Government should involve charities in blockchain experiments, says CAF

The charity sector could offer “great opportunities” to test new blockchain technology, according to the Charities Aid Foundation (CAF).

| 20th Jan 16

The charity sector could offer “great opportunities” to test new blockchain technology, according to the Charities Aid Foundation (CAF).

The Government’s chief scientific adviser, Professor Sir Mark Walport, has recommended the adoption of the technology that powers crypto-currency Bitcoin to improve various public services.

The distributed ledger blockchain technology, which effectively creates a perpetual chain of data ‘blocks’ that record all transactions in a permanent digital distributed ledger, could be used to boost productivity and improve the delivery of public services.

Some of the services Walport sees the technology being used for are tax collection, benefits, and issuing passports.


Unlocking the potential

Research carried out by CAF shows that charities could help to unlock the huge potential of these digital ledgers. The foundation suggests that blockchain could transform the work of charities in the following ways:

1)      Radical transparency: The public nature of the blockchain has significant implications for openness and transparency in any system based on it. This may open the financial dealings of charities and philanthropists up to unprecedented levels of scrutiny. This may offer benefits in terms of increasing levels of trust, but it will also present real challenges.

2)      Low or zero transaction costs: By removing the need for third parties to manage transactions and record-keeping, the blockchain can reduce or even remove transaction costs, thus saving money and enhancing trust and confidence amongst donors and supporters.

3)      New types of assets: Blockchain technology will open up the possibility of transactions in all sorts of assets where this was previously impossible or impractical. This includes donations. Whilst charities may struggle with the challenges of early adoption, there are potentially huge advantages to finding ways to harness this new technology and accept donations of digital assets.

4)      Sharing replaces ownership: The use of blockchain technology could lead to an exponential growth in the “sharing economy” by making the attribution and transfer of ownership fast, cheap and easy.

5)      Philanthropic smart contracts: The development of smart contracts holds huge potential for philanthropy. At the most basic level, it would be possible to include clauses in smart contracts which stipulate that donations are made if certain trigger conditions are met. For example, a company might set up smart contracts which specify that a percentage of profits above a certain threshold go to charity.


Involve charity experts

Rhodri Davies, programme leader of Giving Thought, CAF’s think tank, said: “From the point of view of charities, the support of government could provide a way to explore some of the huge potential of distributed ledgers. From the government’s point of view, the charity sector would offer great opportunities to test some of the applications of this technology to social issues without all the complexities of the public sector.

“We urge the government to involve experts from the voluntary sector when shaping their plans for experimenting with this exciting new technology.”