As a digital, peer-to-peer, decentralized, distributed ledger, blockchain has the potential to transform systems and enable solutions we never thought possible. As with any developing technology, there are challenges to address but initiatives within the social impact space are already demonstrating some of blockchains advantages over traditional solutions.

Reducing Risk And Fraud

The OECD reports that an estimated 20-25% of funds are lost to corruption globally at the government level. Even when it's unintentional, waste, inefficiency and misallocation of funds cost millions of dollars that could otherwise be used for good.

One advantage blockchain has is that its tamper-proof. Through a process known as consensus, each transaction is verified by multiple parties independently. Entries are immutable, meaning they cant be modified, and can only be updated by adding an addendum. With all entries publicly viewable, this offers unparalleled transparency into how donations are used. Not only does this build trust between an organization and donors, but it helps mitigate the waste and fraud that has historically been a part of charitable giving.

Transparency And Accountability

Blockchain-based philanthropy is also addressing social causes that havent been well served by traditional systems. Research shows that trust and confidence in charities has dropped. Donors want to see more accountability and assurance that their contributions are making a difference. Tracing funds from the point of donation is a major benefit blockchain can offer.

Alibaba, Chinas e-commerce conglomerate, developed a blockchain-based donation system called Charities on the Chain. It records donations from Alibabas users and lets charities, auditors, donors, media and other parties track information on how donations are being used.

Reducing Administrative Costs

Administrative costs have been a point of contention with charities; in some cases, overhead is higher than what is passed along to recipients. One administrative expense is the need for legal and financial intermediaries, which cost time and money. I work in smart contracting, which is a blockchain application intended to digitally facilitate or verify the negotiation or execution of a contract. In my experience, smart contracting can help charities reduce the need for these intermediaries.

Transcending Borders Faster And More Efficiently

With traditional banking channels, sending money internationally can be a complex, multistep process. Transactions on blockchain result in a 40 to 80% reduction in transaction costs and take seconds to process instead of two to three days. Instant cross-border transactions allow charitable organizations to make an impact quickly instead of being held up by red tape.

Beyond digital currency, accessing international, immutable forms of identification via blockchain can assist in the screening and verification of volunteers. Accessing verified work history records or other documentation instantly could reduce delays and vastly improve the efficiency of international emergency aid programs. For social good initiatives looking to transcend borders with blockchain, the first step is often determining the unique gaps and inefficiencies that exist. From there, organizations can assess the situation and better determine if blockchain is right for them.

Increasing Accessibility

Many of us take for granted our ability to open a bank account, obtain a credit card or get a mortgage. Meanwhile, approximately 2 billion unbanked or underbanked people. Blockchain technology offers an incredible opportunity for people without access to banks. Decentralized digital currencies not only allow fast, easy and low-cost transfers, but they also create a more open financial system.

In the Philippines, one of the top five countries to receive overseas remittances, coins.ph allows locals to convert cryptocurrency sent to them by relatives into their local currency. This reduces the costs and settlement times of remittance transfers. While just one example, the benefits of accessibility are truly global, given that inclusive financial systems reduce inequality and bolster economic growth.

New Ways To Give

While some charities and foundations accept Bitcoin and other cryptocurrency donations from donors directly, other sites facilitate the donation of cryptocurrencies to good causes through their platform.

Donations can include clauses stipulating that money is only transferred if certain conditions are met, and can be tied to fundraising goals or even performance. Alice, a social funding and impact management platform, makes each projects performance publicly available, allowing donors to find and contribute to social projects that are actually effective.

Whats Next?

While charities and nonprofits are beginning to see the untapped potential of blockchain technology-based solutions, there are still challenges to overcome.

One hurdle facing the blockchain space is regulatory pressure. Policymakers are still attempting to understand the long-term implications of this technology and it is still uncertain how they will choose to regulate it.Ease of use is also a challenge blockchain technology works differently than traditional systems, resulting in an inevitable learning curve for organizations wanting to explore its potential. More user-friendly projects and accessible information will help simplify the use of blockchain.

Security is another key concern. While blockchain is secure, smart contracts are not so finding ways to address the security challenges around this technology is crucial.

Although most use cases are still in their pilot or idea stage, existing use cases demonstrate blockchains potential to benefit social initiatives across the globe. It is clear that blockchain technology is here to stay, and the social impact space will need to experiment, adapt and evolve in order to leverage this technology.

It will be fascinating to watch this technology unfold and address old challenges with new solutions that were never thought possible.

The rest is here:

How Blockchain Is Changing The Game For Social Impact Initiatives - Forbes