The Promise of Blockchain for Nonprofits: Challenges and Hopes

Individuals and companies all over the world are increasingly excited about the opportunities provided by blockchain technology. They appreciate how it offers transparency about transactions, finalizes them efficiently and is cheaper than other ways to handle money, such as transfers. People also discuss how blockchain could be promising for the nonprofit sector. However, along with its probable benefits are challenges that must be overcome for blockchain to become widely adopted in the nonprofit realm.

Blockchain Gives Nonprofits New Ways of Interacting With Donors

According to a poll published in 2015, one-third of Americans felt nonprofits fell short concerning spending money wisely. The amount spent on administrative costs was another point brought up in the survey, and half the respondents said it was very important for them to know a charity spends a low amount on things like salaries and fundraising and gives as much money as possible to the people in need.

A charity in the United Kingdom called English Heritage hopes to help donors know precisely where their money goes with the help of blockchain technology.

It partnered with a platform called Giftcoin that allows seeing what happens to funds from the time they get donated to when charities spend them. There are reportedly other groups working with Giftcoin, too.

Giftcoin and similar platforms could increase donor trust and make them feel confident their funds are well used. Conversely, if a nonprofit’s current setup doesn’t allow for a substantial portion of the money to go to those who need it most, restructuring the organization to make improvements as well as communicating with donors about those changes could prove time-consuming and labor- intensive. However, it would likely be worthwhile in the end.

Embracing Blockchain Requires Willingness and Resources

Blockchain is like any emerging technology in that it requires board members to show enough interest in the tech to be willing to try it out with their organization. Similar to how nonprofits have the ability to choose between cloud-based and on-site hosting solutions, they now need to examine whether they have the resources to link in with existing blockchain platforms or create their own.

Willingness also needs to come from the countries around the world where people live and benefit from nonprofits. The cryptocurrency market and in turn, blockchain influences the global economy. However, even though cryptocurrencies are technically universal in that people can use them worldwide at any merchant accepting them, some countries have banned cryptocurrencies.

Most people immediately associate cryptocurrencies with blockchain, and for a good reason. Many of the places that don’t allow cryptocurrencies are developing countries, and perhaps some of the destinations where people could most benefit from nonprofit assistance. However, if governments don’t accept the technology, nonprofits hit roadblocks.

Organizations Must Take a Balanced Approach

Blockchain isn’t only worthwhile for tracking donations and letting people donate with cryptocurrencies. Several other interesting use cases exist, such as using blockchain to register people’s identities in Estonia or depending on it to reduce instances of forced labor imposed on migrant populations. The CryptoKitties game even auctioned off a virtual cat with proceeds going to charity.

Nonprofit organizations may indeed find blockchain technology empowers them to do things that aren’t otherwise possible. However, they also must be careful to evaluate all other possibilities and determine whether it’d be easier or less expensive to employ a non-blockchain solution. No option, no matter how high-tech, is a fix-all for everything. That’s why nonprofits need to weigh the pros and cons before considering adopting blockchain.

Blockchain Promotes Accountability

Besides the ways blockchain lets donors track the funds they give, it provides accountability in other ways. For example, if a global nonprofit hires a contractor to clean up an affected area after a disaster, blockchain could help the organization monitor the proceedings from afar. There are other efforts underway that could let villagers report things like oil spills and terrorism incidents via blockchain technology, enabling them to assume some accountability for their communities.

However, these programs need foundational components, such as internet access and sizeable segments of the population that have smartphones or other ways to utilize blockchain technology. As such, nonprofits should carry out investigations to determine the usability of technology in particular areas as a starting point.

Consider Blockchain With Reservations

The primary thing for nonprofits to remember is that blockchain could provide them with new ways to reach the people who most need help. However, it’s a technology that needs at least a basic existing infrastructure to work, plus the interest of nonprofit workers, citizens and nations at large to support the efforts required to make blockchain beneficial.

Blockchain isn’t suitable for all cases, but it could make a significant difference in others.