Tech for Good : How can NGOs use cryptocurrencies?
Not a scam
Reading in the news about Bitcoin and cryptocurrencies, it is easy to think this is all a scam. I thought the same until three month ago, when I got curious about cryptocurrencies, NFTs, Ethereum, etc.. I taught myself to code for the blockchain and discovered that this is all very real; changing the world quietly but quickly.
Of course there are scams and people get cheated, but people get cheated through SMS, emails and even phone calls too. Every technology can be used for good or evil. So keep an open mind and spend some time today reading about cryptocurrencies from trustworthy sources like the WSJ.
A quick introduction
Before we jump into the topic of this article, let me give you a quick introduction to the main terms that you should be familiar with. People write books on each of these topics, so this is really just to establish these terms, so we understand them later. Also there are tons of other terms, it can be overwhelming at the beginning :-)
- Blockchain (explainer video): A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. This makes it not only very secure but also very transparent, which means each transaction can be viewed by everyone.
- Cryptocurrencies / Tokens (explainer video): Basically a digital currency. They most famous one is Bitcoin which fluctuates a lot, but there are also “stable coins” which are pegged to the US dollar, so they are very stable. Finally, there are tokens that are not cryptocurrencies (for example money in video games).
- NFT’s (explainer video): Non-fungible tokens are the word of the year (2021). They are most commonly associated with unique images right now, but what you need to know is that it is a unique and non-interchangeable unit. Imagine you own a digital photo and have proof that only one copy of this image exists.
- DAO (explainer video): Is an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members and not influenced by a central government.
- Web 3.0 (explainer video): Currently a few big companies (Amazon, Facebook, Google, etc) control big chunks of the internet. They control the data and the information. Web 3.0 is a new internet that will be decentralised, so information are stored on a vast network where everyone can access it.
Again I feel like I am leaving out a lot of important stuff, but hope that this will be enough “crash course” for this article.
Benefits for NGOs?
So why should an NGO consider adopting cryptocurrencies or launching their own token? There are few advantages compared to traditional money that cryptocurrencies offer:
Traceability/Transparency
There are various methods of how this is implemented (proof of work, proof of stake) but what you have to know is that each transaction is saved on the blockchain and will be there forever. For example, everyone could see how many donations were made and where this money went. Compare this to making a donation on a website and trusting that it will go to the intended recipient and you see quickly why this is very powerful.
No intermediates
For NGO, where as much donated money as possible should go to the intended beneficiary, saving administrative cost and delivering the money as fast as possible should be priority.
Another universal benefit of cryptocurrencies are that there is no middle man taking a cut or taking their time to process transactions. Logistic providers like Maersk have already reduced their document processing times by 40% adopting this technology and are saving millions every year because of it.
You can send anyone cryptocurrencies directly, if they have a crypto wallet address, and it will arrive within a couple of seconds.
Accessibility
Not everyone has access to a bank account or qualifies for a credit card. Try to imagine your life without being being able to do transactions on the internet. It is hard and creates barriers for people in poor countries because they cannot participate in the internet economy (they may have something that they could sell online but without access to the banking system, they cannot receive money, etc.).
Yes, you also need tools to access your cryptocurrency, but the barriers are much lower. This is where I believe there are a lot of untapped opportunities: An NGO could create their own token system and give access to people who need it. Working for an NGO that is ending plastic waste, I could imagine giving waste pickers tokens for the amounts of waste collected, which they can then redeem for actual goods or cash.
Community
NGOs usually evolve around a communities. A community or a network of partners that rally behind a cause and support this cause.
A Decentralized Autonomous Organization (DAO) is a concept already established with NFTs where all holders of the same token can vote on certain things like what they should do with their earnings. Also, all of the holders own a part of assets that are owned by the DAO. This is called fractionalization. For example, if the DAO owns one million dollar worth of assets and there are 1,000 NFT holders, each owner owns $1,000 and can even get “dividends”.
All of this is managed in a decentralised way which reduces administration cost but at the same time gives everyone ultimate transparency what the DAO decided. I could see several applications for NGOs here.
Case Studies
Worldcoin
Although not technically an NGO, this company’s mission is to give everyone access to cryptocurrency (currently only 4% of the world population have it). They state: “Technological progress will lead to unprecedented economic growth. It will be increasingly important to make this prosperity accessible to all of us.” They do this by scanning people’s iris, but doing it in a way that does not gather any person information. It is a genius endeavor with a noble mission.
Read here how they do it
WWF
They applied the concept of NFT rarity to endangered species and issued as many NFT as their are animals left. This not only helps raise money to protect these endangered species but also communicates the sad truth that there are a limited number of animals left.
Read an NFT from WWF here
Orica
This is a NFT marketplace. Their “mission is to accelerate wealth equality through digital assets”. They do this by making it easy for artists to raise money through NFT sales and give the proceeds to charities.
Read more about them here
A quick Google search shows that there are lots of NGOs out there that are experimenting with this relative new technology already. This is amazing or maybe just the result of the last two years living in a COVID-19 dominated world which taught us that we need to change and adapt in order to survive.
Conclusion
We are only at the very beginning of a new era.
It feels like the internet in the 90s, everyone was experimenting on their websites, although it was very complex to create one (you needed a HTML developer which were rare back then). Now you can create an online shop on Shopify.com within hours without knowing anything about building websites.
The same will happen with cryptocurrencies, NFTs, decentralised finance, etc. Everyone will have an “e-wallet” that can store different tokens that you can use to pay online or in the store. This is not another “3D” hype that did not bring any value to people’s lives (except painful noses), these technologies are already changing businesses and people’s lives (this is a reality in some Japanese cities already). So if you are a NGO, or not, take some time to learn about it. It could be the solution to one of your business problems.
If you enjoyed this article, please don’t forget to “clap” and follow me for more. Thank you!
