Why U.K. charities are turning to blockchain to receive donations
The U.K. charity sector is currently facing its biggest ever crisis of trust — with a recent survey conducted by the Charities Aid Foundation finding that the proportion of the general public who donate to charity has declined for the third year in a row — amid rising concerns about wastage and corruption.
Even traditional charity cash cows are struggling, with Comic Relief’s biannual Red Nose Day raising £8 million less in 2019 compared to 2017. Faced with such huge hits to their revenue streams, increasing numbers of charities are turning to payments technology to try and rebuild trust.
In particular, charities have begun partnering with a series of fintechs offering a variety of innovative blockchain-based donation platforms. These systems provide various ways for charities to receive donations while providing a new level of transparency in how the money is being spent.
“The general trend towards declining public trust in the charity sector is something that’s been going on for several years,” said Raphael Mazet, CEO of Alice, which has created a new donation platform for charities using the Ethereum blockchain network. “The promise of blockchain to provide more transparency and restore trust is really powerful. But there are other reasons as well. The admin costs of reporting impact are really high, but blockchain’s shared database where everybody can see impact, and how others are measuring it, is a big draw.”
Mazet explains that the concept of utilizing blockchain within the charity sector began back in 2016. Initiatives such as Binance and Giftcoin have pioneered ways to use the distributed ledgers behind cryptocurrencies to help donors track payments from the time they have been gifted, to when they are actually spent. Giftcoin has conducted trial projects with a series of charities including English Heritage, who look after sites such as Hadrian's Wall and Stonehenge.
“The Giftcoin initiative really helps charities communicate to donors how and where their funds are being used,” said Luke Purser, Development Director at English Heritage. “We think this will be a great new way to raise more funds to support our work.”
Alice’s own approach is subtly different, combining smart contracts with blockchain to create a resulted based financing system. This means that the public make donations towards a specific goal which are then held in e-money tokens, and the charity only receives these payments across the blockchain once the goal has been met and validated.
“You end up having an automation of payments and the impact reporting, so you can see exactly what’s happened in almost real time, and everyone who’s donated can see exactly what their money has helped to pay for,” said Mazet.
A pilot version of this approach has already been trialed with the homelessness charity St Mungo’s, where the public donated money towards finding homes and tackling mental health issues for 15 homeless people.
“This innovative funding platform gave us much more flexibility than usual,” said Rebecca Sycamore, executive director of fundraising at St Mungo’s. “This allowed us to give these people the personalized support to rebuild their lives away from the streets.”
The success of these projects means that blockchain based donation platforms are soon set to be used on a larger scale. Alice has a new partnership with Cancer Research U.K. as well as projects with other homelessness charities.
But it isn’t just big charities who can benefit from blockchain. The DustAid project is looking to connect cryptocurrency exchanges with small charities across the world, and allowing people to donate small amounts of unused digital currency to these initiatives via blockchain. So far they have obtained agreements with 30 different cryptocurrency platforms.
“There is lots of unused digital currency lying around in peoples accounts and wallets and the DustAid founder realized these could be aggregated and transparently given to small charity projects globally,” said Davin Broadbent, CMO of DustAid. “Each exchange and solution is different but essentially they will ‘sweep’ the dust from peoples wallets and aggregate it into a DustAid wallet fee free. Our platform will then automatically aggregate all these amounts and send it to the relevant charity account on the blockchain, so all parties are able to track it. In addition, we partner with payment providers and banks to allow us to move money around almost fee free, thus saving charities significantly in transfer fees.”
However, despite the range of new projects, Mazet predicts that there is still a way to go before blockchain becomes entirely mainstream in the charity sector, in part due to the perceived complexity of the technology.
“I think it’s still in an experimental phase,” he said. “This is as much a cultural shift as anything. Blockchain tech is still scary for a lot of people, they still don’t entirely understand how it works. There’s a lot of skepticism which in many cases is completely legitimate, and there’s still a lot of infrastructure to be built. But we’re starting to see really big things, and I expect that in the next few years, it’s going to become really commonplace.”