Digitalization has significantly changed the way we live our lives. Digital platforms have given workers more freedom and choice over how they make a living, and the usage of these platforms, along with the prevalence of freelance labour and short-term contracts, is what defines a gig economy. This has made employment opportunities available to millions of individuals worldwide, and millions more are jumping on the gig economy bandwagon.
Today, gig workers, independent contractors, and freelancers are a familiar sight in a variety of sectors, including ride-hailing, food delivery, and online marketplaces.
With everything from contracting clients to concluding deals and completing projects being done digitally, it only makes it logical to conduct monetary transactions digitally as well. Herein lies the role that cryptocurrency plays in the gig economy.
Security, efficiency, and anonymity are just a few of the many advantages cryptocurrency has on the gig economy, making its adoption by freelancers and independent contractors appear inevitable. However, among all of these benefits, there are certain drawbacks to be aware of. Read on to discover the pros, cons, and final verdict in this situation.
Implications of Cryptocurrency for the Gig Economy
Simply put, cryptocurrency is a digital form of payment that employs encryption for secure transactions. It is a stand-alone currency based on blockchain technology that is independent of a governing body or bank. Bitcoin was the first cryptocurrency to be presented, back in 2009, and since then, several coins such as Ethereum, Litecoin, and Dogecoin have been introduced.
The gig economy is a subset of the service sector focused on contract or freelance work, frequently requiring communication with clients online. The phrase was first used in the music industry, where “gigs” are temporary contracts at different venues.
Cryptocurrency fits very well with the gig economy since it is so dependent on digital platforms and is built on the principles of independence and flexible labour. Here are several advantages of cryptocurrency for freelancers and independent workers in the gig economy.
Benefits for freelancers and independent contractors
Decentralization and peer-to-peer transactions
The primary link between cryptocurrencies and the gig economy is decentralization. The cryptocurrency was developed using blockchain technology, which has no central authority and stores transactions in discrete blocks along the chain so that no transaction can affect or change any other transaction, and where the stored data is not in anyone’s ownership.
The gig economy is built on the concept of flexibility and the idea that there is no set boss for the gigs that are made. The customers reach out to a freelancer or contractors, they strike a deal, the freelancer completes the work, and the client pays him. Now, if the payments are conducted using Bitcoin, it enables a simple and safe transaction even while maintaining your anonymity as a freelancer. Additionally, using cryptocurrency eliminates the need for middlemen like banks and payment processors.
Potential for greater financial inclusion
According to the World Bank, 1.4 billion adults worldwide lack access to basic banking services. By developing a decentralized ledger system that is transparent and safe, cryptocurrency can end this exclusion. Cryptocurrency makes it possible to carry out financial agreements and lessens the need for middlemen. Because of this inclusion, independent contractors and freelancers can participate in the economy without facing discrimination.
Challenges for gig economy platforms
Besides the flexibility, anonymity, and decentralization offered by cryptocurrency, there are some challenges for the gig economy and traditional financial institutes when adopting cryptocurrency:
Lack of Financial Stability
One of the biggest problems the gig economy has is a lack of financial stability and predictability. Gig workers frequently have variable revenue sources, which makes it difficult to plan and budget their money. Because traditional financial products and services, like loans and credit cards, often demand a solid earning history, this can cause financial stress and make it harder to get them.
To address this issue, various FinTech businesses have emerged that provide novel financial solutions for Gig workers. For instance, the US-based software Steady helps gig workers manage their finances by connecting them with part-time jobs and offering financial tools and support.
This implies that anyone with access to the internet and a smart device can participate in the economy as a freelancer or a hirer without a bank account. Speaking of internet access, if you don’t already have one, check out Kinetic Internet for their fast, dependable service, which is offered in more than 18 US states.
Difficulty in assessing the Gig workers
Another significant hurdle for traditional financial institutions is determining the trustworthiness of Gig workers, who may have poor credit histories or intermittent income streams, and who, since they use digital money, may even be anonymous. Due to this, alternative credit scoring models have emerged, including ones that evaluate a person’s creditworthiness by looking at their payment history and digital footprint.
Financial transactions, like nearly everything else in our lives today, will inevitably become digital. Thus, despite its volatility and poor adaption at the moment, cryptocurrency will be the currency of the future. Similarly, the gig economy appears to represent a significant portion of future employment. Therefore, it’s crucial to educate yourself on the potential effects that cryptocurrencies may have on the gig economy.
Despite some disadvantages, it has the advantages of security, flexibility, and inclusivity. Authorities will therefore need to create rules and regulations to use digital currency for the benefit of independent contractors and freelancers and to promote the gig economy.