Can Blockchain improve social impact and increase charitable giving?

Blockchain has grabbed the attention of investors and gained great enthusiasm in the tech world. With an innovative technology that allows safe storing of information and eliminates the need for a middle-man, many envision this to be the biggest revolution since the massification of the Internet and see Blockchain technology as a total game changer.

Although most people focus on individual gains, Blockchain has great potential to help the philanthropic sector.

But how can Blockchain improve the way charities operate and increase their efficiency, trust and impact?

What is Blockchain and how does it work?

Blockchain is the technology that was initially used to power the first digital cryptocurrencies and has since evolved into something much bigger. Currently, there are many different applications being developed for an array of fields and nearly anything that holds value — from a car to an industrial patent — can be traded and tracked on a Blockchain network.

We can think of Blockchain as a Monopoly game that you play online with your friends. To make sure the game is fair and prevent anyone from cheating, all the game moves, monopoly money transactions and property ownerships are documented on a shared monopoly book (ledger) that everyone owns a copy of. Every page of that book is a different colour, following a rainbow-like sequence, and once a game move or transaction is written on a page, it cannot be edited or removed. This way, if one of your friends would try to cheat and remove a page or insert a new one claiming that the Banker owes him money, the colour sequence would not match, and the system would detect the tampering and reject it.

A great thing about this book is that every player owns a shared updated copy and can access and monitor all the game moves throughout the game and know who owned each monopoly bill or Title Deed Card. For a new entry to take place, there needs to be consensus amongst the players that must agree and validate the information.

To make things easier, the game would also allow smart contracts — pre-defined clauses that every player would agree upon and the system would enforce. For example, every time a player lands on your property, the system would automatically debit the rent money from his monopoly bank account. This would eliminate the need for someone to monitor the game and guarantees that every player pays for what they owe. Now that would be a fair game!

Advantages of using Blockchain

This technology has many significant advantages that can be applied to different sectors:

  • Transparency: because the ledger is public, any data alteration attempt would be visible and easily detectable, making the process transparent and trustable.
  • Eliminates the middle-man: it does not require any trust between its users, so we are able to transfer information without any intermediaries, almost instantaneously.
  • Reduces operating costs: because businesses and individuals can transact directly without a mediator, operational costs decrease significantly.
  • Decentralisation: data is not stored on a single computer or server but replicated throughout the world on a network of individual servers, making it more secure and almost impossible to be tampered with hackers.

Issues with Charities

Two of the biggest issues that charities face is a lack of access to infrastructure that enables high levels of transparency and over-reliance on legacy technology that makes it impossible to efficiently track donations end-to-end. In fact, many organisations have even been exposed by the media as being fraudulent or poorly handling the donations they were given. The UK Annual Fraud Indicator 2017 revealed that, in just a year, registered charities and charitable trusts lost £2.3 billion in fraud.

In addition, according to recent studies, approximately 90% of all contributed money in the UK goes to just 5% of all charities: in other words, four out of five small and medium charities struggle to raise the funds needed to survive. Given that 97% of all registered charities in the UK are considered small and that over 600,000 micro charities have an annual income of less than £1million, the charitable sector is at severe risk of failure. Changing this is crucial and requires immediate attention. 62% of charities reported that generating income and achieving financial sustainability is the most pressing challenge for the future.

Many small and medium sized charitable organisations also struggle to scale their solutions and have a meaningful impact in multiple locations not only due to a lack of funding but also because they have restricted access to technology and infrastructure. Given that less than 10% of charitable giving occurs online, it is clear that many charities have yet to fully grasp the opportunity that technology offers to improve their ongoing access to funding.

Improving Charities with Blockchain

How can Blockchain help? Blockchain technology enables an unprecedented transparent process where it is possible to track the donation from the point at which the gift is made all the way to the ultimate beneficiary. This transparency is required to improve relations between donors and charities, better measure impact and rebuild trust.

As no intermediaries are required to mediate the transactions, operational costs are lower, and more money is available for the organisation to improve their structure and support those in need of assistance. Resources can be assigned to create emergency funds for natural catastrophes or sponsor the construction of basic infrastructures locally or globally. Blockchain can dramatically improve how they manage, monitor and identify issues with budget allocation or find a project’s inadequacy to tackle a problem and, consequently, improve their results.

Because Blockchain offers an extremely high level of security, it is also the perfect system in which to keep important information (like personal ID data or property holdings) for refugees or people living in war zones that need assistance.

This technology will help democratise giving, increase accountability and provide better grounds for charities to raise money and solve problems.

Social Projects Using Blockchain

Many known organisations are already developing ways to provide services to help refugees with Blockchain.

The Bill & Melinda Gates Foundation has been working since 2015 on ways to use Blockchain to help those in need. Its Level One Project has recently launched Mojaloop, a payment platform “designed to provide a reference model for payment interoperability between banks and other providers across a country’s economy. It is available now, free-of-cost, for software developers to adapt and banks, financial service providers and companies to implement”, they announced.

The UN is also using Blockchain in a pilot program named Building Blocks. With a biometric scan, they can distribute electronic food vouchers to refugees in Jordan, eliminating the risk of identity fraud or data mismanagement.

Another organisation helping refugees and looking for ways to increase transparency in the charity sector is AID:Tech. They´ve launched a smart card system that “facilitates the integration of refugees by making it quick and easy for them to prove their identity and not get caught up in the asylum process”. Whenever needed, a government employee can scan the smart card and see important information like the language the person speaks, who their family members are or the social benefits they are entitled to. It can also be used as a mobile bank account, allowing the refugee to buy food and other necessities.

There’s been a lot of exciting new social impact projects using Blockchain technology popping up recently. With so much potential to improve on how charities and social businesses operate, it will soon unequivocally change the sector forever.

PS: Token sale soon at impactmarket.com