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Blockchain Adoption in Philanthropy Is Slow, But the Future Is Bright
New research conducted at Robert Kennedy College and the University of Cumbria by Daniel Mihai sheds light on the state of blockchain in philanthropic and charitable organizations. It’s not a rosy read, but there are some useful insights and evidence of a constructive path forward. The research is based on a survey of 281 charitable organizations from around the world.
Reading the research findings, it is clear that the adoption and insights of the nonprofit sector closely mimic the adoption and performance of blockchain technology in the corporate sector. And since companies often do not shed light on their internal adoption struggles and outcomes, this study provides useful insights that mesh well with the anecdotal feedback I receive in the market.
For charities that are implementing blockchain technology into their operations, there were some bright spots. Nearly 70% reported improved real-time tracking of funds such as donations and spending. About half said blockchain adoption made giving easier and reduced administrative costs. And nearly half of organizations using blockchain also reported that blockchain use led to increased frequency or amount of donations from donors due to increased trust in the organization and the donation process.
However, there were also some disappointments in the data. At the top of the list was the fact that less than half of all entities reported lower transaction fees. It is possible that the high fees on the Ethereum Mainnet had an impact and that not enough charities benefited from the move to low-cost Layer 2 networks.
One of the most touted features of blockchain technology is its ability to connect funding sources and the use of that funding. It has been discussed and tested in the public sector, and charities are also looking into whether it can be used to help donors see a clear connection between their actions and the positive outcomes associated with them. Early feedback, however, is not convincing: only 32% of charities using blockchain believe it helps them connect donations to impact and outcomes.
Additionally, charities reported that the impact of recognition and reward NFTs was “marginal” at best. It seems like we’re still figuring out how to engage, retain donors, and bring them into a community and ecosystem where they feel recognized, rewarded, and involved.
These are critical metrics for charities that want to maintain their impact, and they all have parallels in corporate ecosystems. Loyal, engaged, and satisfied donors or customers are the ones who keep coming back. The study’s author, Daniel Mihai, has had first-hand experience with this as the founder of Anu Initiativea nonprofit startup designed to connect donors with the impact their contributions are generating through the use of non-tradeable NFTs.
Over and over again in the qualitative feedback I discussed with Daniel, philanthropic organizations complained that blockchain tools, especially those that go beyond payments, are simply not fit for purpose and adoption has been difficult to implement and sustain. This is very similar to the type of discussions we have with corporate IT directors. They rarely have the budget to invest in complex new skills to add new technology.
Despite the slow progress and identified obstacles, I came away from reading the study and my discussion with Daniel with an optimistic attitude. For starters, the number of charities using blockchain technology is set to double in the coming years: 10% of respondents plan to implement blockchain technologies in the next one to three years.
Furthermore, only 4% of respondents are completely against the technology, which is frankly a miracle, given the level of fraud and corruption that emerged in the last cryptocurrency bubble.
Furthermore, the single biggest obstacle among the 72% of charities that have no implementation plans is simply a lack of education. For every benefit identified, such as lower costs or greater transparency, 80% of non-adopter respondents consistently lacked knowledge of the value proposition and the reason for implementation. This means no bias for or against, just a lack of awareness.
Having served at several nonprofits and served on the boards of a couple, I believe we need to solve the usability problem before we launch an awareness campaign. Most nonprofits operate on limited budgets and are very dependent on volunteers. They don’t have large IT departments and rarely have “innovation budgets” to draw from. Nonprofit adoption is a good test of the simplicity and reliability of the product.
While companies are not as tied together, we must recognize that corporate IT departments are not what they used to be. Fifty years ago, companies hired software developers and, more often than not, wrote their own software. Today, almost all corporate IT systems are based on ready-made packages and are managed by outsourcing contracts. The work in corporate IT is integration and process control, not new development.
To drive adoption, then, we need to replace complicated, blockchain-specific solutions with application integration models that companies already know how to use. This is starting to happen, as companies like PayPal, Stripe, Wise and others make cryptocurrency payments just another option in their standard offerings. At EY, we’re aiming for the same: standardized application programming interfaces (APIs) that companies use to connect to their applications for supply chain integrations and sourcing.
Perhaps best of all, it’s clear that an entire ecosystem of blockchain-focused philanthropic organizations has emerged to serve nonprofits around the world. AssignmentThe Giving Block, Gitcoin, GainForest, Charmverse, and others were all cited by study participants as facilitating adoption and achieving good results. The future of giving back looks pretty bright from here.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.