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How Blockchain Can Help Charities

Can blockchain really transform the charity sector?

The discussions about how Blockchain can be used to make the world’s financial transactions more efficient and transparent have been increasing in the past few years. These discussions are now including plans to create better inclusions for distribution of philanthropic wealth into the not for profit and charity sector.

Every year, a massive amount of money is spent on charitable causes across the world. It’s estimated that around $410 billion was raised for charity in 2017 in the US alone. From individual donations to state-funded aid, contributions to charitable causes have brought genuine transformation to the lives of billions of people in the past century.

However, questions regarding transparency and accountability of the donated funds have been raised over the years in all parts of the world. There is no denying that charity is a crucial aspect of the human society, but corruption and mismanagement are still issues that are holding the charity sector back from delivering the much-needed help required. In fact, the declining trust towards charitable organizations has discouraged many people from donating to charities altogether. In this scenario, Blockchain has been identified by many technology promoters and enthusiasts as a really promising medium that could potentially enable the entire charitable sector to be more transparent and trustworthy.

Reduction of bureaucracy
More often than not, middlemen, financial intermediaries, and bureaucracies (both national and international) have often been the biggest beneficiaries of the charitable economy. Thus, only a minor proportion of charitable income actually reaches the intended beneficiaries who are at the bottom of the pyramid. In this regard, Blockchain technology can be used to actually bypass the massively inefficient bureaucratic engine and consequently enable aid to reach directly for the intended purpose. If a Blockchain system is implemented to record all the withdrawals and the direction of the aid, then more accountability can be ensured from all sides involved in the system. In fact, the opportunities for corruption and mismanagement of funds can be radically reduced by a transparent Blockchain system that records every single transaction perpetually.

Rapid aid disbursement
With the current aid disbursement system, donations often move across a series of manual intermediaries, because of which aid disbursement is heavily delayed. This has time and again proven to be a really big hindrance in situations that require rapid aid disbursement, as in the case of natural disasters and emergency budget requirements. However, with the implementation of an effective Blockchain-based disbursement and distribution system, this delay can be massively reduced and can be utilized to effectively mobilize large funds during emergencies at minimal cost.

What’s being currently done?
While the implementation of Blockchain in the actual aid disbursement and record system hasn’t occurred yet, some reputed charities have begun embracing the idea of Blockchain by including Cryptocurrency as a means of accepting donations. Although only a tiny proportion of charitable organizations currently accept Cryptocurrency, this can be expected to increase in the near future. In 2014 the Royal National Lifeboat Institution (RNLI) from the UK, became one of the pioneer charities to accept donations through bitcoin. Lately, major internet-based charities like the Wikimedia Foundation and the Internet Archive also accept donations through Cryptocurrency. Over the past few years, popular charity organizations like Greenpeace and PETA have also followed suit.

In May 2018, Unicef Australia launched a mining platform to provide donations for vulnerable children through a dedicated page called ‘The Homepage’, which also happened to be among the first blockchain based initiative adopted by a UN-based agency. Helperbit, an Italian startup has enabled individuals and organizations to directly collect donations through Bitcoins. Even major crowdfunding platforms like IndieGoGo have enabled the donation of Cryptocurrency on projects. The Ethereum foundation has also tried to experiment with a Blockchain based charity collection system through their popular CryptoKitties game, through which they auctioned a character with the proceeds going to charities working on oceans and wildlife. However, beyond the acceptance of Cryptocurrency, most organizations have done little to adopt Blockchain in their systems.

Final thoughts
On the flipside, when compared to mainstream e-payment systems, Blockchain-based systems aren’t really big enough to handle the massive charity donation system. Thus, to compete against the traditional charity collection and disbursement systems, not only does the adoption and knowledge of the Blockchain needs to increase in the society, but the system also needs to be able to handle a lot more transactions in the future. Although the adoption of Blockchain by most charities simply won’t happen overnight, if more and more donors open up to the system, organizations and governments will surely take action to that end.

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