Pick up nearly any business or technology publication and you’ll notice how blockchain is touted as the technology that can solve a wide range of issues across industries and sectors. While much is still in the development phase, blockchain applications have the potential to transform many business and operational processes, including those in the not-for-profit sector.
Blockchain has the potential to improve existing processes and create new models for a range of functions. The ability to streamline and enable operations at a significantly lower cost makes it an ideal technology for charitable and humanitarian organizations that operate on tight budgets. It also can improve effectiveness and speed up the delivery of goods and services.
Proponents foresee several ways in which blockchain technology could transform the effectiveness of not-for-profit organizations:
Aid distribution and emergency relief services. Blockchain is a natural fit for supply chain solutions, offering greater efficiencies by providing verified documentation for tracking food, medical supplies and other materials from their sources to final destinations. Smart contracts can speed up the distribution for relief services by eliminating paper-based processes and records. Blockchain applications also can track aid workers around the world and enable collaboration among agencies in times of crisis. Direct blockchain transfer of relief goods can help organizations navigate government bureaucracy quickly, avoid the potential mishandling of funds by intermediaries and expedite aid to exactly where it is most needed.
Cryptocurrency donations. Donations made in cryptocurrency are converted into cash to fund charitable operations and programs. Fidelity Charitable, a donor-advised fund program operated by Fidelity Investments, assisted donors and not-for-profit organizations in gathering nearly $22 million in bitcoin donations in 2017.[ii] The Airbus Foundation’s A-Cubed subsidiary has launched an open-source public blockchain project to help not-for-profit organizations accept and manage cryptocurrencies and enable smart contracts in their operations.
Donation tracking. Online scandals involving Chinese charities created public mistrust on the national charities’ use of donations. As a result, the Chinese government announced it will use blockchain technology to improve the transparency of its social service activities. Charities in other countries have taken note. Blockchain can provide a secure, transparent, public platform that can enable donors to track usage data on their gifts.[iv]
Most not-for-profit organizations manage on a tight budget. Blockchain can improve recordkeeping, reduce overhead, and optimize back-office operations in a range of functions from payroll processing to stakeholder reporting. Not-for-profit organizations often find vendor relationships to be fragmented and difficult to streamline because of systems interoperability. Blockchain eliminates interoperability difficulties and can streamline the purchasing process, saving time and money.
Grants. Blockchain applications can be used to manage grants throughout their life cycle. Smart contracts on blockchain can enable the application and administration of grant agreements, speed the issuance of funds and track progress for government agencies and other grant-making organizations.
Several charitable organizations around the world have come under fire for misuse of funds and poor communications with their donors. Not-for-profit organizations can become more transparent by providing public access and oversight of donations and data on their distribution and use on a public blockchain platform. Ant Financial, the payments division of China’s internet mass retailer Alibaba, is using blockchain to bring openness and visibility to donor histories, disclosures and other related data.
Blockchain technology has enormous potential to reinvent processes and operations used by not-for-profit organizations and to create new models to hasten the delivery of services for enhanced value. The not-for-profit sector also can reap considerable benefits by investing in and developing new blockchain applications in a number of areas. If they seek a greater understanding of this emerging technology now instead of later, not-for-profit leaders can better decide how to apply blockchain technology to their operations.
Identity records. Around the world, 25 percent of children under age 5 have no birth record or government registration certificate.[vii] Often this lack of documentation follows children into adulthood and complicates banking, travel, property ownership and other life events. Birth certificates are often lost or destroyed when people move or experience natural disasters. In less developed countries, obtaining a copy of a birth certificate can be a long and tedious process, yet individuals often need identity papers to access government services, to travel, to work, or to engage in financial transactions. Blockchain creates permanent records that cannot be altered and are available to all qualified users. By placing identity records on blockchain, any agency could access and confirm an individual’s proof of identity, age and citizenship.
Property rights. Land speculation often creates the risk of illegitimate property seizure, especially in developing countries with high levels of corruption, low literacy rates and weak property laws. Blockchain applications have the potential to transform current processes by providing transparency and authentic documentation for property owners. The World Bank has teamed up with Medici Land Governance to design, implement and evaluate pilot programs to create blockchain proof of claims and related infrastructure to secure property rights.
