Over the past 12 months the cryptocurrency space has attracted a lot of attention. No doubt, you probably know someone who has invested money in bitcoin (or an alternative currency). Some have even managed to make a return on their investment. But the market volatility and the overnight millionaire stories have been a distraction from the technology that is driving cryptocurrencies. In the Internet of Things, this technology is referred to as blockchain.
Blockchain technology is difficult to define. I have simply come to understand it as a unique code that can be attached to any unit of online transaction. As more transactions take place, more ‘blocks’ are added to the unit which allows it to grow into a chain. As blockchain operates on a peer to peer system, everyone who takes part in the online transaction owns a piece of the code.
This makes blockchain unhackable.
Blockchain proponents firmly believe that the technology will make online transactions rapid and highly transparent. It will allow also companies to identify and iron out any inefficiencies within its supply chain. By doing so, they will be able to maximise profits, particularly, for those companies that have supply chains spread across the globe.
Sounds great for businesses. But what about NGOs? How will blockchain technology impact their daily operations?
For starters, blockchain has the potential to be a very powerful tool for NGOs. Because it’s ability to greatly increase the transparency of a supply chain, NGOs will be able to see exactly how a business operates and how it is structured. The increased transparency will mean that that companies who breach environmental and human rights standards will no longer be able to hide behind the shield of a complex supply chain (read here for a pilot program involving Tuna). People will have the power to trace the exact source of the products they are consuming, when and who picked it and if they were paid a fair wage. As blockchains are unhackable, companies will not be able to manipulate any information to cover up any unethical practices.
Blockchain technology will allow people to truly vote with their wallets.
The same goes for NGOs. Blockchain technology will cast the spotlight on how civil society actors operate. And this is something that has been flying under the radar.
The space where the technology will have the most impact is on the income stream of NGOs. Specifically, how donations from supporters are managed. In a blockchain world, people will be able to see how their donations are used. What percentage of the money is going towards the cause and what percentage is going towards administrative costs. There will be many people who will not care too much about this as administrative costs are a way of life for many NGOs. However, there will be people who will demand more efficient and effective use of their hard-earned money.
Perhaps, some supporters will decide to vote with their wallets and shift their support to alternate NGOs. There will be many NGOs who are not prepared for this level of transparency, even those with rigourous annual financial auditing and reporting.
The second disruption to NGOs comes from the ‘peer to peer’ aspect of blockchain technology. We already know that middle-men such as banks play a very limited role when it comes to trading cryptocurrencies (which is why many are unhappy). Just like banks, NGOs can be thought of as middle-men. They raise funds from the public and direct them to a worthy cause. However, in a blockchain world, supporters will be able to identify what is needed on the ground to make a project successful such as critical equipment, bypass the NGO, purchase the equipment and donate it instead.
For all its potential impacts to the NGO sector and online trading in general, there are a number of limitations to the widespread use of blockchain technology. Firstly, all the actors in the supply-chain will need to be on board with blockchain. If one actor along the supply-chain does not embrace the technology, then the chain will break. Secondly, as with all technology, those who cannot afford it will be left behind.
For those who can afford it, there is an argument that they will not have the time to go through the verification processes to ensure that their donations (and money in general) are being used appropriately. I disagree with this as I think that a tool will be built that will allow people to review their online transactions easily.
Blockchain technology offers an interesting opportunity to reimagine online transactions. It has the potential to significantly redefine how organisations operate by increasing the degree of accountability and transparency and making the information readily available to people. I do not think that many NGOs are ready for this level of scrutiny.