Blockchain technology could revolutionise charitable giving – report

16 December 2015

Everyday appliances like washing machines could play a significant role in the future of charitable giving as smart technology and online transactions become more prevalent, a new report argues.

The paper, Giving Unchained – Philanthropy and the Blockchain, published today (Wednesday) by the Charities Aid Foundation, explores the implications blockchain technology may have for how charities fundraise and operate in future.

This includes setting out how ‘smart’ household appliances connected via the blockchain could not only generate money for their owners, but even help them decide which good causes to support with it.

The Blockchain is a shared, decentralised public record which makes virtual currencies like Bitcoin possible by providing a record of all transactions and determining who owns what at any given time. It is owned and maintained by all users of the system, who contribute some of their computers’ processing power to perform calculations, thus doing away with the need for expensive third parties when making transactions.

While the technology is still in its infancy, a number of high profile financial services firms are exploring ways in which it could increase the efficiency and security of online transactions. Earlier this year, the Bank of England’s chief economist said that blockchain-based digital currency issued by central banks could one day replace cash. And as greater numbers of appliances become ‘smart’ – connected online – it is envisaged that they could also become part of the blockchain, contributing their processing power in exchange for money.

Today’s report is believed to be the first to explore what the implications may be for charitable giving. It follows a CAF paper from earlier this year on cryptocurrency – Giving a Bit (Coin) – which set out how virtual currencies could be the answer to charity transparency.

The latest report suggests that blockchain could pave the way for a revolution in how people give to charities and how charities go about addressing social problems.

Blockchain philanthropy image

Rhodri Davies, author of the report and leader of the Giving Thought policy programme at CAF said:

“While still very much in its infancy, this technology has the potential to revolutionise the way charities work.

“Banks and financial organisations are already actively exploring the very large potential of blockchain to change the way they do business, and overhaul how people and markets interact in future. Charities and non-profit organisations will need to be alive to the huge implications this may have for fundamentally changing the nature of social action too.

“The answer to some of the biggest challenges charities face today – raising money, increasing transparency and trust and improving their effectiveness in supporting their beneficiaries – could lie in a technology which is likely to become increasingly mainstream in the not-too-distant future.

“While a world in which washing machines may play a key role in charitable giving may seem like science fiction to some, many of these technologies already exist.

“As this paper intends to show, Blockchain poses some significant challenges, but also presents some huge opportunities for how charities will operate and interact with their supporters and their beneficiaries.”

Download the report

Some of the opportunities the report suggests blockchain will bring for charities include:

  • Increasing transparency and openness, while reducing costs. Any user would be able to view details of any transaction. Because the blockchain is owned and maintained by all users, it removes the need for third parties and the transaction costs that come with them.
  • Smart contracts for giving. Smart contracts are computer protocols underpinned by blockchain technology. While traditional contracts require a third party to manage them and execute terms, smart contracts are designed to be independent and self-executing – for instance by triggering payments when certain conditions are met. This could be a significant boost for international charities working in countries where reliable third parties are difficult to come by. Such contracts could also be used by businesses to fulfil pledges on their charitable contributions.
  • An ‘internet of things’ which automates philanthropy. With everyday household appliances like energy meters, fridges, toasters and washing machines increasing being connected to the internet, blockchain technology could provide a mechanism to allow these objects to connect seamlessly to each other and to users. They would be able to sell spare processing capacity to the blockchain in exchange for money. Using smart contracts, they could even decide how to spend the money, and which charities to give to.
  • Opening up news ways for people to give. Experts believe that blockchain technology could lead to a fundamental rethink of how we think about asset ownership and lead to a growing ‘sharing economy’ as typified by services like ZipCar, Uber and AirBnB. Donations of spare physical capacity could provide new ways of addressing social problems. For example, smart buildings could be used to create new systems for identifying and allocating unused accommodation, which could be used to address the challenge of rough sleeping.

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