Work is not what it used to be. We live in a world where freelancers will soon outweigh full-time employees, with 47% of workers globally identifying as “self-employed”. The rise of portfolio/slasher careers (and employers seeking cost-cutting measures in challenging growth environments) have contributed to this phenomenon. As the digital era evolves, so does the perception of work and the systems that facilitate it. The boundaries that once defined the professional landscape are dissolving, replaced by a world where talent is often assumed to be unrestricted by geography or gatekeepers.

By Jarrod Barnes and Aaren Cristini

The TL;DR

If you only have a few minutes to spare, here’s what investors, operators, and founders should know about the future of talent in web3.

• Decentralized talent marketplaces will remain niche unless they solve DAO talent issues or design tokenomics that justify being an alternative to web2 platforms.

• Composable profiles will unlock potential. The future of work in web3 depends on infrastructure that enables contributors to own their data and translate their onchain actions in dynamic and borderless ways.

• Build interoperable tools. Tools that enable interoperable credentials, profiles and compensation in liquid currencies would be more versatile and valuable for contributors. These will unlock the democratization of opportunities that decentralized technologies make possible.

• Tokenomics alone will not drive demand. While token rewards and governance can help solve incentive alignment, early examples of tokenization are not enough to drive meaningful differentiation or demand within the current talent ecosystem.

• Focus on real pain points. The most promising innovations will tackle talent pain points around integration of pseudonymous contributors, interoperability and flexibility for workers.

The empty marketplace for talent marketplaces

This shift inspired new systems to facilitate work in web3, starting with the emergence of 'learn-to-earn' in 2020. This period marked the beginning of a mass education drive aimed at onboarding users to web3. Platforms like RabbitHole, Layer3, 101, Metaschool, Phi Land and Coinbase Learn focused on teaching users about blockchain, crypto, and web3 through quests. While validating intellectual curiosity and onboarding learners into web3, there was still a gap in verified talent.

In 2021-2022, talent marketplaces emerged to funnel talent into web3 startups and match skills for contributions to decentralized autonomous organizations (DAOs). Platforms like Metaintro, Kleoverse, and DeWork provided a pathway for individuals to build reputation and find avenues to contribute in web3, however they faced a significant hurdle: the gatekeepers, or the OGs, who often relied more on personal networks than onchain credentials to curate talent. This reliance created a bottleneck, impeding the democratization of opportunity that web3 promises. When joining a DAO, nobody is asking what “badges” somebody has or what quests a person has previously completed. "Who you know" is seemingly still more important than “what you know” even in the early stages of web3.

By 2023 the infrastructure to power talent marketplaces started to develop with platforms like Braintrust, TalentLayer, and Station leading the way. A lack of candidates and a declining number of businesses/communities looking for talent due to the volatile market conditions appeared to dry up the immediate opportunity for these marketplaces. The rails were in place, but the pipeline of talent was not as robust as anticipated. According to Electric Capital’s Developer Report, there are approximately 21,670 monthly global active crypto developers, which accounts for 0.0007% of all developers worldwide. Once heralded as the future of work, DAOs have also become a home for contributors, marketers, community builders, and degens alike with 6.9m Governance Token Holders and 2.6m Active Voters and Proposal Makers globally. However, participation has been top heavy and weighted towards DeFi, with only 2.3% of DAOs having over 100 governance token holders.

It's undeniable that talent will play a pivotal role in the evolution of web3, however it’s yet to be seen if the future of talent can be community-owned. The next iteration of badges, credentials, and quests have the potential to redefine meritocracy in a decentralized world. They could serve as a more flexible, dynamic, and inclusive form of recognizing contributions or skills that surpasses traditional qualifications. This is the challenge for the future of work in web3 - a landscape where community ownership and individual merit coexist and reinforce each other.

Bringing sand to the beach: incentive (mis)alignment

The higher difficulty of starting a multi-sided marketplace, or any platform that requires more than one target user to validate its use case, predates web3. This challenge is prominent from top-to-bottom in the decentralized talent platform vertical. As a result, many of these entities promote solving for a lack of incentive alignment between employers, recruiters and/or candidates. Eniola Ajuwon, founder of Prism Labs, confirmed this when contacted for comment: “Builders in this space should look at building 'trustless' labor markets that align incentives between talent and recruiters. There are a number of solutions tackling this problem from different vantage points.”

A common solution has been to introduce tokenization and token rewards. For some, this is their entire financial structure and they are designed in service of a DAO. Their sustainability is entirely reliant on treasury inflows from active token holders and profits are returned to the treasury (e.g. Prism, TalentLayer). For others, a native token is used to reward “high value actions'' such as completing their talent profile and referrals (e.g. $BTRST, $EDEN, $DLANCE), while successful candidates continue to get paid in a currency with better liquidity. In the case of Braintrust, their marketplace fees are also converted to tokens to return to the treasury. These different tokens provide either governance, ownership, access or financial incentive (as compensation or discounts) to contribute to the platform. There’s also other more experimental tokenomics models similar to social tokens (e.g. Talent Protocol).

Ajuwon of Prism mentions, “It will be interesting to see what incentives mechanisms create the necessary flywheel and network effects to build a scalable solution.” Solving for incentive alignment is inherent to scaling a multi-sided marketplace, but whether there is enough friction between these stakeholders that can be solved by a token is questionable. Everyone but the rich and retired are in need of a job and/or wages. Based on some of the examples above, it can be argued token rewards wouldn’t change or amplify the actions or behaviors of key stakeholders. Ajuwon challenges this when he says, “The current process relies heavily on referrals—yet this system is fundamentally broken. [...The g]rowth-at-all-costs model of existing talent platforms favors quantity over quality, creating marketplaces that are saturated and inconsistent. If this is the case, how can you trust the quality of the talent you are engaging with?”

In contrast, learn-to-earn platforms and onchain education providers like RabbitHole and Braintrust mint onchain credentials as “proof of work”. While they may validate intellectual curiosity of the student, they are yet to establish enough meaning to be anything more than LinkedIn Learning. They need to solve for the incentive alignment that continues to benefit traditional tertiary qualifications, which are supported by commonly held beliefs across society, culture and business that they prove skill and are of value.

There are many startups, projects and builders in the space as highlighted on the landscape graphic. Some are just copies of LinkedIn features at varying levels of decentralization. While each of the entities developing the talent marketplace ecosystem may differ in the details and use cases, their business models can be reduced to a combination of the below:

• Marketplace fees: up to 15% on the compensation paid by the hiring entity to the candidate e.g. Braintrust, Thirdwork, Deelance

• Protocol fees: up to 2.5% on onchain actions/transactions paid by the hiring entity and/or candidate e.g. Eden Protocol, TalentLayer

• Subscriptions: regularly recurring payment models from freemium to paid only

• Job postings: hiring entities pay a fee per job posting up to $299 e.g. Kleoverse, Metaintro

• Revenue sharing: up to 50% on revenue generated from job postings e.g. Freeflow

• Community-funded: token-driven business models where all value accruing to the platform is in the form of native token inflows to the treasury e.g. Talent Protocol, Prism.

Dreams of a decentralized, democratized future of work

The lack of demand for these talent credentials, marketplaces and infrastructure can be attributed to marginal differentiation from traditional web2 talent platforms. If DAOs were to penetrate mainstream ways of working, it would be simple for LinkedIn, Upwork, Fiverr and similar platforms to integrate features that make it easier to find contributors. Web3-native companies have the opportunity to scale with the DAO ecosystem, however there is limited innovation in business models outside of primitive tokenomics designs. They don’t clearly deliver increased incentive alignment between behaviors (find work / getting work done) as the incentive alignment is already high.

While many of these platforms promote being decentralized beyond tokenomics, their onchain mechanisms for credentials, tokenization and identity are all tied to a single alt coin ecosystem. Candidates having options to receive compensation in more liquid currencies would be a more flexible solution to the future of work, while composable talent profiles that can connect to different platforms/employers would increase the scope of opportunities. This could be supported through other composable onchain identity tooling, similar to that being built through web3 social protocols like Lens or Farcaster. This also empowers the candidate as they maintain ownership over their data and avoid the platform risk that many decentralized solutions are trying to solve for. Onchain rewards from different entities can then be tracked to provide a history of validated contributions instead of arbitrary credentialing, which is a problem space Dework appears to be solving. Where talent marketplaces can then add value is to set benchmarks for similar contributions/tasks across DAOs and/or use proprietary AI to match contributors to tasks based on their onchain history of work completed.

Unless decentralized talent marketplaces and infrastructure address the root causes of people/talent issues for DAOs or invent a tokenomics model that justifies replacing web2 alternatives, they will continue to remain niche. New startups and projects need to be built in such a way that as demand for DAO work scales, they are futureproofed to evolve with what is an emergent way of working.

The edge of a new meritocracy

The future of talent in web3 depends on decentralized platforms demonstrating real incremental value. TalentLayer is showing one path forward, providing infrastructure for open service markets and interoperable marketplaces by leveraging an onchain liquidity pool of users and services. Their soul-bound identities, escrow, and configurable fees system could enable the transparency, interoperability and flexibility needed.

Noxx is also charting a course, enabling pseudonymous talents to work with legal entities in a compliant manner through zero-knowledge proofs. Overcoming the challenges of integrating pseudonymous contributors could open up web3 talent to a far larger pool.

These are just a few examples of the innovation needed - focusing on real pain points around flexibility, contribution tracking and identity (including pseudonymity). Platforms that build tools maximizing individual potential, independent of traditional constraints, will unlock the democratization of opportunity that decentralized technologies promise. Startups and projects must continue pushing the industry forward to realize the future of truly community-owned, emergent work in web3.

If you’re a founder building in this space:

• Identify untapped talent pools and real pain points in the DAO ecosystem that your solutions could unlock.

• Consider how you can build for flexibility, interoperability and adaptability from the start to future-proof your platforms as the ecosystem matures.

• Focus on enabling individuals to maximize their potential through data ownership; beyond conventional credentialing and gatekeepers.

Building something interesting in the world of talent? We'd love to chat - send us a DM (@jarrodbarnes and @aarenarchive) on twitter.