Donations to charities are part of a conscious approach to participate in the global community. How often do we hear someone say something similar to the phrase, “My life is so blessed. It’s the least I can do to share those blessings with others”? Now, blockchain technology has entered the scene to make a positive impact on several challenging aspects of charitable giving.

In the past, the amount of donations made and amount of administrative costs spent were squirrelled away in both the paper and computer hard-drive records of each charity. When an annual report was published, donors were sometimes dismayed at either the lack of information about how those funds had been spent or the semi-secretive approach of some charities about sharing information at all. All of that is beginning to change, courtesy of blockchain usage. The clarity and transparency of readily available records are comforting, but there are still areas to be addressed:

  • strategies for movements in financial markets
  • decisions on how funds are spent
  • issues of controlling access to records while maintaining transparency

Market volatility means that when there is turbulence in the value of any donations that have been made in the form of cryptocurrency, the amount that has been donated may fluctuate drastically. This means that plans for allocating those funds to specific projects or groups may not be possible. That level of financial uncertainty can also create an unstable atmosphere within the charity. One of the proposed solutions at present is to move donations into a new form of ‘stable coin’ such as SAI or DAI – a cryptocurrency that was specifically designed to hold its value and not fluctuate with generalised market movements. These are currency-secured (the U.S. dollar) products created by the decentralized and autonomous organization Maker. Allocation of funds and transparency of the step-by-step movement of donations will be much clearer in the future once blockchain apps are employed more often by reputable charities. This level of transparency will allow corporate and individual donors to feel more comfortable about the use of their donated funds.1-2

The use of blockchain technology in charities can also lower the cost of transactions. Without the need for using ‘middlemen’ such as Paypal to move funds, costs are lowered for every transaction. Staffing requirements can also be reduced since blockchain users both own and maintain the public ledgers. The charity’s records are now contained within a blockchain that is sprinkled around the world in multiple computers and this also serves to eliminate the need to pay salaries to individuals or third-party records-keeping staff.3

A recent article written by Brian Armstrong, the CEO of Coinbase, noted that most of the digital currency that is donated to charities is converted rather quickly into U.S. dollars so that it can be spent. Instead, Armstrong proposes that a potential alternative to the dollar conversion would be the creation of a significant-sized fund where people and corporations could donate via cryptocurrency. The fund would be created with an ‘evergreen’ style of management – giving away less to various projects or groups than the fund itself generates in profit from the capital that is left invested.4

 

REFERENCES

  1. Bauza, Leo (2017, Oct. 23). Can A Blockchain Help Charities. Retrieved from https://www.viget.com/articles/can-a-blockchain-help-charities/
  2. Dai is a decentralized stablecoin. (n.d.) Retrieved from https://makerdao.com/
  3. Rosic, Ameer (2017, Dec. 6). Goodbye Corrupt Charities: Hello Blockchain. Retrieved from https://www.huffingtonpost.com/ameer-rosic-/goodbye-corrupt-charities_b_13207806.html
  4. Armstrong, Brian (2018, Jan. 27). Charitable giving with cryptocurrency. Retrieved from https://medium.com/@barmstrong/charitable-giving-with-cryptocurrency-11e24923cd4a