Blockchain Technology for Nonprofit Organizations
By Pragnya Jaychandra Dhamigari
What is Blockchain technology?
Blockchain technology (a type of Distributed Ledger Technology — DLT) is a structure that stores transactional records, also known as the ‘block’, of the public in several databases, known as the ‘chain’, in a network connected through peer-to-peer ‘nodes’. Typically, this storage is referred to as a ‘digital ledger.’ Every transaction in this ledger is authorized by the digital signature of the owner, which authenticates the transaction and safeguards it from tampering. Hence, the information the digital ledger contains is highly secure. In simpler words, the digital ledger is like a Google spreadsheet shared among numerous computers in a network, in which, the transactional records are stored based on actual purchases. The fascinating angle is that anybody can see the data, but they cannot corrupt it.
As explained by Deloitte (as an example): You (a “node”) have a file of transactions on your computer (a “ledger”). Two government accountants (“miners”) have the same file on theirs (so it is “distributed”). As you make a transaction, your computer sends an e-mail to each accountant to inform them. Each accountant rushes to be the first to check whether you can afford it (and be paid their salary “Bitcoins”). The first to check and validate hits “REPLY ALL”, attaching their logic for verifying the transaction (“proof of work”). If the other accountant agrees, everyone updates their file. This concept is enabled by “Blockchain” technology.
So, to understand ‘Blockchain technology’, we need to understand what a bitcoin is.
What is a bitcoin?
Bitcoin is, according to its whitepaper, a ‘peer-to-peer electronic cash system’ that ‘allow[s] for online payments to be sent directly from one party to another without going through a financial institution.’ Bitcoin made digital transactions possible without a “trusted intermediary.” The technology allowed this to happen at scale, globally, with cryptography doing what institutions like commercial banks, financial regulators, and central banks used to do: verify the legitimacy of transactions and safeguard the integrity of the underlying asset.
Bitcoin is a decentralized, public ledger. There is no trusted third party controlling the ledger. Anyone with bitcoin can participate in the network, send and receive bitcoins, and even hold a copy of this ledger if they want to. In that sense, the ledger is “trustless” and transparent.
The Bitcoin ledger tracks a single asset: bitcoin. (Note: “Bitcoin” capitalized refers to the Bitcoin ledger, or protocol, while “bitcoin” in lowercase refers to the currency or a unit of account on the Bitcoin ledger.)
The ledger has rules encoded into it, one of which states that there will only ever be 21 M bitcoin produced. Because of this cap on the number of bitcoins in circulation, which will eventually be reached, bitcoin is inherently resistant to inflation. That means that more bitcoin cannot be printed at a whim and reduce the overall value of the currency.
All participants must agree to the ledger’s rules to use it. Bitcoin is politically decentralized — no single entity runs bitcoin — but centralized from a data standpoint — all participants (nodes) agree on the state of the ledger and its rules. A bitcoin or a transaction can’t be changed, erased, copied, or forged — everybody would know.
Efficiency and reduction of complexity:
It has been observed in multiple deployments that the use of DLT serves to reduce complexity and increase efficiency. It allows for better tracking of assets and transactions. It can serve to significantly shorten timelines and automate paperwork laden manual tasks thus making processes rapid and simple. This is achieved through removal of data silos and establishing direct, traceable, and secure interactions between stakeholders.
DLT enables the creation of digital platforms where the benefits from network effects and shared digital infrastructure do not come at the cost of increased market power and data access by an intermediary. This reduction in the cost of networking has profound consequences for market structure, as it allows start-ups and open-source projects to directly compete with entrenched incumbents through the design of platforms where the rents from direct and indirect network effects are shared more widely among participants (e.g., developers, users, investors), and no single player has full control over the network.
DLT in Healthcare:
In the health environment, data collection, recording and analysis is even more delicate since health data is considered as a special category of sensitive personal information. Health data is often organized into silos to preserve patients’ data. However, silos contribute to information asymmetry, which generates both an imbalance in market competition to provide services and a lack of information sharing for proper patient diagnosis. This lack of information sharing results in slower diagnosis, more expensive testing, insecure data transmissions between silos and incomplete records.
To solve these problems, the concept of DLT can be used to make the patient the unique and exclusive owner of their medical data, thereby reducing the number of examinations, procedures, and overall costs incurred. Interoperability is fundamental to support this patient-centric model which would allow for greater security while decreasing the need for trust between service providers.
In this context, DLT technology has emerged as a path to application development that enables interoperability between systems by securing reliable information.
DLT for non-profit sector:
DLT can be used to accept digital donations in the form of popular cryptocurrencies, including Bitcoin and Ether. These digital donations can be directly sent to beneficiaries while bypassing issues associated with poor banking facilities, lengthy bureaucratic processes, and international conversion fees. A case study example is Oxfam Australia’s cash disbursement program in Vanuatu. In this program, the beneficiary is provided with a voucher that can be exchanged for emergency supplies with an Oxfam-partnered vendor. Once the exchange has occurred, the vendor records this transaction on the blockchain-powered application using their smartphone. This system then enables Oxfam to accurately track the donation transactions in real-time, such as how many blankets were purchased by beneficiaries and which vendors later need to be compensated.
Literature suggests that the DLT may enhance several key improvements in the traditional donation supply chain process, including transaction speed, donation liquidity, economic power redistribution, and administrative cost-savings. DLT can enhance provenance for non-profits by enabling donations to be accurately traced dollar-for-dollar in real-time at every stage of the supply chain process.
DLT may assist non-profits in accounting for their donation activities, along with other resource allocation tasks routinely conducted in their social missions. Some of these resource allocation tasks include: (1) volunteer and employee task assignment (e.g., as piloted by the Australian Red Cross, in conjunction with crypto-software developer, (2) identity management systems for beneficiaries (e.g., as piloted by the United Nations in conflict areas and war zones); (3) supply chain tracking of perishable goods (e.g., rice, tuna, and coffee beans) for vulnerable farmers (e.g., as piloted by the World Wildlife Fund in conjunction with crypto consulting firm, ConsenSys, and (4) micro-financing assistance for minority groups who would otherwise lack financial inclusion, such as women in developing nations (e.g., as piloted by Bitpesa in Sub-Saharan Africa, and discussed by the Women’s World Banking Global Network). Research is further underway to understand how DLT can be used to improve stakeholder trust by preventing misconduct and such allegations.
Ms. Pragnya Dharmigari is a Master’s Candidate at New York University. She is volunteering with the Sickle Cell Thalassemia Patients Network (SCEPN) while she completes her degree in financial engineering. We are fortunate to have someone who can skillfully help us share our interests in blockchain, AI, and other tech topics. Stop by again for more articles from Pragnya.
SCTPN is an nonprofit organization providing advocacy, care coordination services, and support interactions for individuals living with sickle cell disease (SCD) and their families. SCTPN is committed tor raising the public profile of sickle cell and offers a Public Outreach & Education Service (POES) program.
To learn more about the Sickle Cell Thalassemia Patients Network, its programs and services, visit https://sctpn.net. Follow SCTPN on FB @SCThalPatientsNetwork (timeline), FB Page @SCTPNWalk, Twitter & IG @SCTPN.
