How The Blockchain Can Improve The World of Charitable Giving
While we do our good works let us not forget that the real solution lies in a world in which charity will have become unnecessary.” ― Chinua Achebe, Anthills of the Savannah
This article discusses the application of the Blockchain to facilitate transfer of resources by disinter-mediation and direct delivery to the recipients who need it the most. While most charities are run efficiently, there could be scope for improvement in deployment of funds for a particular cause or to reduce spending on areas that do not benefit the recipients directly. It is no surprise that the Blockchain can help cross-border transfers of currency with virtually zero marginal cost. However, one of the most human applications of Blockchain can be the tracking, delivery and recording of funds donated for charitable purposes. Of course, this does not obviate the need for basic infrastructure in the most deprived regions of the world. However, as mobile phone penetration increases dramatically, digital wallets can help transfer money almost instantaneously and more importantly to the people who need the funds to keep living.
A Thanksgiving Dinner Table Discussion
This Thursday (November 23rd 2017), as every year, millions will gather at dinner tables and at homes of their families and friends to celebrate Thanksgiving. Last year, I remember my visit as a guest to a friend’s Thanksgiving celebration. I discovered vegetarian Turkey also known as “tofurkey”. More importantly, I felt loved, wanted and well fed. So much so that, my mind couldn’t stop wandering to all the people in the world that were deprived of the comfort of a home and the warmth of food in their stomach. Call it Karma or anything else but I think a lot of people have had similar thoughts on Thanksgiving.
People around me know me as a person who doesn’t do well to hide his emotions. At the dinner table, my friend asked me “what stops you from being charitable?” .
At first, I replied I believed charity begins at home. Unless I have enough money to feel financially secure, I wouldn’t have the courage to give. So, I told him I wished I would earn enough wealth to be able to make a lasting impact such as building a small school that will educate millions of children in the rural areas of India. I am particularly passionate about educating the girl child because women can unleash another tidal wave of economic development that would boost GDP and overall wealth in the country. He reminded me somewhat using the same words Sir John Low, Chief Executive, Charities Aid Foundation used in the CAF World Giving Index Report, 2017:
“…that giving is about spirit and inner motivation, not about financial means”
Next, I continued, I feel as empathetic as every loving human would at the sight of the homeless and scantily clad humans on the street begging for alms. However, I hoped there was a way I can teach them how to earn instead of offering a band-aid and a short term fix. Also, I couldn’t be certain that my money would be well spent. Magnify these feeling a thousand times and you realize the problem with charitable giving.
Granted that certain expenses are unavoidable but the lack of visibility and better governance deters many donors such as myself from donating more openly.
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Global Giving Index
Although many projections show the world growing at 3.8% to 4%, the World Bank titled it’s growth projections for next year “A Fragile Recovery” and projects global economy to grow 0.2% from 2.7% in 2017 to 2.9% in 2018–19.
It doesn’t surprise me that the Charitable Aid Foundation (CAF) reports Africa as the only continent that has increased giving during the year 2016. All other countries have reduced charitable giving.
CAF Global Giving Index Report, September 2017
CAF measures charitable giving under three different classifications: Helping A Stranger, Donating Money and Volunteering Time:
CAF Global Giving Index Report, September 2017
Blockchains on Mobile Devices: A Shape of Things To Come
If Blockchains are to become ubiquitous, one of the first order of business is to improve the user experience of Decentralized Applications (DApps) so that the user enjoys the application just like an app from App Store or Play Store. The design has to be so seamless that the mobile phone user doesn’t know that smart contracts, cryptocurrency conversion protocols and ultimately the blockchain is powering
How Will It Work?
In addition to the existing World Wide Web and the internet of things, a whole new internet is taking shape on a general purpose Blockchain (operating system) called Ethereum. Ethereum is a giant web of interconnected computers around the world. The owners of those computers have essentially loaned out the excess processing power of their machines to the network creating a worldwide web of interconnected machines running the Ethereum software to become part of the network.
On top of this operating system, developers are building a myriad of decentralized applications (Dapps for short). These range from prediction markets to hedge funds to virtually any project that can be developed on the Ethereum Blockchain. The money for most of these projects is raised by? You guessed it right- ICO’s.
Blockchains are envisioned as the building blocks of the future internet. They are truly recording (accounting) instruments that provide one single version of the truth.
Imagine if there was a user friendly interface that could allow you to rank order your preferred charities for donation of time, money or effort.
Then, you could make a payment through your digital wallet on your mobile phone or any other device (AR/VR) that gets recorded on a global blockchain and gets transmitted to the charities of choice which then records how it allocates the donation and provides you with a report on how your money was spent. Every year, smart contracts could also allocate money to the most successful charities or even suggest changes to the donors.
If the end recipient has a digital wallet, the funds can be directly deposited to the respective digital wallet allowing complete transparency at almost zero cost. I say almost zero cost because there are no free lunches in this world. The Blockchain consumes enormous amounts of energy and computing power which is compensated by granting tokens (Ether) in this case to the owners of the computing power.
Illustrative Process Flow
Later, the charity could also use Virtual Reality, Augmented Reality or even simple videoconferencing to show you the smile you put on the recipients face. Startups such as Sirin Labs in Israel are in the process of developing a smartphone which will have a cold storage digital wallet. Cold storage wallets are offline wallets that are not connected to the worldwide Blockchain. Today, storing your Bitcoin private key in a USB drive or writing it down on a piece of paper is also known as a cold storage wallet which is off the grid.
The next step could be the devices on the Internet of Things (IoT) receiving tokens / money for loaning out their computing power and donating the money to charities in what Rhodri Davies of the CAF calls “AI Charity”
Thus, as an overview, charitable organizations and donors will benefit from:
- Possible disinter-mediation of Charity
- Radical transparency on how the donor funds are getting utilized
- Lower transaction costs for global money transfers
- Expansion of donor base to Smart Devices connected over the Internet of Things (IoT)
- Ultimately, the Internet of Everything which includes IoT and the Internet of Value will enable additional types of resources (in addition to time and money) to be donated to charity.
Waves and Uneven Disruption
The impact of emerging technologies (including quantum computing and resultant cryptography, AI, Blockchains, Decentralized Apps, VR/AR ) is all pervasive. Although stark, these words by Stewart Brand are telling:
Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road.
What this means is that every entity will be impacted by rapid changes and keeping up with these changes will be key to survival. While the world of charitable giving will not be any exception, the extent of disassembly of existing mechanisms for donation, transparency and administration of charities is already being contemplated.
There are many places on earth where basic food,water and electricity need to be provided even before we think of mobile phones holding digital wallets. The first order of business in these places would be the creation of basic infrastructure. It could very well be that the roll out of Blockchains may be simultaneous and these places could leapfrog to a world of giving powered by smart contracts. My only point is that the changes will come in waves and will be spread unevenly across the world. It also means that the second movers could learn and improvise on the first mover’s advantage.
However, as you think about the immediate future this holiday season, remember:
Technology has no power to make any difference in people’s lives unless we open our hearts to others.