Messari interprets Braintrust: A talent network managed by the community

Source: Messari

Compiled by: aiekjdns

In the past decade, the rise of the online labor economy has brought rewards to millions of creators and freelancers. By participating in multiple projects, workers benefit from independence, flexibility, and additional personal growth and income opportunities. At the same time, businesses are able to reduce hiring costs and gain the ability to outsource operations and services, allowing them to build centralized teams and enhance internal specialization. In turn, these mutually beneficial arrangements have created millions of job opportunities for workers and driven the growth of the freelance economy. Currently, there are 163 million freelancers registered on online labor platforms globally, with total revenues reaching $520 billion in 2019, and it is expected to grow at a rate of 7.7% annually over the next seven years.

Although these numbers indicate a revolutionary shift in the way we work, we are also beginning to realize that there are no roses without thorns. The expansion of the market has brought significant social and financial costs primarily borne by the labor supply side. Currently, a large portion of the economic value created in the gig economy is captured by intermediaries. Additionally, individuals' work histories—freelancers' reputations and reviews on platforms—are isolated to specific platforms (e.g., Toptal) and cannot be transferred to another freelance platform. This closed nature of reputation display hinders workers from showcasing their work outside of private networks. Furthermore, since freelancers do not have ownership on the platforms, their ability to change platform parameters (fees, review processes, etc.) is limited, leading to inconsistent incentives.

Braintrust was founded in 2018 by two serial entrepreneurs and investors experienced in market startups, Adam Jackson and Gabe Luna-Ostaseski, with the vision of cracking the seemingly entrenched inequalities in the gig economy. Supported by smart contracts and token incentives, the Braintrust network removes intermediaries from the hiring process and provides a decentralized and transparent labor network built, managed, and owned by users through the BTRST token.

Braintrust focuses on aligning incentives between freelancers and the Braintrust network to ensure that platform ownership is directly related to individuals who create the most value. Financial tools, communication, networking platforms, and many other services are being continuously restructured using decentralized protocols.

1. A Fairer Fee Structure

The timing for disrupting the online labor economy has matured, leading to various companies and projects vying for market share. Braintrust is a freelancer marketplace focused on serving the knowledge-driven gig economy, positioning itself against established centralized Web 2.0 freelancer platforms like Upwork, Fiverr, and Freelancer.

However, traditional freelance platforms like Upwork primarily focus on low-cost, high-volume labor transactions. Initially, Braintrust aimed to connect large companies with tech experts. Therefore, on this path, Braintrust's most direct competitors are platforms like Toptal and Gigster, traditional staffing agencies, and Web 2.0 peers like Recruiter, all of which focus on connecting vetted knowledge workers with top organizations.

Braintrust aims to continue growing by leveraging its incentive alignment structure and offering more favorable pricing to clients seeking talent.

Freelancer marketplaces typically charge matching commissions between 20% and 40% of the total contract value, with the supply side (e.g., Upwork) or demand side (e.g., Toptal) bearing high fees. By enabling freelancers to retain 100% of their earnings while reducing client costs by up to 90%, Braintrust significantly surpasses these high-margin business models.

Unlike the most popular Web 2.0 platforms, freelancers do not incur any commission when finding work on the Braintrust network and retain 100% of their contract income. In contrast, the Braintrust network passes fees onto clients, charging 10% of the total contract value, which helps sustain the network. This model allows value drivers in the network to fully extract the economic benefits of their labor while reducing the capital required for companies to acquire skilled labor on demand at much lower costs.

Braintrust combines its financially consistent fee structure with targeted liquidity strategies to promote a healthy and balanced labor market. Initially focusing on high-tech knowledge workers such as developers, project managers, engineers, and designers, Braintrust aims to find liquidity in market demand (clients) and supply (talent). By following such a strategy, Braintrust does not need to rely on additional monetary incentives, which enhances the capital efficiency of the network and prevents the establishment of a labor economy where one party's participation is incentivized at the expense of another's unreported exploitation.

So far, the Braintrust model, combined with its Web3 spirit, has yielded positive results. In September 2019, the total gross services volume (GSV) of the Braintrust network reached $1 million, just nine months after its stealth launch. However, the real acceleration began after the network's public launch in June 2020. The GSV quintupled within ten months after the previous milestone of $1 million, reaching $5 million in April 2021—by November 2021, it had quadrupled again, now standing at $22 million in GSV. For context, Filecoin (a web3 file storage protocol) has generated nearly $4 million in lifetime revenue.

As of this writing, over 34,000 freelancers have joined the Braintrust ecosystem, with hundreds of renowned Fortune 1000 companies creating over 1,500 job postings on the platform, including companies like Twitter, Porsche, Goldman Sachs, and Nike.

The nonprofit network is backed by Coinbase Ventures, Pantera Capital, Tiger Global Management, and numerous other major participants from both the crypto and traditional venture capital industries, with an investment of $23.5 million.

2. In-Depth Look at the Braintrust Network

Abstracting blockchain functionality from the user experience means that both users and companies do not need advanced cryptographic knowledge to use the platform. Unlike the Web 3.0 protocols we typically see, the Braintrust website cannot simply be described as an interface. It does not operate like Uniswap, where all operations run on smart contracts, and anyone can run an interface like Uniswap to interact with the Uniswap protocol. The Braintrust platform is the primary and only hub of Braintrust, where everything related to the network, from job postings and referrals to staking and voting, operates through the Braintrust platform.

The Braintrust platform consists of three specific stakeholders:

1. Talent

2. Clients

3. Connectors

In addition to clients seeking vetted knowledge workers and talent seeking career development opportunities, the third agent acts as a liquidity provider balancing supply and demand. These independent recruiters, referred to as "Connectors," play a crucial role in maintaining the dynamic flow of the network by inviting new clients and knowledge workers to join Braintrust and connecting talent with specific jobs through referrals. For each paid invoice facilitated through referral links, Connectors earn rewards in BTRST tokens, making them key participants in the network's performance, ownership, and governance.

Supply Side: Job Application Process

Although the Braintrust user experience resembles the job search and matching experience of Web 2.0 talent platforms, Braintrust differentiates its network by decentralizing key backend processes and empowering a permissionless community.

First, clients initiate the process by posting one-time jobs or ongoing projects with detailed requirements. Job postings simultaneously appear in the feeds of talent and Connectors (recruiters), where talent can discover jobs, or Connectors can recommend jobs to candidates in their personal networks. Interested talent must undergo a community-led screening process, evaluated by qualified network participants to determine if candidates are suitable for the position, with only those who pass successfully eligible to bid on the job.

Then, Braintrust's matching software connects suitable candidates with jobs based on numerous criteria (e.g., skills, experience, availability, and hourly rates). Once the work is completed, talent is paid the contract value in fiat currency, while clients incur an additional 10% fee. Following a recent governance proposal through Braintrust, the network will integrate a buyback mechanism, where client fees will be used to purchase BTRST tokens, thereby strengthening the treasury. Additionally, Braintrust enables both parties to build reputations on the network through mutual evaluations, contributing to transparent reputation displays.

Currently, the job application process does not utilize BTRST tokens. This means that the matching software and complete reputation display are not on-chain. Braintrust aims to open-source the software code in the future. Furthermore, the Braintrust team has discussed creating an open-source matching protocol to facilitate more teams using Braintrust's software. Looking ahead, Braintrust also plans to implement a more robust on-chain reputation system by introducing additional features, such as bidding for clients and talent. This feature will allow clients to showcase their loyalty and talent by adding more skins to the game, attracting more freelancers to their job postings. This type of staking will also enhance on-chain reputation, as the penalty mechanisms implemented for delivery and hiring failures will involve token transactions and display failures alongside successful completions on-chain.

Flywheel Initialization

Rapidly launching a two-sided market is challenging. Fortunately, token incentives can help establish the early (and difficult) processes of supply and demand. So far, Braintrust has shown signs of sustained network growth, reflected in its total service value. According to Braintrust's weekly growth reports, the total number of talents and job postings on the platform has grown exponentially over the past year, with recent weeks indicating that these metrics continue to grow at a high rate.

Braintrust's success can be attributed to the financial and social impact of its business model. Compared to competitors, Braintrust's freelancer-to-company matching mechanism remains effective, in addition to being financially more profitable. Braintrust's freelancer matching algorithm boasts an 80% matching rate, connecting four to seven freelancers to clients (companies) within the first 24 hours. According to a case study by Harvard Business School Associate Professor Christopher Stanton, interviews with Braintrust clients indicate that the network has improved companies' ability to find suitable freelancers. In this regard, Braintrust not only shortens the arduous hiring process that typically takes weeks to months to just hours or days but also helps companies attract more qualified employees with fewer resources.

A specific case of Braintrust assisting Nestlé's U.S. subsidiary Purina in expanding its IT team provides a real example of how Braintrust achieves this efficient hiring process. To provide direct-to-consumer pet food services in Peru, Nestlé Purina wanted to start operations as soon as possible to maintain a competitive edge. With the help of the Braintrust platform and talent experts, the company was able to find suitable candidates within the first 48 hours and built and recruited a six-member IT team within two weeks, leading to a significantly faster and cheaper hiring process compared to internal recruitment methods.

BTRST Token

The Braintrust token (BTRST) serves as the governance and reward mechanism for the Braintrust network.

Big Brain Governance

The Braintrust token forks the governance model of Compound but modifies the contracts for specific use cases, including on-chain and off-chain tools for proposal discussion and voting. BTRST holders articulate proposals through channels and reference on-chain parameters such as product roadmaps, fees, reputations, and token reserves on the Braintrust platform for voting.

Off-chain voting occurs through Snapshot, followed by on-chain voting on the Braintrust platform's Voting Portal.

Dispute Resolution

Since payments are not processed on the Ethereum blockchain and Braintrust does not support any other external escrow services, a decentralized dispute resolution mechanism is needed for the network's financial sustainability, social stability, and accurate representation of client and talent reputations. While Braintrust's dispute resolution process occurs off-chain, BTRST tokens are indirectly used for community-operated dispute resolution. Participants in the resolution jury must either hold BTRST tokens to become jury members or be selected as jury arbitrators by BTRST holders.

Incentivizing the Talent Network

BTRST is also used as an incentive for key stakeholder functions within the network, including providing jobs, referring clients and talent, and executing other related activities, such as completing profiles and educational courses on the Braintrust platform. However, since job contract payments are settled in fiat currency, BTRST tokens do not generate any network fees and therefore do not provide cash flows such as dividends or profit sharing.

The total supply cap of BTRST is 250,000,000 tokens, with most of the supply gradually allocated to network participants as incentives for contributors.

Tokens allocated to early contributors and investors are subject to various vesting schedules, released simultaneously with the network's expected growth and enhanced community ownership. Early token buyers and early contributors are subject to a 1-year cliff and 2-year and 4-year monthly release schedules, respectively. Meanwhile, approximately 55% of the tokens allocated for community incentives are unlocked immediately after the network launch and will be distributed through reward programs to accelerate network growth. Additionally, Braintrust has reserved 5% of the total supply for public sales conducted through Coinlist to expand the base of token holders.

3. Final Thoughts on the Future of Freelancing

The expansion of the Braintrust network may determine the success or failure of the talent network. Unlike many other Web3 initiatives, projects like Braintrust require extra caution in their governance models. While most DAOs face similar risks to some extent, talent networks primarily operate at the human level, with code not managing many important activities.

The past few decades have been a time of efficient and rapid disruptions. Companies created by entrepreneurs have enabled individuals to become freelancers (e.g., Fiverr) or monetize their idle resources (e.g., Airbnb, Uber), replacing existing talent agencies, taxi companies, and chain hotels. The diffusion of Web3 into the labor market is an imminent continuation of this wave of innovation. Companies like Uber have contributed to the democratization of work by overturning long-standing kings, legitimizing their relatively high profit extraction as networks still require centralized controllers to operate. Web3 networks like Braintrust continue to replace rent-seeking intermediaries and further democratize the way individuals work by removing these gatekeepers through the use of immutable and user-owned networks.