How can blockchain technology transform the fundraising sector?

Bitcoin, blockchain and cryptocurrencies have not received the best press in recent months. While adoption has rapidly increased as the technology has entered the public consciousness for the first time, many still hold negative associations, particularly as banks and governments around the world have warned of the risks.

As with all cutting-edge technology, we are still at a stage where businesses and individuals are figuring out exactly where cryptocurrencies and the blockchain fit within the wider landscape. You probably remember a similar process in the middle of the 1990s with the world wide web.

However, the reason there has been so much excitement is the game-changing potential of this technology across a whole host of industries and sectors.

One such sector particularly well positioned to benefit is fundraising. To understand the extent to which organisations can utilise the blockchain, it is important to differentiate between the use of broader blockchain technology and cryptocurrencies such as bitcoin itself.

While the latter serves as a payment gateway – bitcoin being the most famous example – the former has all sorts of interesting applications, particularly when it comes to more efficiently and transparently tracking donations.

Of course, parts of the fundraising sector have been criticised in recent years over a perceived lack of transparency. According to a 2017 piece of research from the UK’s Charity Commission, the public’s trust in the charity sector was rated at 6.3 on a scale of 0-10, below that of the food and drink industry (6.4).

If you think of a blockchain as an immutable public ledger, there are clear applications for fundraisers in terms of tracking and sharing donations from source to distribution with the public.

Smart contracts – self-executing contracts between parties which are directly written into code – also mean that this process can be automated.

In terms of increasing public trust, this is a remarkably powerful tool. Imagine being able to guarantee donors that their money will not only be fully trackable, but also arrive at its intended destination via an automatically executed process.

Blockchain also offers an opportunity for fundraisers to better engage with a younger audience.

It is no secret that millennials are more demanding in terms of their expectations. A YouGov survey found that half of those between 18-24 prefer to donate via a crowdfunding platform, and 38 per cent of 18-35-year-olds believe that only a small amount of their donation goes towards supporting the specific cause. Millennials are also more likely to research the charity or organization to which they donate.

This presents the sector with an opportunity to offer a blockchain-based fundraising proposition that is genuinely compelling to a wide base of potential donors.

Over the coming months, we will see several projects launch that promise to offer such a solution. This allows not only the fundraising sector, but also the blockchain community to display a real-world use of the technology making a positive difference.

As a result, I expect to see significant investment enter the intersection between blockchain and fundraising.

With the global market capitalization of all cryptocurrencies standing at around $500bn, the stakes are high. Things will move quickly, but it is important that all involved do so in an open, transparent and mutually beneficial fashion.

Jonathan Baha’i is founder of 5050Labs

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