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Innovation 05 Jul 2018

What is the “gig economy”?

The word “gig” comes from musical jargon and refers to a performance by a musical group. When applied to the working world, the concept refers to sporadic jobs of limited duration. The person hired to do the job is responsible for fulfilling a specific role within a project.

The concept of the “gig economy” began in the United States more than a decade ago. With the onset of the economic crisis, the job market underwent a revolution from which arose alternative hiring models, which contrasted with the prevalent traditional models of the time.

This model is akin to working as a freelancer or independent consultant since it consists of taking on assignments for a specific duration of time without exclusively committing to the hiring or contracting company. In the U.S., one of the most successful platforms supporting the gig economy has been TaskRabbit – specializing in domestic odd jobs such as moving, electrical installations, or shopping –, which put customers in touch with people for hire. The latter can respond to specific customer projects advertised, or as per their profile they can be contacted directly by the customer. For many people, this model represents a way to achieve a better work-life balance.

Flexibility and online communication are the basic pillars that enable the gig economy to work. Remote working – being able to work for an employer or customer who is thousands of miles away – is one of the gig economy’s chief characteristics and is made possible by advanced technologies.

The number of companies with a model based on the gig economy has increased exponentially in recent years. McKinsey revealed in a recent report that between 20 and 30 percent of the workforce in the U.S. and Europe participate in the gig economy to some degree.

This new employment model has numerous advantages for both the “employee” (freelancer) and employer. However, the freelancer may find him or herself in an unstable work situation since she/he depends exclusively on one-off projects that match his or her skills.

Blockchain and gig economy: the perfect pair?

Blockchain technology has various applications that are still in development. For the gig economy, blockchain could contribute to security and control solutions to guarantee the transparency of the relationship between the involved parties.

MIT (Massachusetts Institute of Technology) has launched a platform that uses blockchain technology to validate the credentials of its alumni. The application works like a “blockchain wallet” where the alums can keep their diplomas and other documents that can accredit their academic performance at MIT.

Freelance job search platforms like Coinlancer and Ethlance have incorporated blockchain to add transparency to the economic transactions that occur between customer and freelancer.  In both platforms, projects are compensated in cryptocurrencies. Coinlander has its own digital currency, “CL tokens”, and Ethlance’s platform uses Ethereum’s cryptocurrency, “Ether”.

The different ways to apply blockchain in the gig economy could help root out fraudulent users from the market, guarantee payments, and ensure each deal’s transparency.

The new economic model is also generating new financial needs for its participants, especially the freelancers. Many fintechs are creating services geared toward covering the needs of this group. An example is the startup Azlo, one of the projects developed by BBVA’s New Digital Business unit in San Francisco, which is developing financial tools specifically for this economic model.

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