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How Blockchain Technology Can Relieve The Donation Drought

This article ran as part of CEO Chao Cheng-Shorland’s leadership series on Forbes Tech Council.

Whether donating a couple of dollars or making larger monthly contributions, most of us don’t think twice about whether our money goes where we expect it to. Today, there are not enough ways to tangibly demonstrate that those donations actually reach the causes we care about. Perhaps we should start paying more attention to how those contributions are processed.

In the first 11 months of 2022, the U.K. saw 408 cases of charity fraud, accounting for £2.3 million in lost donations and representing a 44% uptick from 2021, according to Action Fraud, a center reporting on fraud. A global slowdown in charity contributions, with charitable donations in the U.S. falling to their lowest level in decades, adds to the troubling report from the U.K.

Lack Of Accountability And Transparency

While bad actors, organizations and/or individuals will always try to exploit others’ generosity, nonprofits and charitable organizations suffer from a lack of accountability and transparency, which ultimately enables scammers to take advantage of others’ goodwill. The vast majority of these organizations operate with full or almost-full transparency, but cases of fraud and misappropriated funds raise suspicion and deep concerns among donors, harming the NGO’s ability to collect the donations they need to operate.

Charities and nonprofits play an immensely important role in picking up where the private and public sectors leave off; they are the soul of an outdated system that needs both implementation and purpose. Without these dedicated organizations and their ability to operate on funds provided by the general public, socioeconomic gaps within our society would be even wider.

As in any business or industry, accountability is paramount. That’s especially true for nonprofits since the public holds them to higher ethical standards due to the nature of their work. In the U.S., only charities that expend more than $750,000 a year in federal funds require a special independent audit.

While private foundations may request a copy of a nonprofit’s financial statements, they are not obligated to comply, leaving lots of wiggle room for scammers to prey on well-intentioned donors. This accountability vacuum must be filled in order to ensure the integrity of all charitable donations, and the greatest hope to achieve this comes from the abundance of new tech tools.

Right now, AI dominates discussions on how technology will revolutionize our lives, but a different technology can be leveraged to ensure transparency and the highest degree of accountability within the nonprofit sector: distributed ledger technology.

Blockchain’s Potential In Philanthropy

Distributed ledger technology, or blockchain, as it’s more commonly known, is a decentralized digital ledger that records transactions in a secure and transparent manner. By using complex algorithms and cryptography, blockchain technology ensures all transactions are immutable and available for all authorized parties to view in real time.

Blockchain can be used to enhance philanthropic accountability by providing a clear and concise digital record of all donations and their use, ensuring each donation reaches its intended recipients and that it’s used in an ethical manner. Furthermore, blockchain technology can also enhance the transparency of all nonprofits and charities by publicizing their records and movements of funds. This can help prevent the misuse of cash and empower individuals and organizations to support the causes they care about, thanks to a clear overview and the collective perceived control of all monetary transactions.

With climate change and green initiatives on the minds of both governments and businesses, the funds raised by nonprofits and charities will become even more important as humanity aims to hit lofty greenhouse-gas reduction targets. Beyond ensuring the transparency of funds, blockchain can also facilitate and expand global carbon credit marketplaces and improve the energy industry’s processes and markets, making it more eco-friendly.

While blockchain is already actively used across the green-tech industry, a nonprofit social impact initiative called Unite For Italy, facilitated by advisory firm Morichi Atelier, launched the world’s first blockchain-based nuclear waste management system to protect and secure all digital nuclear waste. The multi-functional platform supported by the E.U., known as “Herculean Endeavor,” protects and secures all sensitive data and nuclear waste management operations, replacing antiquated protocols typically employed for the nuclear decommissioning and dismantling phases.

While innovative initiatives like Unite For Italy contribute to a healthier planet by developing new donation platform technologies through blockchain, Doctors Without Borders has now adopted crypto donations through The Giving Block; a blockchain donation platform that funnels donations to support important medical initiatives for those in need. The normalization of crypto and blockchain technology within the context of nonprofit work will boost the credibility of these organizations while allowing them to operate more efficiently.

In the philanthropic and NGO world, blockchain has a near-endless number of possible use cases on both a macro and micro scale. Whether supporting a healthy planet, community or economy, the work these organizations do is invaluable, and those willing to donate must have the comfort of knowing their hard-earned money doesn’t go to waste. As the blockchain industry continues to grow, it will be able to aid the work of nonprofits and charities further while developing innovative solutions to expedite their internal operations while maximizing their external ones to improve humanity.

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