Could Programmable Money Encourage More Charitable Donations?

Smart contracts which restrict the spending of donated funds to pre-verified addresses and/or transaction types might decrease mistrust of needy populations and non-profit organizations.

Maybe you’ve seen this cartoon:


It’s meant to be a joke, but maybe this actually isn’t such a bad idea.

One of the most common arguments against giving money to homeless people is that they’ll spend the money on drugs or alcohol. Cash money can be used for anything, and people often don’t trust the homeless to spend money responsibly. Whether or not this is a reasonable expectation, this mistrust is a serious, real-world barrier to people’s willingness to donate.

I think this problem brings up a fundamental issue: people can’t always trust that their money will be well spent when they donate to a cause. Here I propose a potential solution enabled by the unique programmability of digital money: restricted-use donations. In other words, donations of digital cash which are governed by smart contracts that only allow the recipient to use the donated funds at a pre-approved list of vendors and/or purchase categories.

For those late to the crypto train, one of the vast areas of innovation in digital money comes from the possibility of “smart contracts,” which essentially allow people to write code to govern financial transactions. In short, programmable money. In the new world of digital cash, we can write programs for money in ways that are only limited by the reach of human thought and imagination. The innovation we’re just starting to see in the world of digital-native finance may rival the disruption we’ve seen computation bring to information technology over the past 50 years. One small piece of this puzzle, I believe, could be a new, smarter way to give charitably.

Let’s take the example of donations to homeless people. Imagine a peer-to-peer charitable donation, bound by smart contracts which only permit the money to be used for payments at a pre-approved list of reputable vendors and item types: purchasing perishable foodstuffs, access to showers and locker space, paying for child care and/or birth control, securing HIV/AIDS treatment and other health services, paying rent for housing, or submitting applications for government ID and other documents needed for securing employment. Restricted-use programmable donations of this kind could, paradoxically, actually open up the types of donations available to people today. Donors could have the power to give real value directly towards specific services of any type they could think of — for example, if I wanted to help homeless mothers afford childcare but could not find a local non-profit dedicated to this service in my city, programmable cash might allow me to donate $50 towards child care coverage directly to homeless mothers, even in the absence of a dedicated non-profit.

This solution should be at least technically feasible: all the software would require is a list of permissioned public key addresses with a verified mapping to real-world merchants. A trusted, centralized non-profit could be responsible for upkeeping this list, as could a decentralized token-curated registry or similar listing mechanism. Much more tricky would be providing access to digital wallets for homeless people. Again, this could be the task of a non-profit organization which offers services such as daytime computer access or distributing smartphones as a lifeline towards stability, safety and access to the financial system.

If the problems for distribution to populations in deep poverty like the homeless are too complex today, restricted-use donations could still potentially increase donations to non-profit charitable organizations themselves, not just individuals in need. Restricted-use money could increase people’s willingness to donate and dramatically increase trust in all forms of non-profits if they could know with certainty exactly how their money would be spent. The potential use cases even extend beyond charitable organizations: imagine being able to donate money to a political campaign with the power to specify that your dollars be spent to support volunteer recruitment but not attack ads, at a specific geographic location, while forbidding the use of your donation for the purchase of wine bottles. Furthermore, full records of organizational spending could posted on public blockchain networks, allowing for an unprecedented level of accountability and transparency.

Steven Pinker has argued that different circumstances fundamentally shape our behavior by making it easier to indulge either our natural proclivities for cooperation or conflict. One of the most interesting implications of digital cash to me is the possibility that we can program our way out of the prisoner’s dilemma, by changing the parameters of the game itself. By mitigating possible sources of mistrust using programmable contracts, technology could actually shift the game theory of everyday decisions, such as whether or not to donate to a homeless person, in favor of increased altruistic behavior and cooperation.

Programmable money is an incredibly powerful use case for blockchain tech. I’m particularly excited for the potential for smart contracts have to increase our tendency to cooperate with each other, and I’m looking forward very much to seeing these ideas built out over the next several years.

Acknowledgments: credit goes to Virgil Griffith of the Ethereum Foundation for the idea of using smart contracts to shake up the game theory payoff matrix. The cartoon is by Steve Nease.

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