How Web 3.0 Has the Potential to Transform the Freelance Economy

In this article by Hubert Pun, Associate Professor of Management Science at Ivey Business School, and Roberto Armena, HBA candidate at Ivey Business School, we explore Web3, the emergence and functionality of Decentralized Autonomous Organizations (DAOs), and how this technology has the potential to disrupt traditional organizational structures and enhance the global freelance economy. 

The evolution of the internet has drastically impacted the working world over the course of the past thirty years, with Web3 promising to further this disruption. A number of emerging technologies under this new iteration of the internet offer many possibilities to change the working world as we understand it. 

What is Web 3.0? 

Many features of Web 3.0 (also often called Web3) are easily recognizable, including blockchain and cryptocurrencies. To completely understand its concept, it is useful to first take a look at its predecessors. Web1 began as the first iteration of the internet, with one main dimension: “reading” information from online websites. Web2 then emerged in the late 1990’s adding a second dimension of “writing” and creating content for the internet, such as online articles and social media posts. Web3 was first coined in 2014 and has gained traction in recent years, which adds a third dimension of “owning” digital assets on the web. These include cryptocurrency, including Bitcoin and Ethereum, and Non-Fungible tokens (NFTs), which are digital assets that cannot be replicated due to blockchain technology. The owners of these assets maintain complete control, with the ability to sell and trade these items on the virtual market.  

DAOs as a Disruptive New Way to Imagine Organizations 

Web3 has paved the way for a new organizational structure known as a “Decentralized Autonomous Organization”, or DAO. It is composed of anonymous “members” who purchase a stake in the DAO on the basis of virtual currency. DAOs are also decentralized, meaning they have no central governing body and are not based in a specific geographical region. 

A famous example of an existing DAO is PleasrDAO, an organization whose members collectively invest in digital collectibles such as NFTs. They place an emphasis on pieces that represent causes and areas of interest that are important to the members. This highlights another key aspect of DAOs; members tend to be attracted to the organization’s purpose, rather than simply joining for other reasons such as monetary gain. Within PleasrDAO specifically, this is highlighted in the art pieces collected by the members; if they wish to support a specific cause such as gender or racial inequality, they may choose to invest in digital art that highlights these topics. 

DAOs maintain a flat hierarchy, disregarding traditional leadership roles. Instead, every member possesses equal authority with critical business decisions being handled through voting, wherein each member casts a vote for each token they hold. The decisions are then executed through a “smart contract” which operates on blockchain technology. Blockchain ensures the smart contracts are immutable and cannot be tampered with, or otherwise makes it public to all members if an aspect of the contract has been changed.  

This difference in leadership and decision making presents an interesting contrast; in traditional corporations, employees tend to be motivated by money, power, and status wherein DAOs see a new shift towards their members being motivated by autonomous and equal power, and personal interest in the goals of the DAO. Worth noting, however, is that DAOs can still see natural leaders emerge. Certain members may organically find themselves being followed, earning their respect of others with high quality contributions to the organization, and demonstrating traits such as empathy and the empowerment of others. 

This also presents several challenges; for instance, with voting being open to all members, there may be certain members who lack the expertise required to make a wise decision but still cast a vote regardless. For instance, if a DAO is voting as to whether or not they should invest in a certain digital asset, certain member may cast vote even if they lack sufficient knowledge to discern whether it would be a worthwhile investment. This may lead to poor outcomes, such as the underperformance of these investments. 

Two Main Structures 

Given their novelty, DAOs face several restrictions as they are not yet recognized as legal entities in most jurisdictions. This has paved the way for two main structures: “wrapped” and “unwrapped”. A wrapped DAO operates under a recognized legal entity such as a partnership or corporation, while an unwrapped DAO functions as they are with no legal recognition. A DAO may wish to be seen as a legal entity for various reasons such as if they want to sign a contract with a non-DAO organization. An example of this is Spice, a DAO that was created to purchase a rare art book and use it to create a movie. They wrapped themselves as a formal corporation to set up an official bank account to streamline this process. However, DAOs must remain cautious if they pursue this method as this may require the sacrifice of key aspects including the anonymity of members and the decentralized structure. 

Development of New Earning Models 

The current working world largely operates under a traditional “work-to-earn” model, though new Web3 developments have led to the emergence of newer earning models. These include “learn-to-earn” wherein individuals earn money to learn new concepts, as seen in the platform RabbitHole which pays users to learn about Web3 concepts. Another emerging model is “use-to-earn” which sees individuals earning money for engaging with online applications, such as the social media platform Minds which compensates its users for interactions such as posting comments. DAOs in particular have fueled the growth of these models, as their web-oriented nature has provided newer opportunities that reflect these newer earning structures.  

Potential for a Global Freelance Economy 

Web3 and the emergence of DAOs have led to numerous economic trends. Primarily, their decentralized nature has made it easier for international collaborators to come together, as reflected in the diverse regions DAO members come from. Further, DAOs lack the traditional recruiting and interviewing processes found in existing companies. These collectively make it easier for members to both join and exit DAOs, creating a trend towards joining multiple organizations in a “freelance” manner rather than being a salaried employee for one company. These trends are likely to continue in the long term, further amplifying the development of the global freelance community. 

Implications and Difficulties Around Regulations 

Though Web3 promises many exciting benefits to the future of work, there are also several difficulties surrounding its implementation. The most major concern regards the regulation of decentralized organizations such as DAOs; as they are not tied down to a specific region, it is difficult to apply legal regulations. This affects a certain number of items such as compensation, taxes, and most notably personal liability. As they are largely unrecognized as legal entities in most places, DAO members lack limited liability measures found in traditional companies. Thus, if a DAO faces legal issues, every single member could be found liable. Some regions, such as the American states of Wyoming and Vermont, have begun enacting legislation to circumvent this and increase regulation, though there is still much to be done to resolve these concerns. 

The rise of remote work has already raised many legal and ethical questions around global work, with Digital Nomads being a prime example. While an increasing number of remote employees have been traveling and working outside of their home countries, especially to destinations with a lower cost of living, there’s been concerns about these “digital nomads” raising the cost of living to be inaccessible to local populations without providing financial or other support to the communities they now inhabit. An even further decentralized system could work to compound the effects of this trend even further. As our digital world gets more complex with unprecedented challenges arising, policies have to evolve alongside it at an increasingly rapid rate. 

Conclusion

While there is much potential for Web3 to reshape our working world, there is still a considerable amount of logistical work required to address the concerns it brings regarding regulations, finances, and the implementation of these new technologies.  

One thing does remain certain: every single worker will be impacted by the changes Web3 brings, requiring everyone to adopt new skills or otherwise be prepared to embrace new career paths. Most importantly, every worker can benefit from familiarizing themselves with Web3 initiatives such as blockchain and cryptocurrency; being an early adopter of these trends is critical to remain on top of the disruptions to come in the future of work. 

This article was co-written by Hubert Pun and Roberto Armena. Roberto is entering his fourth year of study at Western University, pursuing a dual degree in Computer Science and Business Administration at Ivey Business School. His academic interests include Artificial Intelligence (AI), Machine Learning, and Technology. In his spare time, he enjoys keeping up with Formula 1 racing, reading Stephen King novels, and listening to true crime podcasts.

Additional Resources:

What is the future of work? (McKinsey)
Future of Work Research (Accenture)
Four things you need to know about the future of work (RBC Wealth Management)
9 Future of Work Trends for 2023 (Gartner)
Hybrid Work Policies: The Future of the Modern Workplace (Forbes)
Hybrid is the future of work (Stanford - Institute for Economic Policy Research)
11 Trends that Will Shape Work in 2022 and Beyond (Harvard Business Review)
The Future of Diversity & Inclusion: It's A People Thing (Finance Monthly)
Defining the skills citizens will need in the future of work (McKinsey)
How DAOs are Changing Leadership (Entrepreneur)
Web 3.0 is Here to Disrupt the Way We Work (The Future of Work Exchange)
The Future of Work is Built on Blockchain (MarTech Vibe)
What Web3 means for the future of work (Fast Company)
What Are DAOs And Why You Should Pay Attention (Forbes)
What's a DAO in Crypto? Why Does it Matter (World Coin)
What Are DAOs? (NY Times)
Web3 and the Future of Work: Disrupting Traditional Employment Models with Blockchain-Based Freelancing Platforms and Tools (LinkedIn)
How DAOs Could Change the Way We Work (Harvard Business Review)
Building the future of work ecosystem with Web3.0 and Metaverse (Economic Times HR World - The Middle East)
How DAOs are Changing Leadership (Entrepreneur)
Lessons in DAO Leadership #1 (LinkedIn)
How to choose a legal wrapper for your DAO (Aragon)
Understanding DAOs Can Benefit Leaders of Traditional Organizations (Cutter)
No Bosses: What It's Like Working at a DAO (TIME)
Dispelling the "flat" DAO myth (Coin Telegraph)
Re-envisioning corporations: How DAOs and blockchain can improve the way we organize (World Economic Forum)
Why The Digital Nomad Lifestyle Is On The Rise (Forbes)

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