Crypto technologies are ideal for preventing fraud in NGOs.
Charity lies at the foundation of human sentiment and compassion – a cornerstone of humanity and the representation of consciousness and conscientiousness with regard to fellow humans in their times of need. Alleviating the suffering of fellow humans is what philanthropy is all about, which has transformed into countless charity organizations that rely on the goodwill and compassion of those who care about their fellow man.
The charity market is big, immense, even, as illustrated by a recent report, which states that the global NGOs and charitable organizations market reached a value of nearly $255,705.9 million in 2019, having increased at a compound annual growth rate (CAGR) of 4.4% since 2015. The market is expected to decline from $255,705.9 million in 2019 to $253,336.3 million in 2020 at a rate of -0.9%, which is largely attributable to the pandemic and its effects on the global economy as a whole.
Despite the decline, the NGO and charitable organizations market is expected to grow from $279.81 billion in 2020 to $285.5 billion in 2021 at a compound annual growth rate (CAGR) of 2%. Such dynamics are being made possible by the gradual recovery of the global economy and the introduction of new approaches to crowdfunding that are being introduced into the charity industry.
One of the most important developments that has taken place in the industry is the adoption of decentralized technologies through crowdfunding platforms and the acceptance of cryptocurrencies as donations. The prospects for the application of cryptocurrencies in the industry are immense, considering the inherent advantages of blockchain-based currencies over their fiat counterparts.
The biggest stumbling block of the charity industry is the essence of it – money. Fiat currencies are inherently flawed and their allocation, distribution, tracking, monitoring, and control are next to impossible. That is why charity organizations suffer from rampant fraud, as does the industry as a whole.
Examples of fraud abound, as a recent case in Thailand in May 2019 illustrates, when fake poverty became a hashtag after a young woman raised 7 million baht from trusting Samaritans for a fake dream of hers. Another case in the US is under investigation, with over $110 million in funds collected using deceptive schemes for fake charities after 1.3 billion calls. The Covid pandemic has spawned a slew of fraud in charity, with Covid aid scams leading the shameful parade of actions claiming to be collecting funds for anything from helping India fight the pandemic to globe-spanning relief efforts.
What Crypto Can Change
Cryptocurrencies bear inherent advantages for all industries that they are applied to. The underlying technologies are especially relevant to the charity industry, where the need for effective tracking and allocation of earmarked resources is the key to making sure that they reach their end targets.
When philanthropists donate funds to a certain charity, all they have to go on in terms of accountability is the report they receive from the organization regarding the allocation of their funds. The avenues for corruption in such an approach are blatant and immense, as the human factor is present as the weak link between the target and the financial resources in question. Blockchain technologies and cryptocurrencies allow donors to track every dollar they allocate to any specific charity. The immutable nature of the blockchain, as well as its transparency and open nature allow anyone with a browser to see the full record of the charity’s transactions with end addresses.
Cryptocurrencies also bypass the biggest limitation of fiat funds in the form of transportability. Cryptocurrencies have no borders and can thus be transferred to any point in the world without the need for intermediaries. Digital currencies are also immune to sanctions regimes, allowing them to be used for relief efforts in countries suffering from political and economic pressure.
Transparency is the biggest advantage that blockchain and cryptocurrencies can provide to the charity industry, as the number of people trusting such organizations is meager at best. Cryptocurrencies are convertible and traceable, making them the ideal value carrier that can be converted into local currencies at the target destination while either retaining or increasing in value as per market dynamics.
Some charities are already employing cryptocurrencies and blockchain-based technologies for improving their overall images and expanding their frontiers and capabilities. UNICEF is among the leaders in terms of adoption, as the global organization accepts cryptocurrencies as donations through its UNICEF CryptoFund, which is also responsible for holding and increasing the value of such assets.
Other organizations have joined the march to become crypto-friendly. Save The Children is the latest in the list of international NGOs accepting cryptocurrencies. The organization accepts not only Bitcoin and Ether, but also Dogecoin and a host of other assets.
Help is also being injected from crypto enthusiasts and industry leaders, as demonstrated by Ethereum network developer Vitalik Buterin, who donated $1.2 billion to India’s Crypto Covid Relief Fund in 50 trillion Shiba Inu coins. Though the volatility of the latter is high, donations in cryptocurrencies are a considerably more flexible and accessible instrument to most who believe in transparency and accountability that should be the cornerstone of an industry so highly dependent on the human factor as charity.
Charity is all about trust – an element that is currently lacking in the charity industry. Billions of dollars are being misappropriated and human misery persists due to the greed and lack of accountability in the industry. Blockchain technologies and cryptocurrencies can be a panacea to the issues plaguing charities, as the trustless and human factor-free nature of decentralized infrastructures allows every dollar to be traced and accounted for.