Common Misconception: Smart Contracts can Reduce Costs, Eliminate Intermediaries

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  • Yoav Vilner, a tech startup mentor, recommends using blockchain-based smart contracts to allow freelancers to connect with clients.
  • Freelance platforms like UpWork and Fiverr charge high commissions, however, the current design limitations of smart contracts would likely prevent them from being able to effectively solve this issue.

Yoav Vilner, a tech startup mentor and Forbes contributor, recently published a post in which he recommends utilizing blockchain technology to help improve the growing freelance economy. Companies now increasingly prefer hiring freelance workers because it’s more affordable, or economical, compared to employing full-time staff.

The advent of globalization, which can be attributed to improvements in communications technology and the internet becoming accessible to billions of people around the globe, allows companies to fully outsource their work for far lower costs compared to hiring workers locally.

However, popular platforms for freelancers such as UpWork and Fiverr require that they pay as much as 20% in commission. Also, as Vilner notes, “if their code or project lives on and continues to provide value to consumers”, the freelancer only receives payment once for their efforts.

Directly Connecting Clients With Freelancers

In order for workers to receive better compensation, Vilner suggests using blockchain technology, as many people have now recommended. He explains the distributed ledger could help people directly connect clients with freelancers and eliminate the middlemen who charge high fees.

Vilner goes on to write that smart contracts could potentially help improve work-related procedures in the future. He notes that “because these smart contracts are put on an irreversible ledger, it’s possible for payments to become almost instantaneous.”

However, this is more of misconception, or now an increasingly widespread misunderstanding, about what blockchain-powered smart contracts are capable of - according to prominent Bitcoin developer Jimmy Song.

In a detailed Medium post, Song basically explains that “the execution of the agreed-to consequences are what make smart contracts powerful, not in the contract’s innate intelligence.”

The University of Michigan computer science graduate mentions that writing “normal” legal contracts takes “years of study” while requiring people to pass a difficult bar exam (basically earning a law degree).

Smart Contracts Written By "Newbies"

Song also points out that currently smart contracts are mostly written by “newbies”, or inexperienced workers - who fail to understand that they must be written in a manner which makes them highly secure.

As CryptoGlobe reported in late August, security firm Hosho found that over 25% of smart contracts contained “critical vulnerabilities.” Additionally, three in five, or about 60% of smart contracts, have some type of security flaw.

Given their present state of development, Vilner’s recommendation that blockchain-based smart contracts may be used to improve the global freelance economy may not (at this point) effectively solve the problem of providing better compensation to workers. While he does point out a legitimate issue, which must be addressed, he fails to understand the current design limitations of distributed ledger technology (DLT).

PayPal Reveals Cryptocurrency Development in Letter to European Commission

Michael LaVere
  • Payments giant Paypal has revealed it is working on developing cryptocurrency capabilities.
  • The company's letter to the European Commission supports crypto industry regulation and the creation of transparency. 

Payments giant PayPal has revealed its intention to develop cryptocurrency-related “capabilities” following the announcement of Facebook’s Libra in June 2019. 

In a letter to the European Commission in March, PayPal said it was “assessing” the need for a European framework for cryptoassets that would support the integration of payments and financial services.  

PayPal said the crypto-asset industry had experienced substantial growth over the past few years and generated discussion about the impact of decentralization on central bank digital currencies.

The letter reads:

As such, PayPal is continuously monitoring and evaluating global developments in the crypto and blockchain/distributed ledger space. Of particular interest for us is how these technologies and crypto-assets can be utilized to achieve greater financial inclusion and help reduce/eliminate some of the pain points that exist today in financial services.”

The letter continues, claiming that PayPal has an interest in how cryptocurrency technology can be used to promote transparency and compliance efforts and would be supportive of the European Commission’s attempts to regulate the industry. 

PayPal revealed that it had taken “unilateral and tangible steps to further develop its capabilities” in the area of cryptocurrency since signing a letter of intent to participate in the Libra Association established in June 2019. 

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