Blockchain For Non-Profit
Decentralized Social Impact: Blockchain for Good
“Poor fundraising practice, inappropriate data sharing, damaging commercial relationships… have all combined to knock the public’s confidence in charity”. Trust in financial institutions has been steadily decreasing since 2005. Reports argue that there has been a 15% decrease of public confidence in nonprofits. Donors ultimately want to be sure their contribution matters, and to know what impact their money is making. Ambiguity in financial planning clouds the public’s view of an organization. A possible solution to this issue lies in this year’s most popular tech trend — the blockchain. This technology has the potential to transform the philanthropy aid industry by enhancing transparency.
Transparency & Accountability
Lack of transparency degrades trust in charities, and can come back to bite in several ways, deserved or not. For one, donors are unlikely to give to charities implicated in wasteful or illegal practices, decreasing whatever good they are doing. Additionally, well-meaning charities can be wrapped up in scandal — say, giving to suffering groups in a country where terrorism is rife — and can face undue sanctions as a result. The ability to trace funds from their point of donation to the recipient will necessarily crack down on wasteful spending and lift a fog from the philanthropic landscape, exposing fraudulent actors and reestablishing trust for donors who rightfully expect their money to be passed along under true pretenses.
Facilitating Emergency Aid
There is no shortage of emergency aid-related scandals and snafus. More than eight years after relief for Haiti was completely bungled, the search for $500 million in missing donations continues. In the wake of Hurricane Maria, FEMA was scheduled to deliver 30 million meals to starving Puerto Ricans. Instead, a mere 50,000 were provided. Hurricane Katrina, is bitterly remembered more for the aid that wasn’t delivered. About $1 billion in funds meant for the victims of the storm was stolen by fraudsters, and in 2006, FEMA was spending $250,000 per month to store $860 million worth of unused trailer units meant for Katrina victims.
So, yes, the administering of emergency aid could use a complete blockchain overhaul. Emergencies are when most charitable donations are made, and being able to trace those funds’ route to their destination is absolutely essential to avoid the waste and fraud that has become synonymous with emergency relief. It will also help bypass many logistical barriers that come with electronic money transfers and fragmentation in the emergency aid supply chain.
Goal-Driven Fundraising Models
Sites like Kickstarter, GoFundMe, and Indiegogo have laid a successful blueprint for goal-driven philanthropy, with GoFundMe having reached a point where donations exceed $1 billion over a 12-month span. However, GoFundMe sustains itself on a 5% fee of all donations plus credit card processing fees, which totals as much as $50 million in revenue in a given 12-month period. While Kickstarter reaps more modest profits — approximately $5 million–$10 million in the same period — a blockchain-tailored philanthropic platform would imitate the goal-based fundraising model while relying on the technology to reduce fees for a less revenue-dependent system. Smart contracts are a particularly useful facet of the blockchain for this purpose. Additional funds are released only as evidentiary milestones are achieved, ensuring that tangible value is being delivered and incentivizing fundraisers to adhere to their professed goals and initiatives.
Anonymous donorship is beneficial to those giving both large and small amounts, providing a measure of privacy that averts unspoken social stigma and peer pressure. With Americans alone giving over $410 billion to charity in 2017, the blockchain could normalize anonymity in philanthropy to a point that the anonymous donation could become the norm, minimizing the “look at me” nature of charity and minimizing donation shaming in both directions. Digital wallets inherently mask the identity of owners, and some have proposed that this could even allow otherwise forbidden causes — such as defending persecution of minority groups in an intolerant nation — to be awarded unprecedented levels of funding.
The effective transfer and utilization of the funds are key challenges for any charity organization as well as governments. However, when it comes to international aid, upto 10% of that fund is lost by transfer fees and exchange rates. Additionally, funds have to go through the hands of multiple intermediaries before it reaches the people who need them. Due to lack of transparency and accountability in our current scenario, there are increasing risks of frauds and corruption.
The distributed nature of blockchain-based transactions means that they aren’t technically tied to any geographic region, which reduces associated legal and taxation risks associated with cross-border philanthropic donations. Though regulation could emerge, several entities are working to implement more efficient, cost-effective cross-border giving with less red tape and fewer intermediaries.
Greater Philanthropist Control Over Causes
The philanthropy sector has proven over the past decade that it is willing to embrace disruptive new models and concepts. The advent of impact investing, the term given to investments in companies that produce returns but also tangible social impact, is just one example of how donors are rethinking how and to whom they give. Social investors, such as Bill and Melinda Gates, are also proving that new, rarely considered causes can attract major philanthro-bucks, so long as the need for fundraising is clearly explained and well-established.
As of early 2016, socially responsible funds under investment totaled $8.72 trillion in the U.S. alone, and $23 trillion globally. And Bank of America Merrill Lynch estimates that over the next two to three decades, millennials could invest as much as $20 trillion into socially-responsible investments. But in order for this projection to be realized, charities will need to cater to millennials’ desire for their voices to be heard and causes to be funded. Using a crowdfunding-like model, this vision could be made a reality with a little help from the blockchain.
Blockchain technology has shown the capability of allowing donors greater say in which causes become eligible for funding. The communal consensus voting aspect of blockchain platforms allows groups to collectively decide upon and fund worthwhile causes, as well as stay up to date on their progress through milestone completion tracking. The proliferation of these sort of donor-dictated funding models is likely to garner greater enthusiasm in the giving process, as well as allow lesser-known causes to receive the attention they require and deserve.