How Blockchain Technology Can Increase Transparency in Charities

Charities and Transparency: A Common Problem

In 2021, the Australian branch of the Red Cross received $90 million to aid the victims of the bushfires in New South Wales and Victoria. However, the organization faced criticism for its lack of transparency when it was revealed that only one-third of the funds would be immediately distributed and that it could take up to three years to distribute the total amount. This is just one example of the challenges charities face in managing and distributing funds.

The Benefits of Blockchain for Charities

Blockchain technology offers tangible benefits for both donors and charities. It provides greater accountability and transparency, allowing donors to track their donations and see how they are being used. Blockchain also ensures the immutability of financial records and donation histories, making them safe from alteration. Smart contracts, another aspect of blockchain technology, can automate processes such as fund distribution and verification, further enhancing transparency and reducing the risk of misusing funds.

Real-Life Examples: Charities Using Blockchain

Several charities have already embraced blockchain technology to increase transparency. The United Nations World Food Programme used blockchain to provide food assistance to Syrian refugees in Jordan and Yemen, ensuring aid reached those in need while minimizing the risk of diversion or fraud. Binance launched the Ukraine Emergency Relief Fund, a cryptocurrency-focused crowdfunding platform, to provide emergency relief efforts and logistical support for refugees. Smaller charities like GiveDirectly have also adopted blockchain technology to record and verify transactions.

Considerations for Charities Adopting Blockchain

Charities considering blockchain integration should establish clear objectives, select the most suitable blockchain platform, and ensure they have the technical readiness to manage cryptocurrency wallets and other blockchain-related infrastructures. Good security practices, data accuracy, and adherence to data protection regulations are also crucial. Charities should plan for scalability and assess whether their community is ready to accept blockchain platforms for charitable purposes.

Combining Blockchain with Organizational Processes

While blockchain technology can help track the flow of funds, it should be combined with additional organizational processes to ensure effective use of charitable donations. Independent audits play a vital role in ensuring transparency and objective evaluation. Charities should also provide comprehensive reports that detail their activities and financial information, including the allocation of funds and money raised, which can be gathered from the blockchain.

Conclusion: A Comprehensive Approach to Transparency

Blockchain technology holds great potential for increasing transparency in charities, but it is not a standalone solution. It should be combined with organizational processes, independent audits, and comprehensive reporting to ensure the full potential of blockchain is realized. By adopting blockchain technology and implementing a well-planned approach, charities can build trust, enhance accountability, and provide donors with the transparency they seek.