as risks — for individuals and for trade unions. It’s important to first understand the system as well as the inherent risks regarding data use and regulatory issues.
Here’s how blockchain works. Once a transaction is recorded into the ledger or blockchain network, it stays there forever, as the blocks of the chain cannot be removed or changed. Everyone who has received permission to join the blockchain can see the same information, in real time. The chain is owned not by one ‘controller’ but by all its users. Transparency is thus ensured by knowing who holds what in a cryptographically secure and verifiable way.
Blockchain tries to redefine the meaning of ‘trust’ as an element that is built into the architecture of the system. As such, it allows parties that do not normally trust each other to carry out transactions or enter into contracts, based on rules agreed by them and which translate into so-called Smart Contracts.
Practically speaking, the system is based on code that contains a set of rules and penalties, described step-by-step, designed and agreed by the parties themselves, encoded in the blockchain and enforced automatically, with no authority or third party involved.
Blockchain is already part of our life. It is used by small and medium-sized companies to create new business models and payment systems. Big banks are experimenting with it for clearing and settlement, trade finance and syndicated loans. Governments are using it to provide digital identity and land mapping. Police forces use it to conduct criminal investigations.
Why should workers care about blockchain?
As a technology that can lead to a total revolution in how we exchange goods and services, blockchain needs to be on the radar of workers. Credit for small businesses, temporary employment and recruitment are three areas in which we can already identify concrete impact.
- Credit for small businesses
In Africa, accessing capital to finance business is a real problem for most small-to-medium enterprises (SMEs). Many of them are excluded from the traditional banking sector. Sensing an opportunity, Viola Llewellyn co-founded Ovamba Solutions, a blockchain-based platform that connects international investors from the US, the UK and Japan directly with micro, small and medium-sized African companies, giving them access to short-term capital and financial services.
Blockchain provides transparency to investors, as everybody can see the deal flow, customers, applications, etc. It also intends to use blockchain and cryptocurrencies to eliminate the many trade barriers that still exist in Africa.
The platform uses an algorithm that compiles over 500 data points to determine an SME’s risk profile before disbursing the funds. Users connect to a web platform, through a mobile phone, and can communicate in their own language, if they don’t speak English, French or Arabic. Ovamba also buys assets/inventory on behalf of SMEs, adding a small commission in the process. The transaction is secured by the inventory and is linked to a repayment plan that allows business to maintain sufficient levels of cash flow.
This has helped numerous small African businesses and farmers connect with each other and have access to cheaper funding, which helps them to survive and grow.
2. Temporary employment
In the field of temporary employment, Andrea Pinna and other researchers propose a decentralized employment system, which simplifies the recruitment procedure and turns it into a fairer relationship. Here, the blockchain helps to rule the peer-to-peer network of employers and temporary workers with smart contracts. The model developed is based on two essential values for work, namely it obliges employer to make the employment relationship transparent and at the same time prevents undeclared labour.
The employer needs to specify working time, wage, job description and deposit digital assets to secure the wages in a smart contract. When all requirements are met, the job offer is sent out by an automatic and decentralized system. Workers can then apply for the job knowing the conditions and the pay. When the work has been completed, the worker receives the agreed payment.
The recruitment industry is also going to evolve as blockchain can be used by companies, head-hunters and recruitment agencies, at a much lower cost than existing systems.
Created under Swiss law, Global Jobcoin aims at facilitating the movement of people and providing access to a qualified workforce in Europe. It uses the blockchain technology and tokens to provide a decentralized, autonomous and flexible platform to pay for employment-related services.
Using smart contracts, the company connects SMEs with freelancers. Jobs are posted on a multilingual platform, a freelancer is selected and once the job has been completed, the tokens are released by the system and the freelancer is paid.
HireMatch is another job marketplace using a token hire system. Both these companies work on the basis of a recruitment commission much lower than traditional actors in the sector.
These examples may be the first signs of things to come. Blockchain is redefining the notion of “trust” and may one day redefine the notion of “work.”
However, some uncertainties remain as to its future. From a regulatory point of view, blockchain is not yet regulated as such and blockchain-based companies are subject to the same laws and regulations as other companies. This provides some degree of comfort, but some other features of the technology do generate uncertainty and will need to be looked at.
As blockchain is based on an immutable database, from which transactions are never erased, data protection and privacy in particular are an issue. Also, since there is no ‘central authority’ involved in smart contracts, there is little possibility to override the consensus.
Surely, legislators will need to work around these issues to protect the community using blockchain.
In principle, blockchain can be used for everything and the developers believe that anything is possible. If it can help communities of people to grow, if it can contribute to fair trade and financial inclusion, it should be encouraged.
Looking at its impact on work and employment, it remains to be seen how a technology that favors direct transactions between individuals can really serve workers, and not damage the collective dimension of work.
Maybe unions should enter the dance and use blockchain for the benefit of workers. Perhaps they can start thinking about how to use this technology to provide better support to workers, anywhere in the world, recognize qualifications and promote additional forms of organizing.
Blockchain has the ability to change the world we live and work in, and it will be necessary to think about how it can be used to protect us all, including as workers.