The blockchain refers to a public ledger technology in which each cryptocurrency transaction is digitally signed to confirm its originality and ensure that the information therein is not tampered with. As such, the operations recorded on the blockchain and the ledger itself are considered to be of the highest level of integrity.
In the early days of cryptocurrency, people thought that blockchain was all about bitcoin. Today, it is fast becoming evident that the technology is about more than just bitcoin merchant token or digital currencies for that matter. But while blockchain has the potential to revolutionize nearly every industry, nowhere will its impact be more pronounced than in charitable giving.
For charity organizations, blockchain presents a rare window for transparency and honesty, which could help make them more trustworthy in the eyes of backers. Some of the problems that nonprofits grapple with involve lack of accountability for how money is spent and transparency. Donors are sometimes reluctant to give because they cannot be sure where their funds are going to or who they are helping with their donation. Over time, such concerns can cause them to become disenchanted.
This makes it hard for charity organizations to attract sponsors or retain them. However, blockchain is fast raising trust in the system by showing philanthropists where their money is going. The technology achieves this by making the system wholly transparent and information, easily accessible. Here’s how blockchain enhances transparency and trust in charities:
- Funds go directly to the cause donors are contributing towards. Thanks to blockchain technology, donations need not pass through intermediaries any more. Instead, they go straight to the recipients and the companies that are in a position to assist them. This help ensures that there’s less room for fraud or financial leakage in the system and that monies aren’t going into the wrong pockets. The result is that donors feel more encouraged to give.
- All transactions are traceable. Distributed ledgers can be used to track transactions. Such improved traceability makes it easier to monitor how funds are being spent. As a result, donors can see even from a distance, how their funds ended up helping the people that charity foundations claim to assist.
- Blockchain makes it easier to tell well-intentioned organizations apart from fraudulent ones. Since donations made using cryptocurrencies can be traced, it becomes easier for donors to identify the organizations that are furthering their cause from those that only seek to enrich a few individuals. This way, they get to know the right charities to work with.
Overall, blockchain and cryptocurrency will help ensure efficiency and give backers confidence that their donation is being put toward the cause that they support.