Blockchain Application in the Charity Sector: "Digital Philanthropy"

Charity efforts often struggle to succeed due to a lack of exposure and transparency, unclear accountability, and limited donation channels. Digital philanthropy (using blockchain technology to facilitate charitable donations) offers a new solution, enabling charities to receive and raise funds more efficiently through decentralized transactions.

Donating Digital Currency

The globalization of digital currency still has a long way to go, and the widespread adoption of digital philanthropy will take even longer. Currently, a small number of charities have begun accepting digital currency as a form of donation, and this number continues to grow.

Donors looking to use digital currency may be limited to supporting organizations that already accept it or donating large amounts of digital currency to their favorite charities to encourage them to adopt digital donations.

Before a charity can accept digital currency donations, it needs to establish a transparent and efficient process system to manage and distribute these funds. Understanding the basics of digital currency and blockchain—and knowing how digital donations can be converted into fiat currency—is crucial for developing a concrete implementation plan.

Potential Value of Digital Philanthropy

Digital philanthropy offers several notable advantages for both charities and donors:

• Complete Transparency: Every digital currency transaction is traceable through blockchain data. This high level of transparency and openness encourages donations while significantly enhancing the credibility of charities.

• Globalization and Decentralization: Most blockchain networks are highly decentralized and do not rely solely on centralized governments or institutions. As a result, donations can be transferred directly from donors to charities. The decentralized nature of blockchain makes global transactions simple and reliable.

• Digital Agreements: Blockchain simplifies the sharing and storage of electronic data and can also be used to ensure that important documents and contracts cannot be tampered with.

• Reduced Costs: Blockchain technology has great potential to streamline charity management, automate processes, and reduce intermediary fees.

• Tax Benefits: For example, if a U.S. donor donates Bitcoin, the charity can receive the full amount (since no taxes are deducted). Additionally, the donor can claim a substantial tax deduction.

Limitations

Despite its potential advantages, there are also concerns about digital philanthropy:

• Volatility: Except for stablecoins, most digital currencies are subject to significant price fluctuations in rapidly changing markets.

• Security Risks: If the private key to a donation is lost, the funds are lost forever. Similarly, if private keys are mishandled, they can be stolen.

• Public Awareness: Many people find blockchain technology obscure and difficult to understand. Potential donors often lack basic knowledge about digital currencies, distrust the system, and are reluctant to use blockchain for donations.

Real-World Examples

In recent years, many charities have begun embracing digital philanthropy. In 2017, the global charity Fidelity Charitable accepted digital currency donations worth $69 million. That same year, an anonymous donor donated $55 million worth of Bitcoin to multiple charities worldwide through the Pineapple Fund.

Conclusion

Digital philanthropy is still a novel approach to donating, receiving, and distributing funds. However, with the rapid growth and widespread adoption of blockchain technology, charities and donors are gradually embracing this new way to help those in need. If the public continues to adopt digital currency donations, it would be wise for charities to strengthen their operational systems in this area.