Bitcoin is everywhere and digital currencies are demonstrating a spectacular rise in value. Blockchain technology, that’s at the heart of cryptocurrencies, may have the potential to drive profound social impact and transform the social sector. Let’s have a closer look at decentralized technologies’ potential to transform philanthropy and international aid along the way.
Cryptocurrencies are shaped by the groundbreaking blockchain technology. “This technology is exciting, because the transparency and security of data stored in a blockchain facilitates trust and efficiency between users in an unprecedented way. Though many people associate blockchain technology solely with cryptocurrency transactions, it can be used to record any type of exchange,” David Lehr and Paul Lamb write in their article in the Stanford Social Innovation Review.
They go on to pinpoint blockchain technology’s promise by offering numbers. They say, “In terms of its development, blockchain is in its early days. Only 0.5 percent of the world’s population is using blockchain, while more than 50 percent of the population has access to the Internet. And much like the Internet, we expect to see an explosion of users and usages over time.”
Advancing aid transparency
Although in its early days, the use case of philanthropy and international aid proves to be an interesting one. The technology offers donors the opportunity to trace transactions and monitor how they are spent. As a result, it has incited a movement for greater transparency in aid.
“For example, the BitGive Foundation has launched an initiative called GiveTrack, which allows bitcoin donors and the public ‘to trace nonprofit transactions on a public platform in real time to see how funds are spent, ensure they reach their final destination, and track the results generated from contributions’,” Lehr and Lamb write.
Additionally, the United Nations World Food Program (WFP) has conducted another experiment in aid transparency. Lehr and Lamb: “[They provided] Syrian refugees based in Jordan with digital currency vouchers to trade at selected markets. WFP used the platform to successfully transfer $1.4 million to more than 10,000 people, eliminating the dangers of carrying cash, and gave the organization a more effective and less expensive method for distributing and tracking payments.”
“Blockchain technology could help remake the field and provide powerful new benefits to both organizations in the social sector and their beneficiaries” – David Lehr and Paul Lamb in the Stanford Social Innovation Review
A young technology
These are just two promising applications of blockchain technology in the social sector, and there’s many more. They carry the potential to put the sector on its head. Nonetheless, despite the promising nature of blockchain, it is still a young technology and it presents a number of challenges.
The most prominent one, Lehr and Lamb describe as follows, “[T]he application of blockchain to social challenges is occasionally over-hyped, and solutions are sometimes chasing problems, with technologists rather than sector representatives driving development.”
They add, “As a result, social impact organizations and those they serve are sometimes taking a back seat in determining the relevancy and appropriate application of the technology. Even when the social sector takes the lead, they may not have the resources or technical skills to bring their ideas to fruition.”
Blockchain technology: what’s next?
We would be wise not to get too wound up by the hype, Lehr and Lamb advise. Nonetheless, “NGOs and philanthropies should begin learning more about blockchain’s unique capabilities and help shape the field. There are many (…) potential opportunities (…), including the use of blockchain for impact monitoring and impact measurement.”
“We already see significant investment of time and resources by a wide range of organizations. These include the Bill and Melinda Gates Foundation, Unicef, the World Bank, private companies like Consensys, and collaboratives like the Blockchain for Social Impact Coalition. The combination of large-scale interest and investment will drive further development and innovation in the sector,” they say.
They add, expectantly, “These applications and others could help remake the field and provide powerful new benefits to both organizations in the social sector and their beneficiaries.”
David Lehr and Paul Lamb’s full article, Digital currencies and blockchain in the social sector: How decentralized technologies are transforming philanthropy and NGO work, is available at the Stanford Social Innovation Review.
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