Is Blockchain the missing link charities are looking for?

If you don’t yet know what blockchain technology is, there is at least a good chance you have heard of bitcoin – the cryptocurrency it underpins.

Bitcoin came to prominence as the medium of exchange that dominated the dark web. Favoured because it gave it users the anonymity needed to trade in illicit goods. But the currency has come a long way since then, earning legitimacy with a slew of other cryptocurrencies that includes the likes of Ethereum, Ripple and Litecoin. The common denominator in all of them is the blockchain. 

Blockchain can be crudely described as a decentralized ledger whereby all a list of all transactions – called blocks – is recorded, linked and secured on a network of computers using cryptography. 

Unsurprisingly, the openness, security and immediacy offered by the blockchain has had a lot of people in the banking industry excited, and perhaps even a little scared. Afterall, the technology has the potential to be very disruptive. There is also a lot of excitement in the non-for-profit world. 

Beyond trust 

Just looking at the basics, there is a lot of about the blockchain that should appeal to philanthropic organisations. For a start it creates trust – a concept that is integral to any charitable endeavour. Counterintuitively it does this by being “trustless”; allowing strangers who would not otherwise trust one another to collaborate without having to go through a central authority. 

As explained in a recent report by the Charities Aid Foundation (Giving Unchained: Philanthropy and the Blockchain) one of the major benefits of this is that people trading on the blockchain no longer have to depend on third party institutions such as banks or law firms in order to have faith in the system because the system is maintained by its users. 

What does this mean? Its means that the cost of doing transaction – and by extension the process of giving – is greatly reduced, meaning trust is greater and, crucially, more resources end up where they are intended. 

Smart with a heart 

But is not just about transferring money, it goes much deeper. Blockchain doesn’t just underpin currency, it also underpins something called “smart contracts”. These are computer protocols that represent formal agreements between parties for the provision of goods or services. Again, the decentralised nature of the blockchain means that these contracts are independent and self-executing without a third party. So not only can the blockchain serve as an instruction to give – in the case of a simple financial transaction – but can also govern how we give. For example, a decision to give a certain amount can be triggered by conditions in the contract. 

The combination of these two things throws up an infinite amount of possibilities for the future of philanthropy but some benefits will come sooner than you think. The radical transparency brought by the blockchain will mean the financial dealings of charities will reach unprecedented levels of scrutiny and transaction costs will be near zero. 

Meanwhile, the ability to quickly transfer the ownership of physical assets through a digital ledger will means a new sharing economy will emerge to replace traditional concepts of ownership – vastly reducing waste and redundancy. At the same time, smart contracts will be a means of tackling vast amounts of data and distributing donations at scale with fewer human resources needed. 

Before long, blockchain – the technology that emerged from the shadow deals of the dark web – will be a radical means for shedding more light in the world through innovation. It is early days, but at Uinspire (www.uinspire.co.uk) – a company that thrives on the transparency, trust and innovation – we aim to play a role in this next evolutionary step.