Recent research by Daniel Mihai at the Robert Kennedy College and University of Cumbria sheds light on blockchain adoption in charities. This study, based on a survey of 281 charitable organizations worldwide, provides valuable insights and highlights both challenges and potential benefits.
Nonprofit Sector and Blockchain Adoption
The adoption of blockchain technology in the nonprofit sector mirrors its adoption in the enterprise sector. Enterprises rarely disclose their internal adoption struggles and results, so this study offers valuable insights that align with anecdotal market feedback.
Positive Outcomes of Blockchain Implementation
Some charitable organizations implementing blockchain have reported positive outcomes. Nearly 70% of these organizations experienced enhanced real-time tracking of funds, such as donations and spending. Around half noted that blockchain adoption streamlined donations and reduced administrative costs. Additionally, nearly half observed an increase in donation frequency or amount due to enhanced trust in the organization and the donation process.
Challenges and Disappointments
However, the data also revealed some disappointments. Less than half of the entities reported lower transaction costs, possibly due to high fees on the Ethereum Mainnet. Not enough charities have transitioned to lower-cost Layer 2 networks.
Linking Funding to Impact
One of blockchain’s most touted features is its ability to link funding sources to their use. While this has been tested in the public sector, charities are exploring its potential to help donors see a clear link between their contributions and the resulting positive outcomes. Early feedback indicates that only 32% of charities using blockchain found it useful for correlating donations with impact and outcomes.
Marginal Impact of Recognition and Reward NFTs
Charities reported that the impact of recognition and reward NFTs was “marginal” at best. The search continues for effective ways to engage and retain donors, fostering a community where they feel recognized and rewarded.
Sustainability Metrics
These metrics are crucial for charities aiming to sustain their impact, analogous to business ecosystems. Loyal, engaged, and satisfied donors, much like customers, are essential for continued support. Daniel Mihai, the study’s author and founder of the Anu Initiative, has firsthand experience with this concept. The Anu Initiative connects donors with the impact of their contributions using non-tradable NFTs.
Implementation Challenges
Qualitative feedback from philanthropic organizations indicates that blockchain tools, especially those beyond payments, are not yet fit for purpose. This mirrors discussions with enterprise IT directors who often lack the budget to invest in new technology skills.
Optimism for the Future
Despite the slow progress and challenges, there is reason for optimism. The number of charitable organizations using blockchain technology is expected to nearly double in the next few years, with 10% planning to implement it within one to three years. Only 4% of respondents are entirely against the technology, a positive sign given the fraud and corruption revealed during the last crypto bubble.
Education and Awareness
The primary obstacle for the 72% of charities not planning to implement blockchain is a lack of education. For each identified benefit, such as lower costs or better transparency, 80% of non-adopters lacked knowledge of the value proposition. This indicates a need for awareness rather than prejudice against the technology.
Usability and Integration
To increase adoption, usability issues must be addressed before raising awareness. Most non-profits operate on tight budgets and rely heavily on volunteers, with minimal IT resources and no “innovation budgets.” Adoption by non-profits tests product simplicity and reliability.
Enterprise IT and Blockchain Integration
Enterprise IT departments today focus more on integration and process control than new development. To drive adoption, complex blockchain solutions should be replaced with application integration models familiar to enterprises. Companies like PayPal, Stripe, and Wise are already making crypto payments a standard option. At EY, efforts are being made to standardize APIs for integration with supply chain and procurement applications.
Emerging Blockchain-Centric Philanthropic Organizations
An ecosystem of blockchain-centric philanthropic organizations has emerged, such as Endowment, The Giving Block, Gitonin, Gain Forest, and Charm verse. These organizations have facilitated adoption and achieved positive results, indicating a promising future for blockchain adoption in charities.
