Dec 23 2019

How Nonprofits Can Harness Blockchain to Meet Their Goals

The technology can lead to financial wins, improved security and increased trust among large donors.

Blockchain technology hasn’t always had the best reputation. Many hear the term and think of cryptocurrency or ransomware attacks, but blockchain is simply a method of keeping secure data records. It refers to a decentralized database of information made up of “blocks” or digital containers, and these blocks contain time-stamped transaction records. Each new block contains a compressed version of the transaction that preceded it, making it impossible to alter data — whether maliciously or out of negligence.

Blockchain was, in fact, originally developed in 2008 to proliferate the digital currency bitcoin. But since hitting the market, the technology has been harnessed by a diverse set of organizations in sectors ranging from finance to cybersecurity. By 2016, industry observers were declaring that blockchain had officially “gone mainstream,” citing programs announced by Microsoft and Bank of America. And, according to Deloitte, more than 100 financial institutions have already invested $1 billion in blockchain.

The technology also has practical applications for nonprofits. Specifically, blockchain can drive down costs, protect data and donor information, and increase efficiency across an organization. 

The Security Advantages of Blockchain for Nonprofits

Blockchain can give an organization complete control over its own data. The technology is designed to regulate the flow of information between parties by automatically keeping an uneditable record of currency exchanges. This allows a nonprofit to permanently log every dollar that moves in and out of each department. Not only will hackers be unable to penetrate the system, but it will also be impossible for internal users to alter data or delete archival information.

Blockchain technologies are well-suited for the specific security needs of nonprofit organizations, which include grassroots development teams, easily digestible ledgers for internal use and a safe method of transferring funds from headquarters to local offices.

Nonprofits Can Save Money with Blockchain

Blockchain solutions can automate many repetitive administrative processes that can slow down the operations of nonprofits. Taking record-keeping and regular data audits off the desks of nonprofit employees streamlines workflows, freeing up teams to focus on high-level strategy rather than day-to-day minutiae.

Along with saving money for nonprofits, blockchain can give organizations a cost-effective tool to help facilitate growth. Microsoft Azure, for example, uses blockchain technology to give organizations the ability to scale out without creating added security risks.

MORE FROM BIZTECH: 5 nonprofit tech trends to watch for in 2020.

Blockchain Protects Donor Information

Whether a nonprofit opens itself up to cryptocurrency donations or simply uses blockchain to organize its finances, the technology can help the organization assure donors that their information is being rigorously protected. Because cryptocurrency and blockchain encourages anonymity, a nonprofit wielding the technology can drive an increase in truly selfless giving.

It can also facilitate cross-border donation, as the distributed nature of blockchain data means it’s not centralized in any specific location. In a way, the technology can truly take a nonprofit digital, elevating the organization beyond national and political borders.

As more resources pour into the philanthropic world (led by the emergence of megadonors such as Bill and Melinda Gates), blockchain will allow nonprofits to expand their capacity. DisruptorDaily notes, for example, that blockchain “has shown the capability of allowing donors greater say in which causes become eligible for funding.” This means large donors can control where their funds go and can even receive automatic updates on where their funds are being allocated within a nonprofit.

In the same vein, Forbes reports that the transparency of blockchain has led to an increase in consumer trust regarding nonprofits; when an organization’s data is publicly available and secure, it’s clear where a donation is actually headed. That transparency and security can help organizations pursue their purpose-driven missions.

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