Blockchain and Charity: Good Together?

EXSCUDO Team
August 21, 2019
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Currently, blockchain philanthropy is gaining momentum, as this sector has many problems the technology addresses. More and more charity organizations are starting to integrate crypto donation in their fundraising practices. Also, there are new charities (like BitGive Foundation) created with the specific purpose of accepting donations in BTC and other digital currencies.

What blockchain has to offer here? Let’s have a closer look at the charity sector major problems and explore the solutions suggested by DLT.
It should be noted, the innovation has arrived just in time, as the current reputation of nonprofits is far from perfect: it’s reported that about 30% of Americans lack trust in charities, thinking they spend part of donated funds not on charity causes, but on their own needs. Though millennials are ready to give money to charity, but they want the organizations be accountable before the donors. And here we deal the first major issue,

Transparency

Donations in bitcoin and other digital currencies are easier to trace than the traditional ones. The donors are able to see where their money go and how it is being used. Normally, it would be impossible: most donations go to one pot used to finance the work of the organization in general. But a crypto donation is easy to follow – say, if you give just 1 coin to buy a PC for the kids of a certain school in the rural India, you will still be able to see how the charity has spent it. 

Another opportunity here is creating unique charity tokens, customized for a particular use. Such tokens can only be exchanged for socially beneficial products or services. A good example would be the Clear Water Coin. In this model miners donate part of their profits to the specific charity cause. 

Obviously, the increased level of transparency and accountability will encourage more people to donate, restoring their trust in nonprofits. As we have mentioned, crypto millionaires, whose riches are not really hard-earned, are more inclined to share their money with those less fortunate. Thus, they present a new source of funds that did not exist before. Easy come, easy go.

Cross-border donations made simpler

Another problem of global charities is unreasonably high fees charged by banks for processing international transactions and currency exchange. As a result, part of money destined for charity ends up in the deep pockets of financial institutions.

Unlike traditional currencies, crypto is not restricted geographically. Ideally, it functions in any jurisdiction. You only pay standard transfer fees (nothing compared to what banks charge), and your funds do not have to pass through many greedy hands, each taking their share.

Also, as crypto is not dependent on banks, you can direct donations to conflict zones or troubled regions where banks cannot operate properly due to economic sanctions or dangerous political turbulence.

P2P approach

As any social sector, charity has to deal with a lot of intermediaries who are supposed to make things easier because they know how it all works.
Nowadays, instead of direct P2P giving donors rely on specialized organizations. They collect all the donations and distribute them among those in need. We moved away from traditional person-to-person helping model (i.e. alms-giving) to more impersonal but large-scale approach.

Blockchain-based solutions for charities again (but on a new level) make it possible for us to directly support families or individuals in poor countries. It might be the most effective way to solve small-scale problems. Besides, we should not underestimate the ‘human touch’ – it probably feels better to donate when you know the ‘final consumer’.

 

Blockchain-based giving: the basic problems

The main challenges of DLT application for charity are pretty typical. First, it’s uncertainty of regulation: in some countries which would benefit the most from such an innovation, cryptocurrencies are prohibited by law, or the citizens are officially discouraged from their use.

Another problem is the well-known volatility of cryptocurrencies – their price may drop very fast and for no good reason. As a result, right now cryptocurrencies should better be seen as something that may help when traditional currencies fail to complete the mission.

The third reason why a decent nonprofit might be shying away from cryptocurrencies is the donor anonymity issue. It’s rather controversial: some would say ‘if the cash is there, we don’t care’, but others prefer to know their source to avoid being connected with criminals, businesses or politicians whose views are inconsistent with the mission of the charity.

Anyway, it’s too early to say that blockchain is here to change the rules of the charity sector, but it already can help in many ways.


Hopefully, crypto charity has a big future.

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