Aid system: blockchain about to push it to the edge

Note: This is an edited version of a blog post originally published at https://aboutronaldblog.wordpress.com.

As giving, charity, aid and philanthropy have a humanistic foundation, on a matter of fact they became a Billion US$ industry. And as in other industries, there are currently some pretty amazing things going on in the aid industry. This post presents some building blocks of the development aid system and takes to look at some highly innovative approaches to improve giving and aid.

Just to get things into perspective, its worth looking at the fundamentals: It started in prehistoric times when someone with disposable assets handed something over — at these times most probably food — to someone less fortunate without expecting a direct return. No intermediary, no service provider, no charity, just two hands — one giving, the other taking.

Building blocks of the giving system

Things became a little more complicated as charity started to deal with greater challenges. Why?

Charity became a more complex business
In 1443 the Hôtel-Dieu was established in the city of Beaune in France. The donor, a high-ranking government official named Nicolas Rolin, gave a substantial amount of money annually to run the hospital for the poor. Such a charity obviously needs some design work to set up the structure of the charitable „program“.
This is what I call … Programming

Charities needed more resources
Such more complex and costly efforts need big money, often more than one donor was able to finance. Smaller donations had to be aggregated.
That is why I call this … Aggregation

Charity became a full-time job
In 1473 the city council of Strasbourg handed responsibility for managing the cities charity program to a public servant. Later in the last decade the job profile of a professional development worker emerged, working with the poor in various ways, with the aim to improve the living conditions and creating opportunities.
That is … Implementation / ”Assistance”

Charities had to consolidate the needs and select the people they thought are in need
In the early days of giving it was just the „poor“. At some point giver started to identify groups of people which from their view should receive charity whereas others are not eligible. Around 1370 the charity rules of the German city Nurnberg (in German: “Nürnberger Almosenordnung“) asked for two or three citizens to testify that the respective person really is poor.
That is … Consolidation of needs/demands

One more thing …

However, increased complexity of giving created a major problem: A growing distance between donor and beneficiary, giver and receiver. So one crucial element had to be added for these blocks to work as a system: trust.

The system works as long as there is the confidence with the donor that funds are transferred without loss and used properly, meaning: as intended by the donor. The system which evolved over time was designed to maintain the ability of the donor to decide at almost every point of the process. Without a transfer/trust block the other building blocks would not work as intended.

Giving as a system

So here is the point: Over time the simple act of giving became a complicated business. Each of these elements added another block to the structure one can observe today in the charity sector.

As this seems to be quite straightforward, it helps to understand approaches to innovate the sector, to even “reinvent giving”.

Innovation in aid by “Aggregating” and “Consolidating”?

GoFundMe consolidated smaller platforms like GiveForward, Generosity, and YouCaring to a Billion US$ crowdfunding platform is forcefully addressing the aggregation segment. Programming, implementation and transfer in contrast is done in the quite traditional way NGOs work.

GiveDirectly is innovating from the other side of the equation, by consolidating individuals or families in need and providing them with unconditional cash transfers. Beyond that the approach obviously also includes a transfer/trust component while transferring funds as wells as monitoring and auditing the recipients.

While there is already innovation in aid systems, blockchains may well change the game

But if it comes to trust and transfer of funds, no surprise, distributed ledger technology (DLT)-based projects are currently the big eye-catchers. Here are a few:

Humancoin brings together the philanthropy industry, retail e-commerce and cryptocurrency markets based on a token system to built a global e-commerce loyalty program aggregator.

Little Phil wants to close the gap created by the system of giving and link giver and receiver. With distributed ledger technology the project aims at building an emotional connection, proof of impact as well as need, and providing transparency as all transactions and costs are visible on the Little Phil blockchain. The project currently prepares a initial coin offering (ICO).

Giveth is more radical to redefine the transfer/trust element: By using blockchain technology based on the Ethereum platform they are creating a Donation Application and a platform for Decentralized Altruistic Communities. This is a completely decentralized model of giving — which comes quite near the claim “reinvent giving”.

TruBudget is a system a German development bank is currently developing to explore the use of a blockchain application to track payments to beneficiaries, again technically improving the trust block.

These are just very few examples of more than 60 thrilling and inspiring start-ups and initiatives in this field. At PositiveBlockchain.io you can browse a curated open-source database of hundreds of positive blockchain projects. These projects use distributed ledger technologies to generate positive social impact and solve some of our world’s burning problems.

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