Blockchain can help the charity sector increase its transparency and empower its various players, but be warned rip-offs !
As the crisis continues to rage, donations are becoming scarce. Can blockchain help charities solve their problems?
BBB Wise Giving Alliance (Give.org), a database of charities in the United States, conducted a survey of 2,000 people. Among the key points of the investigation, 73% of participants say they are ready to donate in cryptocurrencies. Something that can be explained with the tax advantages associated with crypto transactions.
In the United States, the Internal Revenue Service (IRS) treats cryptocurrencies as stocks or securities, meaning that donors can fully deduct the value of their cryptocurrency donations without paying capital gains tax.
Do Charities Need Blockchain?
The potential and utility of the blockchain no longer need to be demonstrated. Thanks to this practical and affordable technology, cross-border payments and crowdfunding are starting to be democratized in all corners of the world, including developing countries.
Similarly, non-governmental organizations (NGOs) are increasingly turning to blockchain to protect the identity and property rights of the most vulnerable groups, especially refugees who may not always have the means to assert their rights.
Today it is possible to assign an identity to refugees on blockchain where everything is verifiable and which can be consulted at any time by UN charities.
Blockchain can be too an effective way to gain donor trust. In fact, smart contracts can allow donors to track their donations from start to finish. Similarly, thanks to the verifiable, immutable and transparent nature of the blockchain, donors can also participate in the governance of charities.
How can blockchain help charities get out of the crisis?
In a report released last year, Moralis showed how blockchain technology can empower the nonprofit sector.
According to the report, blockchain cuts costs and simplifies administrative procedures for charities. So rather than compiling, recording and managing data in their outdated management systems (CRM), associations can leave everything to the blockchain and focus on more important activities.
In addition to the convenience of blockchain, this technology can help charities strengthen their ties with donors and gain transparency and credibility.
“Transparency for nonprofits is the key to their long-term success. By using blockchain to build trust in the charity sector, more people are likely to donate,” reads the Moralis report.
In fact, the blockchain will not only guarantee the accountability and transparency of non-profit organizations, but will also make them more accessible to donors from all over the world. Likewise, sent gifts will get to those who need them faster. From a donor’s perspective, send funds from to crypto wallet it’s much easier than making a bank transfer.
Also, transactions are confirmed within minutes. On the other hand, a large donation through the banking system can take several days and be subject to regulatory scrutiny.
Similarly, several crypto platforms have launched their own charities in recent years. For example, BNB Chain offers a stablecoin called Pink Care Token (PCAT) which allows its holders to support causes they care about. The token was introduced as part of the Period Poverty campaign, which was launched in partnership with 47 companies and organizations.
Beware of crypto scams
Blockchain offers countless opportunities for charities, but the problem of privacy and security of crypto transactions persists.
In July 2020, a 17-year-old teenager hacked the Twitter accounts of several public figures, including Barack Obama, Elon Musk and Kanye West. The hacker impersonated these celebrities and promised to send BTC to anyone who sends funds to his crypto wallet. Thousands of people have fallen into the trap, losing tens of thousands of dollars.
To take advantage of the blockchain, associations must arm themselves against crypto scams and attacks. Therefore, it is important for these organizations to recruit cryptocurrency and cybersecurity specialists.
Associations also need to familiarize themselves with various cryptographic tools, i.e. wallets, DeFi protocols, anonymous donation platforms, etc.
Moral of the story: as you may have understood, the blockchain is a double-edged sword. To take advantage of it, it is important to know its risks and shortcomings.
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