Recently there has been quiet murmurings within the charity sector about blockchain technology and the benefits it can bring. Although charity professionals are aware of the technology, there doesn’t seem to be enough practical information about how blockchain can be used…
Blockchain is the technology behind cryptocurrency – the most famous being Bitcoin. Blockchain is a constantly growing ledger of information maintained by all users on the network rather than one entity. As a result of this, information cannot be manipulated by one person, hence why security is seen as one of the technology’s key traits.
1. Accepting cryptocurrency donations
Most people are much more familiar with Bitcoin than blockchain and so one of the most obvious use cases for blockchain is for charities to accept cryptocurrency donations. It’s already fast becoming the norm to use less conventional cashless methods of giving. For example, the Royal British Legion has found great success with contactless payments for its Poppy Appeal.
Many people are now looking to use cryptocurrencies for charitable causes. A few months ago, the Pineapple Fund was set up, with the goal of donating $86 million’s worth of Bitcoin to charitable causes. So far, almost $28 million has been donated to organisations with very generous donations to charities such as the Water Project and Electronic Frontier Foundation.
To open up your charity to Bitcoin donations, all that is necessary from you is to set up a Bitcoin wallet online. For other cryptocurrencies, it may be easier to work with blockchain platforms built specifically for charities.
2. Offering transparency around donation expenditure
Blockchain’s record keeping feature means that the journey of every donation can be tracked, as it documents when donations are spent and what it’s being spent on. It’s an excellent way to tackle growing cynicism around charity expenditure. The Charity Commission recently found that young people aged 18-24 are likely to be more careful about charitable giving, carrying out their own research before they donate. In response to this trend, it was suggested that charities could encourage younger generations to donate by being more transparent about how their donation is spent.
Blockchain platforms are being created specifically for the charity sector and have these benefits implemented. One way to engage with donors further is by keeping them updated on the impact of their donations.
A Giftcoin survey of more than 2,000 UK respondents found the option to receive notifications was particularly popular for millennials; 70% wanted this level of engagement, compared to 52% of the overall population.
Getting notifications promotes a positive feedback loop where donors feel like they are making a real difference to the charity’s cause, and as such, are more likely to donate again in the future and donate more. Implementing these kinds of features will be especially important for charities to adapt to the needs of later generations.
With the transparency offered by blockchain, the public confidence in charities can be made stronger than ever before. Charities of all sizes can benefit from this transparency. Some people might be more cynical about giving money to small, unknown charities while other people might be distrustful about big charities and money getting lost in overhead costs.
One thing charities will need to be cautious about however, is that once blockchain is implemented, spending will be available for the public to see. Charities should be wary about the kinds of promises they make. If a charity announces that they will spend an explicit amount of money on something, this figure needs to be 100% accurate, or they could face a lot of potential public backlash.
3. Lowering transaction costs
Crowdfunding platforms have grown in popularity over the past few years and while it’s great that people can access charitable causes on different platforms, one big downside is that they also come with high transaction costs.
Sites like JustGiving charge a whopping 5% for transaction costs, as well as credit card costs on top of this. To put this into perspective, following the fire at Grenfell Tower and the London and Manchester attacks, over £7.5 million was raised for these causes. With JustGiving’s high rates, this came to £390,000 taken in fees.
Naturally, it’s to the benefit of the charity and the donors that more of the money can go towards the charity’s cause. By lowering transaction costs, a greater proportion of the donations can go towards doing good. Be mindful that these costs will vary depending on the blockchain platform, so it is worth taking your time to research your options.
4. Donating more directly
One reason for the popularity of crowdfunding platforms is that donors have the choice of donating directly to a specific appeal. With blockchain’s tracking system, charities can offer donors the choice to donate to specific causes within their organisation. Giftcoin's survey found that 69% of consumers would like to have this option.
If there’s a particular aspect of your charity that donors are especially passionate about, then using blockchain may be a way that your charity can better appeal to the needs of prospective donors.
How to get involved
There is no doubt that blockchain technology has so much to bring to charities, and can potentially change the way charities are run forever. But blockchain is also a very new technology and it’s likely that many are unsure about how to implement it or lack the technical expertise to do so.
For a charity to develop a blockchain platform from scratch, they would need to hire blockchain developers and building the platform would be a lengthy process, hence why collaborating with blockchain platforms, that are custom built for the needs of charities, is an option worth considering.
Although these platforms are still in development, there are some charities that are already looking to use blockchain. For example, Giftcoin (one such platform) has a few charities such as Ourmala, Enhance the UK, Grief Encounters, Best Beginnings and Scotty’s Little Soldiers that are already on board to use the platform. However, make sure you do your research on what different platforms can offer, as features and costs will vary.
One last important thing to note is that it’s common for charities to be wary about investing in a new and “unknown” technology. There is pressure to prove to the public that they are using money effectively and wisely. This is why it’ll be especially important to ensure that not only organisation is informed about the applications for blockchain, but your donors are too.
Alex Howard is Co-Founder of Giftcoin