By George Ward
Understanding Transparency
Transparency is like a guiding light in a world of information, revealing the truth behind the scenes. Imagine attempting to solve a puzzle with missing pieces; that is how life feels without transparency.
Without it, trust dwindles, and decisions become hazy. Transparency fosters understanding between people and organizations. It allows stakeholders to see the big picture, which gives them confidence and information.
The Australian Red Cross received $90 million in 2021 to assist people affected by New South Wales and Victoria bushfires. However, many people were irritated because the organization did not reveal where the funds went.
They stated that they would only use about one-third of it immediately and could take up to three years to use it all. According to a victim of the bushfires, the Australian Red Cross said they would do a lot of things, but he has not seen anything. He added that he is not sure where the money is going.
This example embodies a common problem with charities: how they handle and distribute funds can be complex and, at times, inefficient. There is a risk of money being mishandled or mismanaged if there are no robust systems to monitor its spending.
According to Jack Vinijtrongjit, the CEO of AAG Venture Capital, a lot of money given to charities is often utilized inefficiently. Sometimes, only half of the money reaches their intended recipients.
He noted that only a few organizations, such as Oxfam, are highly efficient, with an average effectiveness score of 83%. Accordingly, blockchain technology can be highly beneficial to both donors and charities.
It provides a clear record of where the money goes, allowing donors to see how their contributions are used and the impact they are having. This, in turn, increases trust and transparency in the process.
Transparency Via Blockchain
Blockchain transparency enables charities to provide donors with a detailed breakdown of their contributions, proving how each dollar is allocated to various projects or initiatives. Vinijtrongjit added that if the organization wants to continue receiving donations, it must ensure that as much money as possible reaches its intended destination.
According to Vinijtrongjit, this transparency can significantly reduce fraud and improper use of funds, as corrupt local officials may misuse the funds. Immutability is another critical aspect of blockchain technology.
Once a record or transaction has been added to the blockchain, it cannot be changed or deleted unless all network participants agree. Therefore, a platform’s financial records, donation information, and other critical data remain safe and unaltered.
Charities Using Blockchain Technology
The United Nations World Food Programme’s (WFP) Building Blocks initiative is an excellent example of a charity leveraging blockchain technology. In Jordan, the organization used blockchain to distribute food to Syrian refugees.
There is a blockchain record for every step, from purchasing food to distributing it. This enabled refugees to access their benefits through a biometric-verified account. The World Food Program also used blockchain to provide food aid in Yemen during the civil war.
They ensured that help went to those who needed it by issuing digital vouchers via blockchain while reducing the possibility of aid being diverted or used fraudulently. Similarly, Binance launched the Ukraine Emergency Relief Fund in 2022, a platform focused on using cryptocurrency for crowdfunding.
Individuals could donate to emergency relief efforts explicitly aimed at assisting refugees and vulnerable children through this platform. The initiative also aimed to provide vital logistical assistance to refugees in affected areas, such as food, fuel, and essential supplies.
Furthermore, Binance made a significant donation to this fund by offering 16,042 BNB, worth $6 million at the time.
What Charities Should Consider
Charities seeking to use blockchain technology should follow a few rules. First, they must establish specific objectives for incorporating blockchain into their operations. These goals should be clear and include simplifying administrative tasks.
It is critical to select the best blockchain platform as options such as Ethereum or Hyperledger should be chosen carefully, considering factors like the specific needs of the charitable organization. Marina Zibareva of Binance Charity, a nonprofit organization that uses blockchain for crypto donations, stressed the importance of charities incorporating blockchain technology to enhance transparency in their activities.
According to her, charities must follow some critical best practices when embracing blockchain technology. One such method is having a thorough knowledge of how blockchain and cryptocurrency work.
Having this fundamental understanding is a crucial step in the integration process. Maintaining solid security measures and data accuracy are critical foundations for establishing and maintaining trust with donors and beneficiaries.
Is Blockchain Alone Enough?
While blockchain technology is a valuable tool to monitor fund movement, it should be used in tandem with other organizational procedures to ensure that charity donations are used efficiently. Vinijtrongjit noted that blockchain alone is not enough to solve the issue of transparency because tracking the use of funds is much more complex. He pointed out that an independent audit is still required, but blockchain can be used to ensure the fund reaches its destination.