Blockchain for nonprofits: How can blockchain make our world a better place?

27.12.2018
11 min.
title

The humanities and tech haven’t always been considered natural bedmates, but, in recent years, nonprofits have been looking to the innovations presented by technologies such as blockchain to support their work.

Providing a wealth of solutions to an array of unique problems, blockchain is not a one-size-fits-all resolution. It's an innovation that is changing the way we do both business and nonprofit.

Blockchain for nonprofits?

For a technology that is most often associated with cryptocurrencies, it can be hard to fathom just how blockchain connects with nonprofit. But why not? Blockchain-based solutions have been implemented in many sectors—from art authentication to smart business contracts to digital voting to business process management.

Essentially, the only way a nonprofit differs from a traditional company is that its primary objective is not to make money. Like any industry, nonprofits have business needs to be addressed—project management, analytics, financial activities, etc. So nonprofits can also employ blockchain as a solution to their organizational issues.

Nonprofit problems

Unlike businesses, however, nonprofits, as actors for good, additionally experience problems centered around trust, accountability, and transparency that can prove detrimental to achieving their missions.

Let’s take a look at the top nonprofit issues and their blockchain-based solutions:

Issue: Corruption and Accountability

Considered a hot topic in the nonprofit world, one of the key issues facing nonprofits at the moment is accountability. Especially considering how recent scandals have rocked their once-golden image—from high-paid top executives to ill-spent funds—more and more people are recognizing the sad truth is that those working for nonprofits are not always as clean as they make themselves out to be. Corruption can be particularly prevalent in less economically developed countries where many nonprofits work. This happens in various forms such as “misplaced aid,” bribes, favors for aid, etc. And is especially damaging to an organization’s image.

Occasionally, it’s unavoidable—bribes need to be paid to access those in need—but other times, it’s just malfeasance. The UN even reported that up to 30% of aid is lost due to corruption.

But does that mean people shouldn’t donate? Absolutely not. There are those genuinely in need in the world, and we shouldn’t turn our backs on them because of the poor decisions of the few. The fact is humans are, by nature, flawed. And while we would like to believe the best in people, sometimes they need a little help to stay honest, and this is where accountability comes in.

Blockchain solution:

So, what makes people accountable in their roles? Reporting, transparency, and general openness in what they do. Blockchain can provide organizations the opportunity to account for their activities, track the passage of funds from the donor to the end user, and show that their employees are fulfilling the actual objectives of the organization.

When funds just seem to “disappear” or cash solutions are proving tricky, employing blockchain for nonprofit can help keep it accountable for exactly how funds are being used. As every transaction is intricately recorded, it becomes visible where corruption is occurring.

Issue: Trust and Transparency

Is your money really going where it’s supposed to or did you just donate to a scam? Many nonprofits use highly emotional advertising to encourage potential donors to open their wallets.

The implication is that these funds go directly to those in need, more often than not. But this is simply not the case: logistics, taxes, staff employment, and other factors need to be taken into consideration—doing good isn’t free.

In the main, nonprofits are honest, their costs are kept to a minimum, and their staff are paid a lower than average wage when compared to the equivalent role in the corporate world. However, donors need to know that their investments are having a tangible effect and this is a key issue that blockchain can address.

Blockchain solution:

Similar to accountability, trust is achieved when funds are seen to be going where they are supposed to, and services are being provided. Blockchain presents itself as an almost infallible platform for tracking funds, services, and actions made by the nonprofit. It can help regulate and control the passage of finances, helping the organization show their funds truly go to those in need.

Issue: Anonymous donors

Not all transparency issues are negative, in fact, sometimes anonymity can be a good thing, especially when it comes to anonymous donors. From do-good philanthropists to those who may be persecuted for investing in certain nonprofits, anonymous donors come with a range of reasons why they wish to remain unknown.

Traditional funding methods make it difficult to maintain this anonymity as there’s always a financial trail somewhere, whereas blockchain presents the ultimate solution for remaining in the shadows.

Blockchain solution:

One of the benefits of blockchain is it allows anonymity while retaining trust and accountability. Transactions can be made using smart contracts which automatically trigger once certain conditions are fulfilled.

Issue: Geography

When tragedies happen, often they can be hundreds, if not thousands, of miles away from where a nonprofit is based or where their primary resources are. Getting resources to the right place at the right time can make all the difference in the world.

If traditional methods fail, blockchain can provide a surprisingly useful solution.

Blockchain solution:

It can be a challenge to get funds needed on location in enough time to prevent further damage. In this case, blockchain-based funding systems can instantly transport payments from one side of the world to the other in a matter of minutes.

Additionally, blockchain also serves as a reliable system to do so in case of a bank or national currency collapse as it retains a level of value (usually in comparison to the US dollar).

One successful example of this already in practice was the United Nations Food Programme who were able to provide aid to Syrian refugees through the Ethereum blockchain in May 2017.

Other blockchain solutions

Significant but not all-encompassing, these solutions may address the current problems faced by nonprofits, but they don’t come close to its full potential for humanity.

Identity rights

During war and displacement, establishing who is who can be impossible once the dust settles. But even without conflict, 25% of the global under-5 population remain without documentation. By implementing cost-effective blockchain solutions at birth, it becomes possible to give an identity where a person may otherwise be without one. This can act as a form of ID and help ensure no one falls between the crack when it comes to accessing services, upholding their rights, or engaging in education.

Property rights

Real estate is one of the world’s biggest industries, but in some countries, especially following a war, it can be difficult to say who the owner is. Blockchain solutions can help track the history of a property and detect discrepancies such as illegal land acquisition. This is already a reality. In 2017, the Bitfury Group successfully tested a program in the country of Georgia to monitor the sale and transfer of property rights.

Right to free speech

As much as we’d like to believe it, speech is almost never free. However, in some countries speaking your mind can cost you a whole lot more than a liability lawsuit. Blockchain offers solutions to encrypt communication and protect the rights of free speech without being at risk of repercussions.

UNICEF invests in blockchain

In January 2018, UNICEF (United Nations International Children’s Emergency Fund) announced its intention to invest $100,000 USD in blockchain startups through its innovation fund. The chosen innovators were Atix Labs, Onesmart, Prescrypto, Statwig, Utopixar, and W3 Engineers.

Let’s take a closer look at the services they are set to provide:

Atix Labs

An Argentinian blockchain platform developer, Atix Labs will focus on the democratization and traceability of funds, addressing issues of transparency and accountability. With a focus on ensuring funds raised on crowdfunding platforms get to where they’re supposed to, Atix Labs used smart contracts to facilitate the process and ensure the successful reception of the funds.

Onesmart

Based in Mexico, Onesmart seeks to address issues of corruption, transparency, and accountability, with a platform that tracks the implementation of state-delivered social services, and the accountability of how those resources are allocated.

Prescrypto

Another Mexican provider but with a very different approach, Prescrypto creates a platform for various medical providers—pharmacists, doctors, nurses, etc.—to be able to access a patient’s history so they can provide appropriate care. With a focus on electronic prescriptions, this solution addresses the issues of geography and connectivity between various agencies.

StaTwig

An Indian start-up using blockchain to increase transparency for logistics providers. Their aim is to help prevent corruption and ensure appropriate distribution by developing blockchain-based systems that track food and vaccine deliveries.

W3 Engineers

Headquartered in Bangladesh, W3 is developing a solution to provide communication access to remote areas with an open-source messaging service. Enabled by blockchain technology, the company’s solution helps connect refugees, aid workers, and NGOs providing communication and emergency broadcasting.

Utopixar

Founded in Tunisia, Utopixar uses blockchain to facilitate participative decision making, increase community cooperation, and empower young people. The technology works through a decentralized system where groups can come together and address social and environmental issues.

What to take away

Blockchain solutions for nonprofits are still in their infancy, but present fantastic potential to solve the critical issues facing nonprofits today—trust, accountability, geography, and corruption—and rebuild the faith of people investing in doing good.

Early solutions can prove expensive and confusing, but reliable providers can expand the possibilities of not-for-profit organizations in achieving their key objectives and truly making the world a better place.

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