From enabling cryptocurrency donations to building public trust, charities are already benefitting in a number of ways through Blockchain technology
Blockchain is a promising technology for charities as they look to promote transparency and at the same time cut the risk of fraud. But too often it is being ignored by charities through a lack of understanding, which can be due to a lack of technical expertise, as well as difficulty in explaining how it can offer charities tangible benefits.
Here we will explain the basics of Blockchain and how it can benefit the voluntary sector, making it more efficient and robust along the way.
Put simply, Blockchain is a form of technology that allows digital information to be distributed, but not copied. This means each piece of data only has one owner. Through Blockchain processes, information can be distributed in a transparent way, which is safe and can help mitigate against fraud.
When describing Blockchain the phrase ‘digital ledger of transactions (DLT)’ is used, which means it is duplicated and distributed across computer systems. With Blockchain, transactions are recorded with a cryptographic signature, called a hash.
Each block within this chain of information contains a number of transactions and each time a new transaction is made in this Blockchain, a record is added to every participant’s ‘ledger’. It is essentially a growing list of records.
What does this mean for charities? In practical terms the use of Blockchain means that if one of the blocks is changed it is immediately evident that it has been altered. This makes life difficult for cyber criminals and hackers. They would find it hard to corrupt a Blockchain without changing every block in the chain, across all versions.
Blockchain is often used when talking about cryptocurrency, such as Bitcoin. But it is a misconception to see Blockchain as a cryptocurrency itself. It is the process which enables cryptocurrencies to operate, in the same way the internet allows email to work.
The first talk of Blockchain was in a 2008 whitepaper called Bitcoin: A Peer to Peer Electronic Cash System that talked of how Blockchain technology can enable a “purely peer-to-peer version of electronic cash”.
Understanding of Blockchain has developed since then, with many realising its potential to offer more than just enabling cryptocurrency to operate.
This is understandable for organisations in the pursuit of efficiency savings as there are clear benefits in decreasing the cost of transactions through Blockchain’s efficient and secure process. This has led to an increase in investment among organisations looking to see how Blockchain can improve the efficiency of supply chains, finance, voting, contracting, healthcare, and more.
Managing donations more efficiently is another benefit for charities, as well as improving trust with donors through the ability of being able to track and trace transactions through Blockchain.
Digital fundraising can also be aided through Blockchain, as charities can accept payments securely, transparently, and globally without the need to pay currency exchange fees.
Among charity sector initiatives in this area has been Cypto Giving Tuesday, which promotes donations using Blockchain through Bitcoin.
According to the website, 14,000 Bitcoin has been donated to charities. At the time of writing the present article, each Bitcoin is worth £36,021. Charities accepting cryptocurrency include Save the Children, Unicef, Global Heritage Fund, and Wild Tomorrow Fund.
The ability to react to global events quickly has proved a real benefit of Blockchain assisted Bitcoin donations for Save the Children in particular. It has accepted Bitcoin since 2013 and nearly a decade on accepts multiple forms of cryptocurrencies, including Ethereum, ZCash, Litecoin, and Basic Attention Token.
Other charities accepting Bitcoin donations using Blockchain include the RNLI, which was among the first in the voluntary sector in the UK to accept this form of digital currency. The charity said it is ensuring it can accept Bitcoin with an eye on the future.
Charities Aid Foundation is among sector bodies to look at the variety of ways charities can use blockchain. This includes making donations of intangible assets, such as intellectual property.
Another is through self-governing ‘smart contracts that offer opportunities for businesses to embed giving into their organisations and help charities raise money’.
It also highlights the benefit of public trust in charity that blockchain can offer. This is through the decentralised nature of blockchain so there is no reliance on third parties for financial transactions. The transaction is owned and maintained by its users, rather than banks and other third parties.
This in turn cuts costs, so the public can have greater confidence that their donations are being used for good causes.