Transparency

You ever wonder how much of a donation actually goes to the people who need it? Websites like Charity Navigator and Charity Watch rank charities so we can see how much of our donation goes towards the cause, and how much benefits the administration of the charity. Some charity executives earn millions a year in salary.

With blockchain, it is possible to donate directly to an organization, and to track that donation to see how much of it directly helps the cause. Transparency allows a donation to be tracked directly to the recipient.

This not only saves the charity overhead costs, it builds up trust from donors. If a donor sees that 80% of their donation went to the charity organization executives, they will most likely donate to a different charity. Likewise, an organization will try to reduce administration costs such as executive salaries if they know the donors have complete visibility into the effect of their donations.

Streamlining

When making a donation, a portion of the donation typically goes to an intermediary to process the transaction, such as Western Union or a credit card company. With blockchain, the donation can go directly to the charity, without using this intermediary.

There is a minimal transaction cost to process a transaction using a blockchain application. As such, more of the donation goes to those who need it. One of the first blockchain applications I have used is Sean’s Outpost, which provides meals to the homeless in Florida (www.seansoutpost.com/).

Privacy

Sometimes a donor does not want to be recognized for their donation. These anonymous donations are easy to make in blockchain using public keys or addresses. The donation can go to those who need it, and the donor does not need to be publicly recognized.

A challenge here, though, is the potential for conflicts of interest that go unchecked with blockchain. For example, a construction company uses blockchain to make a large donation to a campaign fund, with the hope that the politician will favor them with construction contracts.

Permanence

Every year our family accumulates a small stack of paper—letters and receipts from charities acknowledging our donations. Of course, keeping track of all these papers is time-consuming, and keeping such records manually is an error-prone process. It takes space to save the papers, or time to scan each one.

A blockchain ledger can provide an immutable record of the donation. As such, if a donor is audited, he or she can use the blockchain ledger to prove receipt of the donation. Likewise, a tax authority such as the IRS can use the ledger to prove a donation was not made.

Distribution

Smart contracts in blockchain can be used to initiate micro-donations to charities. A micro-donation is a very small donation—it could be just pennies or dimes. However, every donation helps; lots of micro-donations can have a substantial impact.

A micro-donation today needs to be made in person with cash, in order to avoid credit card and processing fees, which could reduce the value of a micro-donation to close to zero. The fire service volunteers who wait at traffic lights with buckets for coins are examples of people collecting micro-donations in person.

A blockchain application could make it much easier to make and accept these micro-donations. Smart contracts can be used to initiate micro-donations for events which may not traditionally be associated with a donation, such as:

• An employee quits smoking, and the employer’s wellness center made a donation
• For every book that sells, the publisher will donate a quarter to a particular charity
• Whenever the school basketball team wins, parents donate to the Parent Teacher Organization (PTO)

I took a training class on a blockchain technology, and after completing it, a small donation was made by the vendor to a charity of my choice. It was a simple act that made me feel good, and probably boosted the vendor’s public image as well.