Big-Time Philanthropists Explore Blockchain’s Potential For Good
02.01.2019

This story is part of BREAKER’s Social Good Week, a series looking at ways blockchain technology can engineer progress and help humanity. Dahna Goldstein is a Bretton Woods II fellow at New America, where she works on blockchain-for-social-good projects.

Although many people see blockchain as a way to generate wealth, many are also exploring the technology to give money away. From cryptocurrency donations to blockchain-enabled tools that help the world’s most disadvantaged people, blockchain has potential to have significant impact.

Newly minted cryptocurrency millionaires have followed in the footsteps of mega-philanthropists like Andrew Carnegie and Bill Gates, though often with a twist. Given the pseudonymity provided by bitcoin, some are opting to remain as mysterious as Satoshi Nakamoto, with one philanthropist referring to themselves only as “Pine” and donating over $55M (5,104 BTC at the time) to 60 charities. Other individuals are converting some of their accumulated crypto wealth to fiat and donating it to nonprofits, or donating cryptocurrencies directly to nonprofits that are equipped to receive crypto donations. Blockchain companies are getting directly involved in philanthropy. For example, Ripple donated the equivalent of $29 million in XRP in May 2018 to fund every projectover 35,000 of themlisted on DonorsChoose, a site that helps teachers raise funds they need for their classrooms.

But perhaps more interesting than high-profile infusions of crypto capital into the social good sector is what the technology itself enables, both for the mechanics of philanthropy and for the issues philanthropy is trying to address.

International philanthropic dollars flow more easily to large or trusted organizations, even though grassroots organizations may provide better results. 

Philanthropy, particularly funds donated by foundations and governments, has long been plagued by a lack of transparency and trust. Without clear ways to verify that money has being put to good use, many donors that support international organizations give only to well-known organizations or to large, trusted groups that provide services abroad, even though grassroots civil society organizations may provide better results.

This leads to two problems: international philanthropic dollars flow more easily to large or trusted groups, even though grassroots organizations may provide better results, and nonprofits spend inordinate amounts of time and energy on paperwork to reassure funders their money is being put to good usepaperwork that is frequently duplicative, and takes resources that could otherwise be spent delivering critical programs.

Related: “Don’t Be Evil” Isn’t Enough. Time For “Do Good”

Blockchain has the potential to address both of those issues. Near-real-time visibility into transactions, made possible by blockchain, can help increase donor confidence in how funds are spent, helping to redirect capital to grassroots organizations that might otherwise be considered risky philanthropic investments because they are lesser-known quantities. That same transparency can help reduce redundant paperwork by tracking both the uses of philanthropic funds and the impact achieved with those funds on a blockchain, thereby reducing the transaction costs of grant funding, and enabling more funds to be directed to program and service delivery.

In addition to potentially supporting the mechanics of philanthropy, blockchain is already being used to pilot solutions that address some of the critical issues that philanthropic funds currently support, from facilitating renewable energy microgrids in Brooklyn, to helping farmers in Kenya access capital if adverse weather conditions ruin their crops, to the UN World Food Program’s frequently-cited (and sometimes criticized) Building Blocks project that is using blockchain to significantly reduce bank fees associated with providing capital for Syrian refugees in Jordan.

Through both traditional philanthropyalbeit with a different type of currencyand leveraging the unique attributes of the technology to both facilitate philanthropy and deliver critical services, blockchain is already starting to make a difference.

The real impact of blockchain technology may lie in restoring trust.

To help organizations considering blockchain projects for social impact, New America’s Blockchain Trust Accelerator recently released a groundbreaking Blueprint for Blockchain and Social Innovation. The report is designed to provide a technical overview of blockchain for an audience not steeped in nascent frontier technology, and explore applications that increase security, accountability, and efficiency at every level of social infrastructure. The guide covers a broad range of structural, procedural, and technical questions that simplify the process for organizations considering whether and how to apply blockchain in their work.

Main takeaways from the guide include how to approach whether blockchain is the best solution to a challenge, and encourages organizations to consider opportunities to collaborate with partners on a blockchain solution. In addition, since data on a blockchain lives forever, organizations considering blockchain solutions should spend significant time preparing their data and ensuring high data quality before moving to the design stages of a blockchain solution. The Blueprint provides a full checklist for deploying a blockchain-powered solution.

While it’s still early days for social impact blockchain projects, initial projects demonstrate that the potential for blockchain in social impact lies beyond providing additional philanthropic resources to organizations working on social and environmental issues. The real impact of blockchain technology may lie in restoring trust in systems and powering social impact solutions.

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