There's a lot going on in philanthropy regarding newer technologies such as blockchain and the use of cryptocurrencies like Bitcoin. While their practical application may not be quite ready for many small and medium-sized nonprofits and NGOs — it is fairly easy now to get set up to accept bitcoins on nonprofit websites. Much of the field is still largely in an experimentation or proof-of-concept phase.
Remind Me — What Is Blockchain Again?
Blockchain is a very clever technology that first appeared in 2008 via a white paper by the mysterious Satoshi Nakamoto, who may or may not be a real person. Blockchain was conceived as a way to do peer-to-peer transactions over the Internet. It is essentially a distributed ledger or database chain of transactions that is owned and maintained by all users of the system. It is not privately owned or operated by anyone.
The technology records a digital signature for each entry and has an encrypted and unchangeable hash number of each transaction in a continuous chain. Nothing can be altered once it's in the ledger. Since its inception, there have been a surprising number of uses for blockchain technology. Most notably, it has become the basis for the cryptocurrency Bitcoin, which is a nonprofit currency not linked to any government fiat currency or central bank.
The Current State of Blockchain in Philanthropy
Researchers at Stanford University have been compiling a Master List of Blockchain for Social Good Projects that is now 240 entries long. Lots of the projects involve international charitable donations. Motherboard reported five years ago that "the ultimate philanthropic potential of digital currency may lie in the developing world, where high exchange rates, bank fees and inflation can dilute the buying power of international donors. Taking and transferring small donations without losing too much to PayPal or credit card transaction fees is a big potential benefit of bitcoin donations."
This seems to be holding true. Sheila Warren, portfolio head for blockchain and distributed ledger technology at the World Economic Forum, describes the current situation:
"We're already seeing increased liquidity in emerging economies as a result of cryptocurrency. For example, the startup BitPesa has expanded capital markets and currency trading across the African continent using bitcoin as an intermediary. It's also telling that the Libra Association, initiated by Facebook, has NGOs as participants; in fact one of the stated goals of the association is to benefit the unbanked.
"As a final example, central banks have already been experimenting with this technology to reduce friction in their payments systems. I think it's just a matter of time before this technology becomes more widespread, if not commonplace, including in the philanthropic arena. The opportunities to reduce friction, whether via engendering liquidity or mitigating administrative costs, obviously exist in philanthropy."
Examples of Philanthropic Blockchain Projects
Below are some of the more prominent philanthropic blockchain-based projects. What they have in common is that most of them are international crowdfunding platforms, and many also use blockchain smart contracts. These are lines of code that are stored on a blockchain and automatically execute when certain conditions are met. In most cases, charities seeking funding must provide evidence of achieving specific performance goals before the funding is released to them.
GiveTrack is a donation platform for nonprofits to provide transparency and accountability to donors by sharing financial information and direct project results in real time. It is a project of the nonprofit BitGive Foundation, which was founded in 2013. The GiveTrack crowdfunding platform is built on Bitcoin and blockchain technology. They are currently focusing their support on select charitable projects that are chosen by BitGive without solicitation.
For projects that are not fully funded, donors are notified and given an opportunity to reassign their donation to another project or receive a refund. Donating is via an integration with Uphold! It is a cloud-based financial services platform that enables anyone to convert and transact in any form of money or commodity. See a list of GiveTrack charity campaigns.
Alice is a social funding and impact management platform built on the Ethereum blockchain. They incentivize charities, NGOs, and social enterprises to run projects transparently, by making sure that they get paid more when they achieve their goals.
The performance of each project is publicly available, making it easier for funders to identify and help scale social projects that actually work. Shared impact data also helps reduce due diligence and reporting costs and helps social organizations collaborate more effectively.
Swiss-based charity AIDChain is a giving platform that charities can use to promote projects and collect and manage donations. AIDChain has developed a payment gateway, AidPay, to allow charities to accept cryptocurrency donations on their own websites. They have also created AidCoin, their own cryptocurrency, to drive AIDPay and the AIDChain ecosystem. World Wildlife Fund Italy uses this funding platform.
Accountability is being tackled by the IXO Foundation at scale. Their IXO protocol collects, measures, and verifies impact delivery in pursuit of the UN's 17 Sustainable Development Goals. The technology provides "proof of impact" for work and goals achieved. Nonprofits can more objectively demonstrate performance, and foundations will make an evolutionary leap by having better data for their measurement and evaluation.
Givv.io and Amply
Givv is an apparently failed blockchain venture that attempted to direct all revenues to nonprofit organizations to advance the UN Sustainable Development Goals. The project encouraged individuals, universities, and corporations to use their idle computer capacity to generate funds and support any cause that mattered to them. When we tried to contact them, the website had been taken down.
The Amply platform was a UNICEF Innovation Fund for early childhood development project that used the IXO protocol to track attendance at preschools in South Africa, for a national government subsidy scheme. That website has also been taken down.
TechSoup itself is working to understand how blockchain technology might increase the effectiveness of our own work. We are particularly interested in exploring its usage for our charity validation work worldwide. The technology would allow us to document our verification steps so that anyone can see our proof of effort. Our Validation Services customers could use the blockchain to check on the validation status of a particular nonprofit or NGO anywhere in the world.
How Big Is Bitcoin Now?
Alex Lielacher of Bitcoin Market Journal estimates that 5 percent of Americans now use Bitcoin. That comes out to 16.5 million people. He estimates that 25 million people use it globally. There are over 2,000 cryptocurrencies now, but only a few have wide acceptance and have a net worth above $1 million. They include Bitcoin and Bitcoin Cash, Litecoin, IOTA, and Ethereum.
Bitcoin is of course the big player in the market today. It was the first major usable cryptocurrency and is the most valuable one. Each bitcoin is currently worth around $10,000, but their value this year has fluctuated from around $3,000 up to $14,000. Transactions can be made in fractions of a bitcoin.
Accepting Bitcoin Donations Directly
A few years ago, a number of large charities started experimenting with accepting bitcoin donations. Since then, the effort around this seems to have cooled off. Organizations that experimented with this include American Red Cross, Wikipedia, United Way, Save the Children, Team Rubicon USA Tornado Relief, and Khan Academy, among many others.
It's actually pretty easy to start accepting bitcoin donations on your website. Our fairly recent article, How to Set Up Bitcoin for Your Nonprofit, describes how to do it. Essentially your charity first sets up a bitcoin account with a service like Bitpay or GoCoin or Coinbase that provides you with a digital wallet.
You can then solicit bitcoin donations on your website by providing your Bitcoin address or QR code to prospective donors. Bitpay lists some services that can enable bitcoin donations on your site.
The Current State of Blockchain and Bitcoin in Philanthropy
While the time is not quite ripe for most small and medium-sized nonprofits to get onto the blockchain and Bitcoin bandwagon, it is something we recommend that you keep an eye on. Over 16 million Americans use Bitcoin now, and despite its volatility, they seem to like that it allows them to pay for things anonymously like they can with cash. We also wouldn't be surprised to find that foundations start to use blockchain-style smart contracts and IXO Foundation–style proof-of-impact tools in their grantmaking in the fairly near future.