Intro

The rise of freelancing has gotten plenty of hype over recent years, but the movement hasn’t yet lived up to its utopian vision. Instead, online marketplaces like Uber, Doordash, and Upwork have struggled to turn a profit, which has led them to extract painful amounts of value from freelancers trying to make a living on their platform.

Braintrust is looking to leverage the blockchain to solve this problem with existing talent marketplaces, and is currently able to levy an industry-low 10% take rate by leveraging clever tokenomics of its BTRST token. The core tokenomic feature is that all revenue collected by Braintrust is sent to their proprietary “fee converter,” which then buys BTRST off the open market. This buying pressure allows them to continuously incentivize participation in the network through distributions of the BTRST token to valuable contributors.

Why Braintrust’s Fee Converter is a Game-Changer

Below is a nice graphic from a community member illustrating how money flows through the network: companies pay 10% fees to Braintrust for the talent they hire, Braintrust then uses that to buy BTRST via its fee converter smart contract, and the community can then approve BTRST token distribution incentives from the community treasury.

The key advantage of the fee converter is that it allows for better stakeholder alignment than Braintrust’s web2 peers. Most companies raise a bunch of money from professional investors who are simply looking for a return on their investment. The companies then use this money to hire talent, build out a product/service, and grow a customer base.

In the case of a marketplace, this means you have an investor who wants the company to charge as high of fees as they can to maximize short-term profits, customers who obviously want to pay as small of fees as possible, and employees who just want to make a good income. These are 3 parties all vying for a share of the economic pie created by the product/service offered by the company.

Through the BTRST token and the fee converter, however, a ceiling is set for how much of the protocol is controlled by passive investors who aren’t contributing to the network. This is for a few reasons:

• BTRST holdings are more inflationary for passive holders than they are for active contributors, making the value proposition superior for the active contributors.
• The BTRST token has utility in the network for things such as making your jobs stand out to talent as someone hiring or making your bids stand out as talent looking for work
• Funding early losses to invest in and grow the network, which is traditionally done by VC’s, can instead be done by distributing BTRST rewards to community members. This greatly reduces the need most companies have of bringing in passive investors whose interest aren’t aligned with the users of the marketplace

Whereas freelancers on and customers of Upwork or Doordash, who receive no distributions of equity in exchange for their contributions, have minimal leverage to affect corporate governance and management decisions, freelancers on and clients of Braintrust are also significant holders of the BTRST token. As opposed to being relegated to protests or voicing their concerns on social media in the hopes of influencing management direction, users of the Braintrust network have direct economic control over the policy and direction of the network they rely upon.

In Bill Gurley’s influential article on marketplaces, A Rake Too Far, he explains how short-term profit maximization incentives created by passive investors ultimately leads marketplaces to charge too high of fees and thus drive users to seek disintermediation. As he says, “A sustainable marketplace is one where the value of being in the network clearly outshines the transaction costs from participating in the network.”

Web2 marketplaces rarely make the hard decision to keep fees low for long enough to gain such a large market share that they become profitable, with companies led by visionary CEOs such as Jeff Bezos at Amazon being the outliers. It’s hard for businesses with a massive contingent of shareholders demanding returns to resist the urge to raise prices, but much less difficult for a protocol in which one of the largest contingents of governing power lies with the users who themselves would be paying this fee.

So as we can see, BTRST tokenomics have laid out the incentives for keeping fees on the network low, which should allow the marketplace to continue its rapid pace of growth, which can be tracked in real time on their network dashboard. However, while their tokenomics are keeping the community happy while there’s still a large treasury to fund incentives, incentive distributions currently outweigh the BTRST being repurchased through the fee converter. According to the dashboard, enough fees have been collected to buyback ~350k BTRST tokens while 6.6M BTRST in community incentives have been distributed so far. Given the cap of 250M BTRST, incentives will have to be funded completely by the fee converter in the long-run.

How Braintrust Can Fully Utilize the Blockchain

Ultimately, for Braintrust to disrupt its web2 predecessors, it needs to be able to break even while also charging its industry-low take rate. In the same way that the path to disrupting Uber or Doordash is through fleets of self-driving vehicles that obviate the need to pay a human to fulfill orders, I think disrupting Upwork or Fiverr will likely require automation of as much of the marketplace’s services as possible.

The path to a superior product could in fully capturing the fundamental value propositions of blockchain/web3: a permissionless, censorship resistant, and decentralized talent marketplace. This could be a parallel option to facilitate jobs via smart contracts on Ethereum (or another smart contract platform), which would give anyone with an Ethereum wallet the ability to contribute as talent or hire talent on the marketplace with no incremental work needed to be done by the Braintrust DAO. If the fulfillment of jobs can morph from a service provided by Braintrust to an immutable application primitive on the blockchain, variable costs incurred by the DAO could fall to zero, leaving only allocation of token incentives for DAO governance to handle.

Beyond just the unit economics, smart contract support may be necessary for bringing other web3 DAOs into the network, as many don't and may never have an affiliated legal entity that could become a client on the current Braintrust marketplace. As a community who’s collectively bullish on the continued growth of web3, I think it’s logical to think that the biggest opportunity for a web3 talent marketplace will be in catering to other web3 projects.

To think through how the smart contracts might be architected, let's first establish the key services provided by talent marketplaces, so we know what capabilities the smart contract needs:

1. Matching jobs with talent
2. Payments Infrastructure
3. Dispute Resolution

All 3 of these can be facilitated in a decentralized way that requires no incremental work per transaction for the Braintrust team:

1 - Talent matching will work similarly as it does today, but with one significant difference: data used to rank/sort talent/clients such as work history and client reviews, which normally are stored on a centralized server controlled by Braintrust or another centralized entity, are now immutably stored on the blockchain. This is powerful because now users are in control over their own data, which means their reputation can be based on a verifiable past body of work that is no longer vulnerable to slander from bad actors. It also means they have the ability to take their reputation with them should they not be pleased with the experienced on Braintrust for whatever reason.

2: Payments and dispute resolution will be more automated and tightly integrated than they are in web2 marketplaces, most notably in that they won't require intervention from any centralized Braintrust team at any point in the transaction. Pay structures don't need to change much, with the possible exception of crypto-native payment primitives like superfluid payment streaming. The difference simply being that payment processing is facilitated on the blockchain (or through layer 2 solutions like payment channels), with the 10% fee automatically being sent to the fee converter contract once the final payment is made and both parties sign an on-chain message that the job is finished.

3: If a dispute arises, either party will have the ability to appeal the case to arbitration to be carried out through a decentralized dispute resolution protocol. Braintrust already has a volunteer-based dispute resolution mechanism that could just be integrated into the same master smart contract that facilitates the payments. Kleros has already shipped a decentralized dispute resolution protocol on Ethereum, and cover in depth the methodology behind it in their Handbook of Decentralized Justice, so there’s no shortage of ideas to take inspiration from.

This is certainly an oversimplification of a fully immutable freelance gig-fulfillment smart contract, but I think captures all the features it would need to provide a valuable service to its users. Were an immutable primitive like this to be shipped, it could empower anyone in the world with a good idea to find talent to help them deliver on it, and allow any talented individual in the world to leverage their skills for economic gain on a level playing field with everybody else.