By Matej Michalko, Founder and CEO of DECENT
We at DECENT are investing in educating communities about the different ways that blockchain can be leveraged to make the world a better place. For example, in 2018, we worked with Techstars to bring a Techstars Startup Weekend Decentralize to Boulder. At this 54-hour event, participants pitched ideas for how to put blockchain to use, from improving infrastructure to bringing more equity into the insurance industry. However, one area we didn’t see discussed was how blockchain can restore trust in charities.
We all want to #GiveFirst and know that what we give is going to the right place, and blockchain can make this happen.
Charities Misuse Funds, Donors Become Mistrustful
In 2010, people gave half a billion dollars to the Red Cross to support victims after a terrible earthquake in Haiti. The Red Cross claimed to provide homes for more than 130,000 people with these funds, but in 2015, Propublica and NPR reported that most of that money did not go toward helping Haitians after this disaster, and only six permanent homes had been built. Also in 2015, the New York Times reported that four cancer charities—known collectively as the Reynolds Cancer Charities—took donations of nearly $200 million intended to support cancer patients and used these funds primarily for personal expenses.
These shameful examples left the public suspicious of charities. Trust in Charities 2018, a report from the Charity Commission for England and Wales, found an average level of trust in charities at 5.5 out of 10, with 45% of respondents self-reporting that their trust in charities has decreased—a dramatic increase of 12% compared to 2016.
Security, Transparency, Reliability
Blockchain can add much-needed security, transparency, and reliability into processes where those elements are important, like charitable giving. Here’s how:
1. Eliminate Corruption
All transactions on blockchain are available to public audit. This allows for donations to be tracked transparently, granting the donors direct information on when, how, and who handles their contributions. Users can put their trust in the fact that transactions are executed precisely as the protocol commands, removing the need for a third party. Changes to public blockchains are publicly viewable by all parties, which creates transparency, and transactions are immutable, meaning they cannot be altered or deleted. Donors want to see where the money goes and how it is used, and with blockchain, they can do exactly that.
2. Diminish Unnecessary Costs
Third-party intermediaries often eat into donations in the form of transaction fees or fees for payments. Blockchain can help charities avoid intermediaries and aggregators, and keep more money for the intended use. This can maximize the impact of the funds raised, and incentivize donors to continue supporting good causes with confidence.
In addition, charities will no longer need to depend on institutions like banks or various government agencies that may apply shady practices while handling the donated funds.
3. Turn One-Time Donors into Repeat Donors
The online fundraising platform Charity Checkout published a 2018 report on The Future of Online Giving, and found that nearly 90% of donors would rather donate through a charity’s website than a third-party fundraising platform. The report also found that “almost half of those donating directly via a charity’s website agreed or strongly agreed that they would be more likely to give again; this is compared to just 19 percent of donors saying they would give again after using third-party fundraising platforms.”
When charities use blockchain technology and accept donations on their own websites, they’re meeting donor preferences—and increasing repeat donations.
4. No Geographic Limitations and Real-Time Transfers
Blockchain works on an entirely decentralized basis. This means that it poses no geographic limitations for donors or charities, making cross-border payments seamless and much less expensive. Contrast this with traditional systems, like banks, which require any transferred funds to go through a single SWIFT network. A peer-to-peer-enabled system, like blockchain, can make it easy for charities to break down borders, allowing blockchain-created cryptocurrencies to be utilized from any country around the world.
Donations also take place in real time, with some of the more technologically mature blockchains being able to process upwards of thousands of transactions per second, eliminating atrocious waiting periods. This makes giving much more appealing for people who want to see their funds being received and used right away.
Re-establishing Trust Through Transparency
These are all important benefits. But the most important element for re-establishing public trust in charities is the transparency of blockchain.
For charities, this means that donations can be released quickly and transparently to those in need. Charitable donations can be tracked within the public ledger, making it visible for anyone to see exactly how the funds are distributed. Ultimately, this protects both the donor and the charitable institution accepting the donations from manipulated transaction records and any possible sanctions.
By utilizing cryptography and nodes which are distributed and decentralized, blockchain can ensure that these transactions are secured and immutable. By following protocols which intrinsically govern blockchain, known as smart contracts, donors are left with a sense of assurance between the trusted parties (i.e., the charity and donors). In their essence, smart contracts are fundamentally blockchain-enabled security protocols that ensure that a contract is fulfilled as per agreement. This can ensure that such contracts don’t get breached.
The New Kid On The Block
Blockchain is still the new kid on the block, often compared to the Internet in 1995, but it offers benefits that are hard to dismiss. The technology has experienced significant growth over just the past few years. Some charities are already taking advantage of these benefits to do good in the world, such as Alice, Humanity Token, AidCoin, and many more.
The number of blockchain charity projects is growing, and this is good for everyone: good for donors, good for people in need, and good for the charities that want to lend a helping hand. We look forward to seeing where else blockchain will solve problems and gain wide public adoption.
After all, the internet in 1995 may not have been too impressive—but the people and companies that saw its potential went on to change the world.