Braintrust: A Talent Network Governed by its Community

The following report was written by Messari Hub Analyst(s) and commissioned by Braintrust, a member of Messari Hub. For additional information, please see the disclaimers following the article

The rise of the online workforce economy in the last decade has been rewarding for millions of creators and freelancers. Workers benefited from the independence, flexibility, and additional personal growth and income opportunities by working on multiple projects. Meanwhile, companies were able to cut down on hiring costs and gained the ability to outsource operations and services, allowing them to build concentrated teams and enhance internal specialization. In turn, these mutual benefits created millions of job opportunities for workers and spearheaded the growth of the freelancer economy. Currently, there are 163 million freelancers registered on online labor platforms globally whose revenues totaled up to $520 billion in 2019, expected to grow at 7.7% annually over 7 years.

Although these numbers indicate that the way we work is in a revolutionary transformation, we also started to realize that there's no rose without a thorn. The expansion of the market introduced several high social and financial costs mainly billed to the supply side of the labor. Currently, a significant chunk of the economic value created within the gig economy is captured by the intermediaries. Additionally, an individual’s history of work – a freelancer’s reputation and reviews on a platform – is siloed to the specific platform (e.g. Toptal) and cannot be imported to another freelance platform. This closed nature of reputation display hinders workers from showcasing their work outside private networks. Further, since freelancers possess no ownership in the platform, their ability to change parameters of the platform – fees, review moderation, etc – is limited and creates misaligned incentives.

Braintrust was founded in 2018 by two serial entrepreneurs and experienced investors in marketplace startups, Adam Jackson and Gabe Luna-Ostaseski, with the vision to crack the seemingly solidified inequity in the gig economy. Underpinned by smart contracts and token incentives, The Braintrust network removes the intermediaries from the hiring process and employs the BTRST token to offer a decentralized and transparent labor network built, governed, and owned by its users.

Braintrust focuses on aligning incentives between freelancers and the Braintrust network to ensure that ownership of the platform is directly correlated to the individuals that create the most value. Financial instruments, communication, web platforms, and many other services are continuously getting rearchitected using decentralized protocols.

A Fairer Fee Structure

The online workforce economy is ripe for disruption and thus there are various companies and projects competing for market share. Braintrust is a freelancer marketplace focused on servicing the knowledge-driven gig economy, making the industry-leading centralized Web 2.0 freelance platforms like Upwork, Fiverr, and Freelancer.com some of the existing competitors.

However, traditional freelance platforms like Upwork predominately specialize in low-cost, high-volume labor transactions. Initially, Braintrust targets connecting big companies with technical specialists. Therefore, the most direct competitors to Braintrust in this avenue are platforms like Toptal and Gigster, traditional staffing agencies, as well as Web 2.0 counterparts such as Recruiter.com, which all hold the same focus of connecting vetted knowledge workers with top-tier organizations.

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

Commissions for matchmaking on freelance marketplace incumbents range between 20% and 40% of the total contract value where either the supply side (e.g., Upwork) or the demand side (e.g., Toptal) has to endure high fees. Braintrust significantly outcompetes these high-margin business models by enabling freelancers to retain 100% of their earnings while lowering the clients' costs by up to 90%.

Unlike the most popular Web 2.0 platforms, freelancers don't incur any commission fees when they find work on the Braintrust network and instead retain 100% of their freelance contracted income. In contrast, the Braintrust network passes the fees onto the clients and 10% of the total contract value is billed to the clients which helps maintain network sustainability. This model enables the value-drivers of the network to extract the financial benefits of their labor entirely, meanwhile reducing the capital required for hiring by allowing companies to access skilled labor on-demand with substantially lower fees.

Braintrust couples its financially aligned fee structure with a targeted liquidity strategy to foster a healthy and balanced labor market. Keeping their initial focus on high tech knowledge workers like developers, project managers, engineers, and designers, Braintrust aims to find liquidity on both demand (clients) and supply (talent) side of the market. By following a strategy like this, Braintrust doesn't need to use extra monetary incentives, which increases the capital efficiency of the network and prevents building a labor economy where one side's participation is incentivized at the expense of the other's undeclared exploitation.

To date, Braintrust model combined with its Web3 ethos has yielded positive results. In September 2019, the Braintrust network reached $1 million in gross service volume (GSV), only nine months after its stealth launch. Yet, the real acceleration started after the network’s public launch in June 2020. Total GSV quintupled in the ten months following the previous milestone of $1 million and reached $5 million GSV in April 2021 — which also quadrupled as of November 2021, and now sitting at $22 million GSV. To provide context, Filecoin (a web3 file storage protocol) has generated nearly $4 million in lifetime revenue.

At the time of this writing, more than 34,000 freelancers have joined the Braintrust ecosystem, and more than 1,500 jobs have been created on the platform by hundreds of reputable Fortune 1000 companies, including enterprises such as Twitter, Porsche, Goldman Sachs, and Nike.

The non-profit network is backed by Coinbase Ventures, Pantera Capital, Tiger Global Management, and numerous other key players from the crypto and traditional venture capital industries with a $23.5 million investment.

A Deep Dive to Braintrust Network

Braintrust abstracts the blockchain features from the user experience so that both users and companies don’t require advanced crypto knowledge to use the platform. Contrary to what we generally see with Web 3.0 protocols, the Braintrust website cannot be described as a mere interface. It is not like Uniswap where all operations are run on smart contracts and anybody can run an interface like uniswap.org to interact with the Uniswap protocol. The Braintrust platform is the primary and only hub for Braintrust, and everything related to the network, from job postings and referrals to staking and voting, is run through the Braintrust platform.

The Braintrust platform is comprised of three specific stakeholders:

• Talents
• Clients
• Connectors

Alongside the clients seeking vetted knowledge workers and the talents seeking career-advancing opportunities, the third agent acts as a liquidity provider for both the demand and the supply side of the equilibrium. These independent recruiters, called "connectors," play a key part in maintaining the network's dynamic flow as they invite new clients and knowledge workers to Braintrust and connect talents to specific jobs through referrals. For each paid invoice facilitated by their referral link, connectors are rewarded in BTRST tokens, which turns them into main actors in network performance and its ownership and governance.

Supply Side

Even though the Braintrust user experience is similar to the job finding and matchmaking experience of Web 2.0 talent platforms, Braintrust differentiates its network by decentralizing key backend processes and empowering a permissionless community.

First, clients start the process by posting one-time jobs or ongoing projects with detailed requirements. Job postings are displayed on both talents' and connectors’ (recruiters) feeds where either talent can discover the job or connectors can refer jobs to candidates within their personal network. Talents who want to apply for the job go through a community-led screening process, an assessment is conducted by qualified network participants to determine if the candidate is suitable for the job, and only those who successfully pass are eligible to bid on jobs.

Then, Braintrust's matchmaking software connects the right candidate with the job based on numerous criteria (e.g., skills, experience, availability, and hourly rates). After the job is completed, talent is paid the contract value in fiat currency while an additional 10% is billed to the client. After the recently passed Braintrust governance proposal, Braintrust is to integrate a buyback mechanism through which the client fees will be used to purchase BTRST tokens and thus strengthen the treasury. Additionally, Braintrust enables both parties to build a reputation on the network by allowing them to rate each other, contributing to a transparent reputation showcasing.

Currently, the job application process doesn’t utilize the BTRST token. This means neither the matching software nor the complete reputation showcasing is on-chain. Braintrust aims to make the code for the software open source in the future. Further, the Braintrust teams have discussed creating an open-source matchmaking protocol facilitating more teams to Braintrust’s software. Moving forward Braintrust also plans to implement a more robust on-chain reputation system by introducing additional features like bid staking for clients and talents. This feature will allow clients to attract more freelancers to their job posts by showing how committed they are and talents to stand out with their bids by putting more skin in the game. This type of staking will also improve on-chain reputation as the slashing mechanism implemented for delivery and hiring failures will involve a token transaction and enable failures to be showcased on-chain alongside the successful completions.

Initializing a Flywheel

Jumpstarting a two-sided marketplace is challenging. Fortunately, token incentives can help the early (and difficult) process of building supply and demand. To date, Braintrust has been showing signs of continued network growth, which is reflected in its gross-service-value. According to Braintrust's weekly growth reports, the total number of talents and jobs posted on the platform has increased exponentially over the last year, and data from recent weeks indicates that these metrics are continuing to rise at an elevated rate.

Braintrust's success can be attributed to both the financial and societal implications of its business model. Apart from being the more financially lucrative option compared to its competitors, Braintrust’s freelancer to company matching mechanism continues to remain effective. Braintrust’s freelancer matching algorithm holds a 80% match rate, connecting clients (companies) within four to seven freelancers within the first twenty-four hours. And according to the HBS case study by Christopher Stanton, Associate Professor at Harvard Business School, interviews with Braintrust clients showed that the network increased the ability of companies to find suitable freelancers. Along these lines, Braintrust not only truncated the arduous recruitment processes that normally take weeks to months into mere hours or days, but also helped companies reach more qualified employees with fewer resources.

A real-life example of how Braintrust achieves this efficient hiring process can be found in a particular case where Braintrust helped Nestle's American subsidiary Purina scale its IT team. Set out to provide direct-to-customer pet food services in Peru, Nestle Purina wanted to start running its operations as fast as possible and thus stay ahead of the competition. With the help of the Braintrust platform and talent specialists, the company was able to find a suiting match in the first forty-eight hours and build and onboard six members to its IT team in two weeks, which resulted in a hiring process that is substantially faster and thousands of dollars cheaper than in-house hiring methods.

BTRST Token

The Braintrust token (BTRST) acts as the governance and reward mechanism of the Braintrust network.

Big Brain Governance

The Braintrust token forked Compound’s governance model, but modified the contract for specific use cases including on-chain and off-chain tools for proposal discussion and voting. BTRST owners use channels to elaborate on proposals and refer to the Braintrust platform to vote on on-chain parameters such as product roadmap, fees, reputation, and token treasury.

After off-chain voting passes through Snapshot, on-chain voting happens on the Voting Portal of the Braintrust platform.

Dispute Resolution

Since payments aren't processed on the Ethereum blockchain, and Braintrust doesn't support any other external escrow services, a decentralized dispute solution mechanism becomes necessary for the network's financial sustainability, social stability, and for an accurate representation of client and talent reputation. While Braintrust’s dispute resolution process occurs off-chain, BTRST tokens are indirectly used in community-run dispute resolutions. The participants for the resolution jury either need to hold BTRST tokens to become jury members or get chosen by BTRST holders to become jury arbitrators.

Incentivizing a Talent Network

BTRST is also utilized as an incentive for key stakeholders functions in the network including delivering jobs, referring clients and talent, and performing other tangential activities like completing profiles and finishing educational courses on the Braintrust platform. However, as the contract payments for jobs are settled in fiat currencies, the BTRST token doesn't accrue any network fees, thus offers no cash flows like dividends or profit-sharing.

BTRST Tokenomics

The total supply of BTRST is capped at 250,000,000 tokens with the majority of the supply gradually distributed to network participants as incentives for contributors.

The tokens allocated to early contributors and investors are subject to various vesting schedules, releasing in parallel with the network's anticipated growth and strengthened community ownership. Early token purchasers and early contributors are subject to a 1 year cliff followed by 2 year and 4 year monthly release schedules respectively. Meanwhile, approximately 55% of the tokens that are allocated to community incentives were unlocked immediately after the network launch and will be distributed through reward programs to accelerate the network growth. Additionally, Braintrust reserved 5% of the total supply for a public sale conducted through Coinlist in order to broaden the token holder base.

Final Thoughts

Braintrust’s network scaling might determine the success or failure of the talent network. One thing that is different for projects like Braintrust compared to many other Web3 initiatives is the necessity for extra care in the project governance model. Although most DAOs suffer similar risks to a certain extent, a talent network mostly operates on the human layer where the code does not govern many vital activities.

The last several decades have been an era of highly effective and fast occurring disruptions. Entrepreneurs created companies that enabled individuals to become freelancers (e.g. Fiverr) or monetize their idle resources (i.e. Airbnb, Uber, etc) which replaced existing incumbents like talent agencies, taxi companies, and hotel chains. The proliferation of Web3 into the labor market is the imminent continuation of this innovative tide. The companies like Uber contributed to the democratization of working by dethroning long-lasted kings, which legitimized their relatively higher profit extraction as networks still necessitated centralized controllers for functioning. Web3 networks like Braintrust continue to replace rent-seeking middlemen and further democratize the way individuals work by removing these wardens with immutable and user-owned networks.

This report was written by Messari Hub Analyst(s) and commissioned by Braintrust, a member of Messari Hub. All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. or the organization that requested the report. Paid membership in the Hub does not influence editorial decision or content. Author(s) may hold cryptocurrencies named in this report.

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