CEO of Chronobank Sergei Sergienko is on a mission to create a better human labour trading system by using a cryptocurrency that is backed by time, through blockchain technology. If there’s one takeaway message Sergienko wants people to consider, it’s to understand that your time is far more valuable and measurable, than you think.
After capturing public attention in 2010 with BRW’s Fast Starters list in 2010 through his vocational training and labour hire company, Edway Group, co-founded with Alexander Rugaev and now CEO of Chronobank Sergei Sergienko, 34, is again making waves by combining his experience in labour markets with blockchain technology which he hopes will revolutionise the way labour is bought, sold and traded around the globe with his latest venture, Chronobank.
Investors are taking notice. After raising AUD9.2 million through crowdfunding in February, one of the largest crowdfunded projects in Australia to-date, Chronobank’s central proposition is that human labour is abundant enough for everyone to have access to it, yet scarce enough to be valuable.
By creating Labour Hour Tokens (LHT) – a cryptocurrency that is backed by time, LHT can be traded on a decentralised platform called LaborX using ethereum-based code on blockchain technology. According to Sergienko, because LHT is backed by real labour, it is inflation-proof and has next to zero volatility – in comparison to bitcoin and other cryptocurrencies. LHT is linked to average hourly wages in the host country and is backed by a real labour force from big recruitment and labour-hire companies.
While this sounds exciting, and potentially will have far reaching implications on industries relating to labour markets (e.g. workers’ compensation, insurance industries) the biggest challenge for Chronobank, which is yet to be determined, is how to place value on one human hour.
“LaborX is still in the production phase. We want it to be decentralised, where users can pick their own jurisdictions and pick their own platform in their jurisdiction. Our largest challenge is placing a value on one human hour. How do we quantify our time on the planet? If we’re talking about a dynamic system of exchanges, it’s difficult. Our working time on the planet is the scarcest commodity that we have, yet, few people truly value the hours they spend working. All our time spent in non-work related activities is what is actually valued. So we are trying to quantify an hour produced by one individual to enable a better spent, more productive work hour,” says Sergienko.
To punctuate the problematic of equalising a time value, Sergienko argues that if we had an exchange-based auction system, an hour is still only worth as much as someone who is willing to pay for it. In the current system, where that value is not transparent, no one can prove that a person’s labour is worth x amount.
“Let’s say you have two accountants working in an office. Same age, experience, qualifications… who gets paid more? Usually it’s the guy who kisses the boss’s ass gets paid more. It’s counterproductive. It should be the guy who performs better. We are trying to standardise a base rate, and the people who achieve above or below the base rate which would apply to most professions. Another example is in Europe. To construct a house, its 80 percent material and 20 percent labour cost. In Australia, it’s the other way around. It’s absurd – and the quality of the work is not standard – it’s just done well enough to get a tick. That’s a shitty motivation in an artificially inflated market. Let’s make it fair. Why should a GP who studies for ten years earn thirty dollars an hour in a medical centre, while a plumber on a four-year apprenticeship earns one hundred dollars per hour with less risk exposure than the GP?” says Sergienko.
Chronobank relies on globalisation, with no restrictions to access labour markets anywhere in the world, with the aim to give people a tool to be able to value their time correctly and to be paid fairly for it. To achieve this, Sergienko argues that reputation and peer-review are two ways value can be determined in what would essentially end up as a fairer system that protects both the service provider and the client.
“Reputation is very important. That is why we need blockchain for this project. Reputation is the biggest challenge we face in trying to solve this. Reputation based on client feedback can’t be the only metric as it’s easily corruptible. As you deliver work, unless you’re a total tool, you become friends with the client. People do business with who they like, and will make concessions with whom they have a relationship with so this will affect the reputation rating of the service provider. Secondly, the service provider’s work must be peer-reviewed by people who are able to critically review and understand the quality of the work delivered. However, this is also corruptible. People who are in the same industry, have a massive motivation to mark work down as a competitor, so we need to set up an independent peer review in non-competitive geographic locales. If we had a peer assessor that has a history of putting everyone down, that would be a red flag… Ultimately, reputation is the only thing that matters. Go ask any Uber driver or try and sell anything on eBay with a reputation of less than five stars…there’s no trust on the internet and reputation is the closest thing to trust you can get and blockchain can protect that,” says Sergienko.
By using blockchain, not only can reputation data be immutable, it also enables escrow and settlement of hours worked to be paid at the end of the day in real time. The long-term goal is that not only can anyone trade or buy a person’s unspent hour, it has the potential to equalise labour hours everywhere.
“A labourer in Chili, can go into the system, and borrow an hour of his future time to be delivered at a later date, to purchase some food today. If he doesn’t deliver on it, he’s out of the system. There’s no way back in. If the original buyer no longer needs that hour purchased, he can on-sell it to someone else. LaborX is an alternative system, that can make it possible to distribute labour to large numbers of people anywhere in the world without Government intervention,” says Sergienko.
According to Sergienko, with blockchain, anyone can dream big and be part of creating endless future possibilities. While blockchain is not a new logic, it was originally spawned in response to the GFC 2008 financial crisis, whereby people thought there had to be a better way to transact rather than give everything to the bankers.
“The GFC demonstrated that everyone in the current system, the Government and the bankers are corruptible and only look after their own ass. The biggest detraction from bitcoin is the idea that transactions are anonymous, and are therefore subjected to criminality. This is not true. No one can transact more than USD2,000 without providing your ID which is traceable. Every exchange demands it. The cryptocurrency industry protects itself against illegal activity so it is not the receiver of criminal proceeds. It’s more regulated than any other currency out there. The truth is that most criminals prefer to trade in US dollars,” says Sergienko. “I’m all for a more transparent world and that’s what blockchain offers. It saddens me that after 400 years of economic thought, the best we can come up with is quantitative easing, which is a system where the Government gives money to bankers. Cryptocurrency allows us to move beyond that… However, having said that, it will most likely still be corrupted by Government and bankers no matter what. The reason is that any system the banker or Government come up with will be closed; so we would most likely end up with an AUD cryptocurrency in a private system which will only result in greater efficiency in transfers. Banks are smart because they are using blockchain, which will literally halve their workforce and save a lot of money which is their main motivation. Most paper pushers will soon be out of a job”.
While Sergienko is pragmatic about the potential for anything to be corruptible, he argues that if people opt for an open system, there are plenty of good people who would review the code to make sure its bonafide. While transparency also opens up vulnerabilities to attack and abuse, Sergienko says everything is a double-edged sword, and it’s a necessary evil to forbear the evil with the good. All principles, in essence like democracy, socialism, communism all are beautiful in principle. The problematic is that not everyone will play by the rules of engagement.
While the original cryptocurrency, Bitcoin, has had a bad rap, its popularity is far from being on the wane. With a current market value of USD1,254 for one bitcoin, and the recent problematic of increased capacity on the Bitcoin network over the past few weeks, Sergienko says these are all just teething problems that will eventually be worked out.
“Bitcoin transactions are not going through because the block is too small. There’s too many orders for the miners to transact. At the moment, if you want to transact in Bitcoin in reasonable time, you now need to add a commission fee for the transfer, which is great for a miner but bad for the user because it demonstrates that bitcoin is not good as an everyday transactional currency. At the moment it’s as expensive as transacting in traditional currency and is far less expedient. A lot of people are mistaken if they think bitcoin can be used for every day transactions. It’s not feasible. If you’re buying a bottle of water, the transaction may take 40 minutes for the transaction to go through…From a wealth creation perspective, Bitcoin is excellent… Having said that, there are plans to grow the size of the block, but, as it’s so lucrative for the miners at the moment, whereby they can charge crazy fees for transactions, there is a disincentive to grow the block. Better cryptocurrencies for daily transactions are DASH and NEM. To give you an idea of how fast DASH is growing, its market cap was USD30 million in February, now its at USD530 million this month,” says Sergienko.
The perpetual challenge of countering human self-interest aside, for Sergienko, the greatest asset blockchain technology gives humanity is accountability. In his words, ‘You just can’t bullshit a machine’. With Chronobank’s LaborX exchange system being built on Ethereum’s platform, for Sergienko – it’s revolutionary impact cannot be underestimated – particularly where smart contracts are concerned.
“Smart contracts are the way of the future. Ethereum is designed for executing code. It’s a digital currency to pay for the execution of code. It hit an all-time high yesterday with a market cap of USD 2 billion. The inventor of Ethereum, Vitalkik Buterin is nothing short of a genius. His idea was to execute code on the blockchain. In layman’s terms, think of it as Skynet on the film The Terminator – Ethereum is the prototype of that – the world’s first supercomputer. It’s a very slow computer at the moment, but the implications are amazing. With Ethereum, you can run code and execute a smart contract. For example, if you buy a car and make loan repayments monthly, if you skip a payment, a smart contract can lock you out of your car and not allow you to drive it without making a payment with no human interaction in the entire process,” says Sergienko.
While the pace of change in the technology space is unprecedented in history, which ultimately makes new adoption difficult, Sergienko believes that blockchain means everything is on the table – which creates both opportunity and chaos.
“Everything will be impacted so turning on your critical thinking and questioning everything is important to keep up with the rate of change. Don’t take everything at face value. You don’t have to accept the norm. We are on the cusp of incredible technology, and Chronobank wants to make every minute count,” says Sergienko.