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Task blog

Written by Matthew Rickard
on May 04, 2021

In this article you will learn 4 ways that blockchain can support your social missions. They include:

Blockchain is sending waves in the financial sector and recent new opportunities are also being keenly observed in the social sector too. At first glance it seems tricky to get to grips with how a tech that’s generally associated with cryptocurrencies and online trading can be harnessed in the humanitarian sector, but as we shall see the hand really fits the glove.   


Blockchain technology constitutes a great new approach to keeping track of asset ownership without need for centralised authority. Running minimal transaction costs, the blockchain model appears custom designed for harnessing financial structures within the social impact space.

Oxfam-Asia-Rohingya-Humanitarian-Work-Bangladesh-3A number of nonprofits now favour blockchain over more traditional solutions. Challenges still exist but early implementations suggest that blockchain will probably light the way ahead for many new and existing businesses operating in the nonprofit sector.  

The need for restructure of nonprofit’s handling of funds has been recognised by The Chronicle of Philanthropy who have highlighted the following points in an article published by the Armanino blog.

  • 35% of Americans have little or no confidence in charities
  • 50% of Americans find it important to know charities have low overheads
  • 68% of Americans find it important to know the effectiveness of charity programs
  • 13% of Americans say charities spend money wisely. 

Lets first take a look at tackling the reduction of low overheads and the tightening of administration costs.

Lowering administration costs

Administration costs can swallow up a big chuck of a nonprofit budget. One of the largest admin costs is that of finding the money - the fundraising. Traditionally nonprofit outfits outsource this task to marketing firms who use old style methods such as telephone cold calling, door to door marketing, and poster campaigns. These firms charge large fees up front, and those fees are paid for, as you guessed, with donor’s contributions.

With the advent of social media there are obviously more cost-effective methods of reaching donors using targeted advertisements and engaging interested groups who discuss campaign issues in a lively forum.

 

Newer dynamic nonprofit companies are finding inventive methods to first engage donors before they contribute not only fiscally but by also sharing their own thoughts, ideas, and suggestions thus taking over some of the marketing responsibilities themselves.

Donors should retain interest in their mission with interactive discussion groups and links to follow their contributions from deposit to relief delivery.  

One business that satisfies all of the points raised by The Chronicle of Philanthropy is BitGive. Founded in 2013, BitGive is the first Bitcoin and Blockchain technology 501(c)(3) nonprofit, bridging the gap between innovative technology and its practical applications for nonprofits and humanitarian work in the developing world. With their GiveTrack platform donors can pledge funds that are transferred to the cause in seconds, before being tracked directly against the impact created.

Lumenthropy_648x648Similarly Lumenthropy allows nonprofits to register a digital wallet on Stellar and take advantage of exceedingly low transaction fees and transparency for their donors.

In both cases finances are tracked using blockchain technology until they reach their intended recipient, and there’s a public ledger tracking the account activity - tackling two of the nonprofits biggest headaches - acquiring new donors and eliciting service trust.   

Reducing Risk and Fraud

Inside the nonprofit sphere OECD estimates that 20-25% of funds are lost to government level corruption. This, coupled with the internal mismanagement of funds that nonprofits face, leads to a large chunk of donor’s cash not reaching the intended recipient.

Blockchain uses a consensus system that requires multiple parties to independently verify each transaction. Entries are updated by addendum and can’t be modified. All entries are made public creating a layer of trust hitherto unseen in the charity sector.

Decentralized systems provide true transparency into transaction data — something other platforms simply cannot. This data holds nonprofits accountable and is visible, provided in real time, and accessible to anyone who requests it. - Connie Gallippi, founder and Executive Director at BitGive

Detecting fraudulent activity within a nonprofit organisation and proportioning accountability is not a black and white affair. Layers of grey brush strokes of unethical spending, over-spending, misspending, misappropriation, mission drift, and scandalous expenses.

Decentralising the giving and donation management process hugely reduces the risk of fraud - and it empowers the nonprofit to build stronger relationships with their donor community resulting in improved acquisition and retention rates. centradecentra 2 In addition to quasi-benevolent nonprofit directors donor are equally (if not more) suspicious of the governments operating in the countries where these nonprofits are based or operate. Blockchain technology builds trust with both the needy and the donors in societies with weak government structure and questionable aid agencies.   

Helping to move funds across borders

Moving money internationally has historically been a logistical headache involving intermediary banks, delays, and racking up high transfer fees. The more banks that handle your transfer, the more it will cost you. When sending money internationally, banks that do not have a direct relationship with each other will charge high handling fees.

stellarWith transactions on blockchain resulting in up to 80% reduction in costs and taking seconds rather than days, blockchain technology is a great fix to this problem.

Companies such as Stellar, an open network for storing and moving money, are building partnerships in emerging economies to help more people gain access to the financial system.

Ultimately, we’re seeking to create equitable access to the global financial system by making money more fluid, markets more open and people more empowered. - Denelle Dixon, CEO of the Stellar Development Foundation

By leapfrogging the banking sector and switching to cyber currencies needy citizens without bank accounts can trade without the requirements of a physical bank. While cyber currencies in the west are seen as a speculative investment, in the developing world crypto might be a life-saving financial silver bullet. 

Increasing accessibility

We often take for granted the ease with which we can access our birth certificate, open a bank account, obtain a driving license, acquire a loan or take out a mortgage. In the larger picture as many as 1.7 billion people living in the world who do not have a bank account according to The World Bank.

This is often through lack of paperwork, displacement of origin, government bureaucracy, lack of legal representation and so forth, and thus shunned from stepping on the first rung of entering organised capitalist society.FinancialInclusionReport-5Blockchain offers an amazing new opportunity for these people who without access to banks are now able to trade outside of centralised traditional banking systems. An example in the Philippines is coins.ph that allows citizens to covert cryptocurrency into local money for onward transmittance to family and friends. And when you look at the reach of mobile, and the ability to connect with the majority of these people, mobile solutions built on blockchain can deliver even more value.

As charities and nonprofits are realising the potential of blockchain there are some challenges remaining. Lawmakers need to understand the long-term effects of a decentralised currency.

  • Is blockchain a friend or a foe to their ultimate agenda?
  • What are the long-term implications of a currency and banking system outside of government control?
  • How will it be regulated?

All that noted the more nonprofit organisations who get behind and harness blockchain technology the better chances it will have of becoming accepted within the traditional sphere. It will be interesting to watch this concept unfold and adapt to solving problems in both the traditional commercial sector and the nonprofit social sector in the coming months. 

Are you part of a social enterprise that's using blockchain to improve efficiencies? Or maybe you'd like to learn more about how Task can help you achieve your mission.

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