Ed Harvey writes for Third Sector
In 2015, the Bill & Melinda Gates Foundation turned to blockchain technology to help the 2.5 billion people worldwide without bank accounts. But what is blockchain, and how are international charities making use of it to improve the livelihood of the those in the less-developed world?
Blockchain is a decentralised public ledger that records all the ownerships and transactions in a system. In short, blockchain presents financial transactions online, which are then approved and validated by a network, creating a transparent record of transactions. They are increasingly popular because they cannot be hacked and have no single authority.
Blockchain has had a significant impact in the financial world, and is now being tested by some of the leading players in the non-profit world, with suggestions that it will not only change charitable projects, but also the way that charities fundraise.
As an example, the Bill & Melinda Gates Foundation’s Level One Project is a digital platform designed to issue and receive payments from anyone, thereby bringing the poor into the greater economy by providing them with access to financial services. As well as providing more access, the project is significant for its ability to deliver more reliable, cheaper and easier-to-use financial services for those most in need.
Blockchain in charitable projects
Given the added security of blockchain, it is not only the Level One Project that is testing the technology. Building Blocks is a major initiative of the UN’s World Food Programme, designed to provide cash transfers to people in need. It has supported 9.3 million people in this way, empowering them to make their own purchasing decisions to relieve hunger. Through Building Blocks, the WFP is trialling blockchain, it says, as a means of "making cash transfers more efficient, transparent and secure". So far, Building Blocks has reached more than 100,000 people in camps. The system helps to "reduce payment costs… better protect beneficiary data, control financial risks and set up assistance operations more rapidly in the wake of emergencies".
Blockchain is changing the fundraising landscape
Blockchain will also be a key part of donations in the future, given that donors will be looking for added security. AidCoin recently launched AidChain, a donation platform that (through blockchain innovation) enables people to make donations that are fully transparent and traceable. Such platforms are playing their part in rebuilding trust in charities and have led to the development of Smart Contracts, advanced electronic contracts that contain a set of rules for fundraising. Advocates of the contracts emphasise that they add a layer of security and effectiveness into donations, allowing the transfer of funds only if specific conditions are met – for example, if at least 50 per cent of the funds are raised.
According to AidCoin, "smart contracts will play a central role in revolutionising the non-profit sector. Donors will be more incentivised to donate to the non-profit sector… since, in addition to public transparency, they will also have the certainty that funds are only raised upon fulfilment of set conditions and contingencies".
A platform akin to AidCoin is Vantage Network, a "contribution tracking platform" built on blockchain technologies. Whereas AidCoin emphasises the role of smart contracts, Vantage Network is providing greater transparency by enabling donors to track how their donations are spent by non-profit organisations. Vantage Network describes it as like tracking a package. In addition, a donor can see all the transactions tied to their donation and they receive a report of overall campaign fund usage. As well as the beneficiaries getting the funds they need, and the non-profits getting more money to do good, this system allows the donors to clearly see their impact.
Blockchain for smaller charities
As you might expect, the major blockchain innovations in the charity sector are currently being led by those at the very top. However, in the future, we can expect to see a trickle down of such technologies, with the potential to change how we interact with (and donate to) charities, enabling charities and organisations to deliver remarkable new projects. For those who are considering embracing blockchain, it’s important to consider the following:
Plan: implementing blockchain in your non-profit will take time. Consider where you want your charity to be in five years’ time and whether blockchain can help you get there. Be clear about what the charity would use blockchain for: your projects, your donations, for internal use?
Speak to your stakeholders: for any non-profit, there is no benefit from implementing a major project that is unpopular or confusing. Discuss the idea of blockchain with your stakeholders – your trustees, your senior executives, your trusted advisers, your major donors, your beneficiaries – and gauge their interest.
Have a checklist: are you simply jumping on the bandwagon? Do you have the internal expertise to implement blockchain? What’s your track record with new technologies? Can you outline what success would look like, with Smart objectives? Can you justify the risk?
The initial projects and organisations that are built on blockchain are revolutionary and have shown real signs of making a significant and positive difference in the charitable sector. Providing that the intent to continue to improve the sector remains at the heart of these initiatives, we should be excited by the opportunities. We are already learning about the power of blockchain from the larger charities. Once the smaller organisations embrace blockchain the impact will be extraordinary.
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