Blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Transactions can include anything that has value associated with it – currency, physical assets, bonds, services, contracts, and IP. Blockchain technology has three key features: first it is distributed, second it is public, and third it is encrypted. Many think blockchain today is what the internet was 30 years ago; having the potential to change many industries, including the charitable sector. This article explores two areas where blockchain may have the largest influence for charities: fundraising and providing new ways of addressing social inequality.
Blockchain & Fundraising Blockchain has the potential to significantly impact charitable fundraising in two ways: by increasing donation accountability and through micro-donations. Over the last few years donors have become increasing scrutiny of charitable activities. Plagued by scandals, donors are increasingly wary of giving to charities not knowing if their donations are going to their intended purposes.
Blockchain may be able to help this “trust problem” by bringing transparency and accountability to the charitable sector like never before. For example, Cryptocurrencies that run on blockchain are traceable through complex supply chains possibility allowing donors to track every dollar donated from its starting point to end beneficiary.
Micro-donations have been around for many years now, but with blockchain they can be taken to the next level. The cryptocurrency Bitcoin can be subdivided up to at least 8 decimal points and occur zero transaction costs when transferred. This may make it possible to build unnoticeable micro-donations into everyday purchases. Imagine millions or billions of transactions allocating unnoticeable micro-donations to charity – it may be a way for charities to secure steady sources or revenue.
Blockchain and Social Inequality Blockchain also can be a new tool to address social inequity by reducing the barriers to financial inclusion and by offering unconventional ways of tracking and exchanging value. The people at the bottom of the pyramid are chronically unbanked and two barriers of providing banking to them is trust and transaction costs.
Blockchain can be used to overcome both. For example, an unbanked person can slowly build up their digital identity and trust profile using unconventional methods. As beneficiaries suddenly become empowered and included in global economic systems they may be able to create and capture new value without the help of third-party intermediaries. Peer-to-peer giving over a secure and decentralized network may provide individuals from all over the world to make loans to each other without central banks or development agencies.
Challenges of Blockchain Blockchain, although having great potential, is still very much in infancy and there are many challenges associated. To state the obvious, blockchain runs on the internet – something not all people have. Additionally, some form of basic literacy is needed to take advantage of blockchain. There are also legal and regulatory challenges. Currently cryptocurrencies are extraordinarily volatile and are considered similar to stock rather than currency by many tax authorities. Finally, like any technology, blockchain can be used for good or evil.
Questions to ask Although it may take a few more years until blockchain is being used mainstream, charities in the meantime can ask themselves the following questions:
1. What effect will emotionless giving have?
2. What will we do if blockchain makes our charity irrelevant?
3. How will we respond to 100% transparency?
4. How can we use blockchain technology to become more effective?
Blockchain should be seriously considered by charities and other organizations within Canada’s social sector not only for how it might disrupt, but for the new possibilities it may bring.
Matthew Schroeder, MBA, GradDipl, and BSc is a non-profit leader who specializes in marketing and how non-profits can innovate to meet the needs of the 21st century. Contact him at: matthew@mjschroeder.com or at www.matthewschroeder.org To read more on Blockchain, click here.
