What opportunities does blockchain offer?

"The blockchain could remove the need for the costly middlemen", Rhodri Davies explains in his new blog written for Acevo’s 30 things to think about.

Blockchain is the technology that provides the infrastructure for the digital cryptocurrency bitcoin. It could fundamentally reshape the nature of charity, and even do away with the charity sector altogether.

A blockchain is a record of all the transactions in a system, but unlike traditional ledgers it does not rely on a third-party authority to maintain it. Instead, it is decentralised and distributed among its users, and they all contribute to its upkeep.

Iterations of the ledger (known as “blocks”) are encrypted, ensuring that once made these blocks are almost impossible to alter. The ledger is public, so everyone can see who has transacted with who. These processes and the built-in transparency guarantee accuracy and robustness.

Many of our systems are built around transactions where trust needs to be ensured. The blockchain system could remove the need for the costly middlemen like banks and lawyers who currently make these systems work.

Enabling donations on the blockchain will have a radical impact, because these donations are 100 per cent transparent. A donor will be able to follow their gift all the way through a charity to the beneficiary, and beyond. There are already organisations putting this theory into practice on a small scale, such as Alice.si, Disberse and the BitGive Foundation.

But perhaps the biggest impact of blockchain will come from the way it enables a wider trend of decentralisation and disintermediation. This is about enabling those who want to do social good to act together directly without intermediation by centralised charitable organisations.

We may no longer need the infrastructure provided by intermediary organisations to coordinate decision making, logistics and so on. Blockchain has created the possibility of decentralising organisational structures themselves, in the form of Distributed Autonomous Organisations (DAOs).

A DAO is a collection of individuals, groups and things recorded on the blockchain and bound together by some smart contracts (self-executing computer programs that perform set actions when specified conditions are met). These smart contracts govern how members of the DAO interact.

The DAO model could transform civil society. It could, for example, enable networks of donors to democratically choose and fund projects or individuals all around the world based on a common cause. It could make it possible to coordinate national or even global campaigning and advocacy work without the need for a single intermediary or group of intermediaries. This may sound like science-fiction, but as with many things in the world of blockchain, it is happening in a small way already.

Initiatives like Giveth.io and Charity DAO are attempting to create DAO structures that will allow people to do social good. In future, people might be able to access the services or products they need directly through decentralised platforms.

Charities could retain a role in this scenario, but it is likely to be as curators or enablers – helping people to access and manage services directly – rather than as service deliverers. Eventually even this role might diminish and we will see the end of the traditional model of a charitable organisation.

However, this doesn’t mean that there will be no role for social leaders. Within these decentralised networks, social leadership will be democratised: rather than being defined as a leader on the basis of your position within an organisational structure, leaders will emerge on the the strength of their ideas and their ability to win support within the flat structure of the DAO.

There will also be a vital role for the expertise that so many people in the charity sector have. Once the ability to act is democratised, it will be incredibly important to ensure that this action is well-directed. And in the absence of an intermediary that can do this by centralising control, those who wish to lead in the social sector will have to rely on their expertise and use of evidence to win support more than ever.

There may also be a vital role for social leaders at the edges of these blockchain-based systems, where they bump up against the real world. A blockchain is merely a ledger and you need to be certain that the information on the ledger reflects what is happening in the real world accurately and truthfully.

For instance, for smart contracts which trigger payments on the basis of outcomes being delivered (a bit like an automated social impact bond) to work, we need to be sure that those outcomes really have been delivered. Confirming these things is likely to be an important part of the role of social leaders in the future.

It is possible that the next 30 years will see the beginning of the end for charitable organisations, but not for social leaders. Their role will almost certainly evolve while remaining as crucial as ever.

Rhodri Davies works at Charities Aid Foundation, where he leads Giving Thought, the in-house thinktank focusing on current and future issues affecting philanthropy and civil society.

To celebrate its 30th Birthday, Acevo has collated 30 things to think about from 30 different voices from around the charity sector. These thought-provoking insights aim to inspire and provoke debate about how civil society leaders can make a difference over the next 30 years. To find out more, visit www.30thingstothinkabout.org and talk about it on Twitter with the hashtag #acevo30.

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