In recent years, industries such as real estate management, management of natural resources, vehicles, luxury units and collectibles, governance within companies and other ecosystems have undergone significant transformations as a result of the impact of the new technologies that have emerged recently.
The phenomenon of blockchain and tokenization has made significant adjustments to improve the above aspects of human life and business existence, providing increased security and transparency in regulation, and the functioning of the decentralization principle.
Moreover, the procedures and schemes for transferring assets to the decentralized register, developed by numerous companies, are already well-established practices of communication between business entities and effective means of attracting investment. For instance, real estate tokenization by transforming property rights into digital tokens makes it possible to become an investor with $100 in equity, regardless of where a person lives. In turn, businesses can use crowdfunding for their projects (from a large number of entities through online platforms).?
According to our opinion, discussions around the future use of such technology for tokenizing time ー that is undoubtedly the most valuable and non-renewable resource for everyone ー are highly interesting. Given the world-famous quote “Time is money,” the relevance of such an innovative transformation really comes to mind. But at the same time, many questions arise about the implementation of such a reform of the hiring and cooperation processes: What regulations should be used or created? Will it comply with the basic legal principles of respect for human rights and freedoms?
How does it work?
At the moment, it is impossible to clearly describe the functioning of tokenized time simply because there is no implemented project. But the technology may look like this:
- The worker registers on the platform and provides the necessary information, for example, undergoes an identification procedure and proves the availability of the claimed skills and abilities with evidences;
- The price in tokens per hour of work is set;
- The client buys the number of tokens that is appropriate for the execution of his order;
- A guarantee that the task will be completed and the contractor will receive funds is a smart contract and a record of such an exchange in the blockchain.
This structure resembles well-known freelance platforms, but there are a number of advantages in comparison:?
- elimination of the bureaucracy of freelance platforms that withhold part of the contractor’s earnings;?
- the availability of an undoubtedly reliable project history and confirmation that the customer will definitely receive high-quality work;?
- the ability to resell unused tokens in cases where they are no longer needed;?
- crowdfunding by young professionals who can monetize their future time right now, receiving investments for continuing education, taking courses, etc;?
- investing in cheap coins of beginners, storing them and trading them in the future when their price increases significantly.
At the same time, many questions arise for discussions
- Coins. Is it more expedient to develop your own brand, i.e. create personalized tokens, or will the platform solve this aspect on its own and introduce a single coin for all areas and levels of expertise. The latter idea can simplify the process for clients and the problem of equivalent exchange.
- Price setting. How exactly will the value of a person’s time be determined, what are the criteria for such measurement, or is it more wise to allow the contractor to choose the cost of a particular job. The issue of transferring/exchanging tokens of different specialists is also unclear. For example, if an entrepreneur wants to exchange tokens for 10 hours of work by a designer for tokens equal to 5 hours of work by a programmer. This dispute can be left to the discretion of the parties to the exchange, or it is better to settle it within the platform by introducing mechanisms for assessing the equality of such transactions.
- Smart contracts. As you know, the terms and conditions contained in smart contracts are not changeable and are encrypted in code. Let’s imagine that the contractor has delivered the work and received payment for it. What should be done if the client is not satisfied with the result or wants to make corrections, but no longer has tokens for the specialist’s time??
- The risk of death, disappearance of the performer. There is a proposal that specialists should make life insurance, and in case of their death, token holders should be able to compensate for the available time tokens. But what if a person simply goes missing? According to Ukrainian law, a person may be declared dead at the request of an interested party, but the period when such an application can be filed varies from 1 month (for example, in case of emergency) to 3 years, and it can also be filed in accordance with the Civil Procedure Code of Ukraine with the court at the applicant’s place of residence or at the last known place of residence (stay) of an individual, or at the location of his or her property, and the law also sets requirements for the content of such applications. This makes it clear that such appeal to the court is problematic, especially if the interested party is located in another country or even on another continent.??
- The impact of this system on human psychology. The viability of this system is controversial in the context of the impact of such labor relations on employee mental condition. We can model the situation: a young specialist monetized future working hours (5 years of work) in order to continue his or her own education. From one point of view, this gives him or her the confidence in job security and additional discipline to improve their professional skills due to a sense of responsibility to investors. But on the other hand, it is pressure due to a large amount of obligations (we can compare it with a loan), the inability to change the field of work, a feeling of lack of control over one’s time, and a loss of autonomy and freedom.?
Also it is important to amend existing or create new legislation. It is obvious that typical labor codes are not able to control the hiring of workers under such a specific scheme. Moreover, legislators will face the challenge of developing regulations not only for the direct parties (customers and contractors), but also for online platforms that will offer such services.?
We, as a company that provides legal support for asset tokenization, are extremely interested in the development of this idea. Taking into account the above-mentioned problematic points of the tokenized time, it may seem that this idea is invaluable. In our turn, we believe that the relevance of this topic prevails, but only if we have a clear understanding of the functioning of such a project. In addition to regulating the technical aspects (coins, pricing, smart contracts), it would be necessary to introduce limits on the sale of time to avoid, firstly, the moral exhaustion of contractors, and, secondly, the inability to compensate clients’ losses in case of force majeure.?
Example legal model of time tokenization
In order to properly regulate the relationship between the parties, i.e. the token issuer (or contractor) and the client, it is advisable to create an agreement, the approximate terms of which may include:
- Identification of the parties to the contract;
- Subject of the contract – tokenized working hours of the contractor;
- Contract price – 1 or more tokens that have a certain value and are equal to a certain number of working hours;
- Technical information about the token, e.g., works on the blockchain on the Ethereum platform;
- Rules for using tokens, for instance, the right to use a token is available no earlier than 2 weeks after its purchase, or the condition that it can only be exchanged for a list of services specified by the contractor;
- The rights of the parties: the right of the client to resell/exchange the token, the right of the contrctor not to perform work that does not comply with the list of services published by him/her, etc;
- Obligations of the parties: to fulfill the order by a worker and inform about the work schedule, to pay for such an order on the part of the client or the obligation to use tokens within the offered services;
- Consequences of breach of contract. For example, if the order cannot be fulfilled, the client receives a token compensation, etc;
- Force majeure: the ability to postpone the deadline without paying a fine, life insurance for employees;
- Termination of the contract: the contract is terminated after the customer uses the tokens;
- Dispute resolution: by referring to the rules of the online platform with the subsequent possibility of referring the dispute to a court of agreed jurisdiction.
As conclusion
We are a law firm that has extensive experience in the field of tokenization of any assets and can offer a range of legal services that will help you implement your own tokenization project in compliance with the existing regulatory rules. In addition, we will help you choose a jurisdiction for financially optimal business operations, advise on company structure and implementation of marketing strategies.
We are grateful for your attention and invite you to further communication. Our mission is to help you realize your most ambitious projects, and we are always ready to assist you every step of the way. Stay with us and see you soon in the next articles!
Our contacts
If you want to become our client or partner, feel free to contact us at [email protected].
Or use our telegram @manimama_sales and we will respond to your inquiry.
We also invite you to visit our website: https://manimama.eu/.Join our Telegram to receive news in a convenient way: Manimama Legal Channel
