Blockchain and the no-profit sector: towards a decentralized future
Blockchain and the no-profit sector: towards a decentralized future
Blockchain

Blockchain and the no-profit sector: towards a decentralized future

By Giovanni Brafa - 3 Mar 2020

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How blockchain can help the no-profit activities?

Bitcoin has enjoyed a huge success with its capital market reaching 10 billion dollars in 2016. This achievement helps to introduce the disruptive impact of blockchain, the underlying technology responsible for Bitcoin’s success.

Blockchain technology is a data storage structure wherein transactions happen without any third party. Introduced in 2008, it differs from other transaction technologies because it relies on a public ledger, where committed transactions are stored in a list of blocks. In a nutshell, the chain grows anytime new blocks are appended to it. 

Nowadays it happens constantly. Asymmetric cryptography as much as distributed consensus algorithms have been implemented for ledger consistency and user security. It is important to focus on some key characteristics such as decentralization, persistency, anonymity which may significantly affect the cost and potentially boost most transactions’ efficiency. In particular, this paper aims at illustrating how blockchain technology can help no-profit actors to have better performances. 

Mr. Kevin Werbach’s The Blockchain and the New Architecture of Trust” (MIT Press, 2018), in response to the idea that blockchain is a radical technology which makes government obsolete, explains how blockchain relies on the social cohesion, political stability and rule of law that governments are called to provide.

He also argues that:

“Law has much to contribute to the blockchain community. Concerns about money laundering, consumer protection, and financial stability do not disappear even when the cryptography works as promised. Taxation does not become unnecessary when there is a new mechanism for moving money secretly. Disputes do not go away because a computer can execute a transaction without human intervention. Bad actors will act badly. All these scenarios will give rise to calls for legal or regulatory action. Some will be justified. If the community flatly rejects every effort to ensure compliance with legal obligations, the blockchain will be an outlaw technology, active in the dark spaces online but largely irrelevant to the mainstream economy. That would be a tragic waste of potential.”

The question comes spontaneously: how can blockchain technology help the “good actors”? A good insight is provided by AID:Tech experience. The company’s mission is to bring social and financial inclusion to the under-documented and underserved with blockchain (Niall Dennehy, TedX 2018).  One of the hottest issues for the not-for profit organisations is to determinately confirm where, how and to whom the donors’ money went towards. In December 2015 a prototype was launched, AID:Tech thus partnered with the Irish Red Cross in order to implement a new instrument able to deliver international aid to Syrian refugees in Lebanon. Blockchain technology injected transparency and traceability into processes around aid distribution.

More precisely, it made the relevant data available at all stages and it reduced administrative burden. This project inaugurated a new season of interactions between humanitarian aid and blockchain technology, key challenges as efficiency and transparency affect directly some not-for-profit areas of interest such as welfare delivery, digital healthcare delivery, and international remittance payments. 

For this reason, AID:Tech developed many partnerships with the Industry’s most important entities like the UN, IFRC, Mastercard and Citi. These business giants’ strategies hence steered towards the path drawn by the Sustainable Development Goals (SDGs) for 2030. More precisely we can list the following ones:

  • SDG 16.9 – to give legal identity for all including free birth registrations;  
  • SDG 3 – to promote good health and well-being;  
  • SDG 10.C – to reduce to less than 3% the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5%;  
  • SDG 17.17 – to encourage effective partnerships.

Blockchain technology can play a significant role in facing the current global challenges.  It may accelerate the pace of global development, both in the developed and developing areas: concerning the former, Blockchain allows payment to be accomplished with no intermediary, thus upgrading various financial services such as digital assets, remittance and online payment, smart contracts, public services and so on. 

The latter may assist a quick process of innovation, enabling developing economies to leapfrog infrastructural barriers. PharmAccess Foundation project about digital delivery healthcare to women in Tanzania and the introduction of affordable and traceable cross border remittance for the Serbian diaspora are some other concrete examples. 

As all groundbreaking innovations, blockchain technology is a powerful instrument, yet far away from epitomizing the panacea of all societal problems. It must embody some positive values to achieve sustainable progress. In this sense, it is helpful to investigate the introduction of colored coins and qualified money.

They are cryptocurrencies designed in order to funnel moral principles into the code of the distributed ledger technologies (DLT). For instance, the CarbonCoin is designed to engage the environmentally conscious community; several Blockchainbased Islamic cryptocurrencies were also deployed, their transactions are aligned with Muslim values including often an anti-radicalization agenda. Thus, Blockchain “may be a boon in developing or politically unstable economies” (Kewell 2017). 

On the contrary, it operates within a complex and divisive political scenario: it hence can be used to support either liberal or radical values. Perilous instrumentalization lurks around the corner. 

In this regard, it is important to look closer at the General Data Protection Regulation of the European Union. Issues like data ownership, the prevention of data’s misuse and the implementation of the right to be forgotten fill up the thick dossiers resting at the Commission desks8. The lack of a well-structured legislative framework suggests that there is still a lot of work to do in terms of advocacy and policy-making. A wise first step is drawn by the Linux foundation: addressing the concerns above the non-profit organization represents “a guiding hand to set the vision and principles to enable the success of the Blockchain for the greater good.” (Baird et al. 2016). 

The standards the company has proposed are likely the most reliable. It is still hard to value them as the most desirable, cause blockchain disruptive features challenge the efficacy of all previously developed legislations. Governments and experts must collaborate in order to ensure that Blockchain technologies complies with international humanitarian law and human rights law; any technological innovation is already bound to respect some core principles, such as the humanity, impartiality, neutrality, and independence. A change of paradigm is foreseeable, but many are the adversities at stake.  

 The most significant hindrances to blockchain scalability are the huge need for electricity, servers, computers and stable internet connections (Purvis 2017). Many are the countries where blockchain could help to overcome their disgrace, the paradox rises when the lack of infrastructure itself is both preventing and urging for the use of blockchain technology. 

Luckily, these countries have witnessed some bold initiatives that are trying to surmount these barriers: NGO exchange is one of the most effective. The company mission is to translate from the profit sector a solution for charities to revolutionize how payments are made.

The NGO Coin is a cryptocurrency pegged 1 to 1 on the USD, which stems from the latest Ethereum technology innovation. NGO Coin will foster NGOs funds circulation globally, producing transactions thanks to an auditable and cryptographically secure digital ledger. It aims at providing a revolutionary model for nonprofit finance and operations: It allows all Non-governmental organizations to easily organize money and time whilst putting effort into the programs that matter to them and to their donors. It adds compliance and transparency, compared to the cumbersome traditional transactions. 

 In essence, the use within the fields of development and humanitarian affairs of blockchain technology depends on the fulfillment of some criteria, which certify its suitability. The following questions may help the reader to grasp the current dilemmas experts face daily.

 Do benefits outweigh the development and scaling costs of blockchain technology? Is decentralization and built-in trust through transparency, a necessary feature of the new technology? Does the Digital Ledger need to be immutable? Do the features of the new technology comply with legal norms, humanitarian principles and professional codes of conduct? 

 If the answer to any of the above questions is a NO, perhaps Blockchain is not the right tool to attain a solution for the problems that a humanitarian agency might try to solve. On the other hand, the reader now is aware that Blockchain technology can be a great asset in tackling many among the current developing challenges. 

For sure, the honest design and application of the digital ledger, the synergy with governments and institutions, the condemnation of all blockchain criminal misuse are some necessary steps to be taken in order to unleash its disruptive power. Blockchain social impact is already documented, the blueprint for a new decentralized future stands in front of our eyes. 

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Giovanni Brafa

Xenophilous and polyglot, I believe in a virtuous globalisation, hence I confide in the power of History and Art. Addicted to Cultural Diplomacy. The ultimate aim is to better grasp several issues (sustainable farming, migration, geopolitics, politics, European studies etc.) that I consider of fond interest. Currently I am improving my skills on project management, marketing communication and fundraising .

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