Blockchain Projects are Helping Bring Trust Back to Charity
In 2018, trust in charities dropped from 67% to 55% in comparison to 2008. Blockchain projects such as GiveTrack, AidCoin, Pinkcoin and Electroneum are ensuring donations get to those in need.
People around the world donate circa $700 billion to charity annually, but where does this money really go? Most charities spend at least 30% of donations in overhead and events to raise more funds. But that’s in the best of cases. Some organisations deliver less than 10%.
Blockchain has the potential to bring back trust ensuring transparency and efficiency. As the World Economic Forum states in a 37-page report on the Fourth Industrial Revolution, those involved in open ledger technology are “building blockchains for a better planet.”
Different blockchain projects have taken diverse approaches, such as GiveTrack, Pinkcoin, AidCoin and Electroneum.
Trust is at an all-time low
In the United States, trust is essentially at the same level, but according to BBB Wise Giving Alliance, only one in five US citizens highly trust charities. In Spain, only 51% trust NGOs.
A new Gallup and Wellcome Trust Study based on a survey of more than 140,000 respondents from 144 countries shows that 52% trust charities.
Where do donations go
An article published by UK’s Channel 4 found that on average less than 30% of donations to 167,000 registered charities in England and Wales were delivered to the cause itself.
The United Kingdom’s Charity Commission, however, discovered that the National Hereditary Breast Cancer Helpline spent a mere 3% on charitable activities in 2014-2015.
Similarly, in the US, where people donate an average of $300 billion a year, there trust in charities is declining. According to a Reader Digest article one charity in particular, the Cancer Fund of America, only delivered 3% of the money they raised to people in need.
US Federal Trade Commission lead attorney Tracy Thorleifson says, “There is no federal law that prohibits a charity from lying to consumer to get money.” This is more than likely the case in every country around the world.
Not all NGOs are the same
There are many honest organisations around the world, however, and according to various reports, the average they spend on actual charitable causes hovers over the 60% area. And then there are others around the world that like UK-based St John Ambulance spend nearly 90% of donations on charitable activities.
A widespread problem
The issue does not only affect developed countries, as in developing nations the problem is usually worse because of the higher levels of corruption. In Mexico and Haiti, for instance, millions of dollars donated to victims of natural disasters completely disappeared.
According to Mexican news outlet Animal Politico, close to $5 million that were donated by people in the US, Canada and Europe for victims of the massive September 2017 earthquake completely disappeared.
Even when donations do arrive
There is a huge difference between donating in response to a disaster and a longer term, more effective and sustainable development. Many experts believe that a lot of the work many charities do in developing countries do not have much impact and in the longer term, can be harmful.
UK news outlet The Guardian wrote that “hundreds of millions of dollars have been wasted on clean water projects in rural Africa. They based this statement on an International Institute for Environment and Development (IIED) report that $360 million was spent on building boreholes and wells in Africa that later became useless because responsibility for maintenance was turned over to locals who had no training or money to carry out the work. Projects like this, that have negative results have corroded the trust of people in charities.
Blockchain to the rescue
AidCoin is one of the many blockchain projects helping not only to restore the trust but to help deliver donations quicker with cryptocurrency to those who in need.
To address this gap, AidCoin has been established, supported by the team behind Charity Stars, the leading online auction site which donates 85% to charities. They use AidChain and have created their AidCoin ERC20 token provided through Ethereum.
“No record can be erased on the blockchain meaning traceable accountability and zero fraud and there’s no need for middlemen or transaction fees,” says Federico Malvezzi, the managing director of AidCoin. “Smart contracts could mean that if certain predetermined conditions aren’t fulfilled, donors would receive their donations back or be able to redirect them towards more deserving or pressing causes.”
Cryptocurrency for charity
Electroneum has their unique approach to helping people on the ground. Their ETN cryptocurrency network underwent a ground-breaking software update that among other game-changing features, enables Electroneum to select who mines ETN.
“We have handpicked non-governmental organisations that have a verified track record of helping people in developing countries who are living in very vulnerable conditions,” says Electroneum CEO Richard Ells. “ETN today is the only cryptocurrency that has trusted NGOs as miners.”
In one case, Electroneum is working with an NGO that delivers assistance in South Africa to children and their families and they channel over 80% of donations to helping families living in vulnerable conditions, source from the charity confirmed. The remaining 20% goes to overhead which includes not only staff but also doctors, nurses and teachers for the people they help, the source added.
The World Economic Forum weighs in
The UN estimates that there is a funding gap of $5 to $7 trillion per year to meet the Sustainable Development Goals, with an investment gap in developing countries of about $2.5 trillion, says the WEF in the report mentioned above.
“Employing blockchain-enabled finance platforms could potentially revolutionise access to capital and unlock potential for new investors in projects that address environmental challenges – from retail-level investment in green infrastructure projects through to charitable donations for developing countries.”