Cryptocurrency Use Cases in Philanthropy and Social Impact

Source

INTRODUCTION

While initial coin offerings (ICOs), blockchain technologies, and decentralized applications (dApps) have drawn much of the cryptocurrency attention, there are increasingly attractive reasons to apply cryptocurrencies to solving some of societies’ biggest challenges. For almost any good or service that can be paid with fiat currency, it is also one that can be procured through cryptocurrency instead.

Cryptocurrency has come a long way since its inception as a digital currency. One of the most exciting frontiers for cryptocurrency is in philanthropy and social impact. Cryptocurrencies, through their underlying blockchain technology, provide new opportunities to increase transparency, reduce overhead, enhance efficiency and democratize value exchange within the charitable giving space. For example, with cryptocurrencies individuals, organizations and even recipients can now transact directly with one another without the need for intermediaries or geographic constraints.

The rise of decentralized finance (DeFi) and increased global adoption of cryptocurrency has also facilitated new methods through which individuals can donate to charitable causes; transparently sending money across borders faster than ever before. The borderless nature of cryptocurrency means charities can reach donors and beneficiaries in any country, ensuring even the most remote or underbanked communities have access to the funds they need.

• TRANSPARENCY AND ACCOUNTABILITY:

One of the biggest advantages of cryptocurrency in philanthropy is that it can help increase transparency and accountability. Traditional charitable organizations often face criticism for how they distribute funds, as donors want to know how much of their donation actually goes towards the cause, and how much is spent on administration. Blockchain technology can solve this problem by enabling donors to track their donations in real-time, making sure that their money is indeed used for what they meant it to be.

Blockchain’s immutable ledger ensures that every transaction is clear and transparent. When a donor sends cryptocurrency to a charity, it’s recorded on the blockchain, which is public. Essentially, anyone can see where the money is going and how it’s being spent.

Similarly, for organizations, this transparency can help with their own operations. They no longer need third-party auditors or complicated financial reporting systems to prove that they’re running their organization in good faith – they just have to point you towards the blockchain.

• LOWERING THE COSTS FOR TRANSACTING:

Reduction of transaction cost is another influential function of cryptocurrency within the context of giving back to society. In conventional donation, generous givers often have to bear some exorbitant fees which are charged by the banks or other service providers in case of donations made towards other countries. This implies that there is a lot of money expected to go to the needers that instead gets stuck within the limits of the donors especially through the aid in the form of cash to third world countries or areas where financial services are not fully developed.

Source

However, cryptocurrencies operate outside the laws of the country’s monetary policy which makes it possible for donations to go directly to those who need them while trying to avoid extraneous charges. This is particularly critical for international relief agencies that are involved in the movement of funds from one country to another to aid people affected by wars, famine or other natural disasters. Their use in those charities help those organizations avoid losing useful amounts of their funds to various sorts of intermediaries and transaction expenses.

For instance, money transfers via Bitcoin, and Ethereum have become a key component of various humanitarian resets by rendering money directly available to individuals in need of support without going through all the associated hassle of sending payments across banks. This has been particularly beneficial in areas with poor or non-existent banking systems because it allows support to be delivered in a quicker and more efficient manner.

• EMPOWERING UNDERSERVED COMMUNITIES:

Cryptocurrency has the potential to empower unbanked or underserved communities by providing them with access to financial resources that they otherwise would not have. There are many regions in the world where people cannot reach a bank, either because of geographical distances or political and economic difficulties. Being excluded from financial services means they cannot receive monetary assistance or engage in activities that may raise their standard of living.

However, via cryptocurrencies, unbanked communities can work around the banking system altogether. To be able to receive donations or payment, all it takes is an internet connection and a cryptocurrency wallet. In this manner, charities can help the people in the most remote areas on earth by offering them financial aid. For example, blockchain initiatives were used to deliver humanitarian aid in refugee camps – places where no one can reach a bank as well.

Cryptocurrencies can help to create local economies in regions where fiat currency is volatile or inaccessible, allowing these communities to receive, store and spend their money in a way that is resilient and secure.

• MICRO-DONATIONS INCENTIVIZATION:

Micro-donation is a trend of donation where many people pool their money to donate but each of them gives a very small amount. Traditionally, the transaction cost of financial system makes this kind of donation impossible because the money left after transaction fee becomes trivial. Nevertheless, cryptocurrency reduces the cost for fund transfer by several orders of magnitude comparing with traditional financial system, making it possible for micro-donation as described above.

Micro donations can be an effective tool in the crowdfunding campaigns and grassroots initiatives, as each donation counts. Cryptocurrency supporting platforms for charity can tap into this feature by letting donors donate in fractions of Bitcoins, Ethers or other cryptocurrencies making philanthropy accessible to masses.

CONCLUSION

Source

Cryptocurrency is changing the game in philanthropy and social impact, with new opportunities to increase transparency, lower costs, enable new forms of community ownership and participation, inject direct liquidity into underserved areas and support micro-transaction giving.