In 2021, the Australian branch of the Red Cross received $90 million to aid the victims of the bushfires that plagued various regions of New South Wal
In 2021, the Australian branch of the Red Cross received $90 million to aid the victims of the bushfires that plagued various regions of New South Wales and Victoria.
However, the organization soon came under fire for its lack of transparency when it revealed that it would only distribute around one-third of the intended funds on immediate assistance and that it could take up to three years to distribute the total amount.
One resident who lost his home to the fires told local media, “They made a lot of promises that they’re going to this, that and other, (but) I’ve received nothing, I have no idea where the money is going.”
This one example highlights a common problem among charities: The processes for distributing charitable giving are often obscured by bureaucracy and prone to mismanagement. Without robust accountability mechanisms, charities risk mismanaging or misusing funds and, at worst, committing outright fraud.
Jack Vinijtrongjit, CEO of AAG — a venture capital firm that heads the AAG Charity DAO — told Cointelegraph, “Statistically, a lot of money goes to waste when it comes to charity. For example, in some cases, only fifty cents out of a dollar ends up at the destination. Very few can achieve efficiency in the 83% range, like Oxfam.”
Blockchain technology can provide tangible benefits for both donors and charities. It offers greater accountability and transparency for contributors, enabling them to follow their donations and see the results of their generosity.
How blockchain can provide transparency
Blockchain technology provides real-time tracking of donations and transactions. This level of transparency helps to build trust and confidence among donors, as they can verify that their funds are being used for the intended purpose.
In addition, it allows charities to provide donors with a detailed breakdown of their contributions, showing how each dollar is allocated to various projects or initiatives. Vinijtrongjit said, “With blockchain, the fund flow can be seen easily, and if the organization expects people to keep donating, they need to make sure as many funds as possible are delivered as intended.”
He said this transparency can reduce fraud and misuse of funds, as “there can be cases where corrupt local officials would take the funds and misuse them.”
Blockchain technology also has the important property of being immutable. A blockchain record or transaction cannot be changed or removed without the agreement of all nodes in the network. Because of its immutability, the charity’s financial records, donation histories and other data are safe from alteration.
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This function is especially important for nonprofit organizations since it guarantees that any donations made to their cause will be permanently documented and easily audited by third parties.
Smart contracts, self-executing contracts with the terms of the agreement directly written into code, are another valuable aspect of blockchain technology for charities. These contracts can be used to automate processes such as distributing funds or verifying the completion of specific tasks.
Smart contracts help ensure that funds are used for their designated purposes, as they only release funds when predefined conditions are met. This enhances transparency by eliminating the need for intermediaries and reducing the risk of misusing funds.
Charities using blockchain technology
One notable example of a charity using blockchain technology is the United Nations World Food Programme’s (WFP) Building Blocks project. WFP deployed blockchain when providing food assistance to Syrian refugees in Jordan.
Each transaction, from food purchases to distribution, was recorded on a blockchain, allowing refugees to access their entitlements via a biometrically verified account.
The World Food Programme also extended its use of blockchain to Yemen, where it employed the technology to provide food assistance to vulnerable populations amid the ongoing Yemeni civil war. By providing digital vouchers through blockchain, the WFP could ensure that aid reached those in need while minimizing the risk of diversion or fraud.
In 2022, Binance launched the Ukraine Emergency Relief Fund, a cryptocurrency-focused crowdfunding platform that allowed people to make contributions to emergency relief efforts aimed at assisting refugees and children in need. This initiative also aims to provide crucial logistical support — including food, fuel and essential supplies — for refugees on the ground. Additionally, Binance donated 16,042 BNB (BNB), equal to $6 million at the time, to the fund.
Donations can be tracked via the official fundraising page, which shows a list of donors, the amount donated by each donor, the total amount raised, and allocations. For example, 2.5 million Binance USD (BUSD) (worth $2.5 million)…
cointelegraph.com
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