The biggest innovation ushered into the financial industry by blockchain technology is the permanent digital ledger. For financial transactions, such a tool has obvious applications, but for industries that depend on the legitimacy and public accountability of their financial information, blockchain technology has the potential to create considerable change.
The key element in the charity blockchain is the ability to tie contributions to benefits. For example, if a contributor wants to buy food for a family through their local charity, a blockchain-enabled ledger would not only allow them to authenticate their contribution, but it would also allow the charity to demonstrate those funds were utilized for their stated purpose.
Such real-time and distributed proof of charitable benefits for a community could go a long way towards improving the image of the charity and the sense of general welfare of both citizens and government leaders.
Clear Tax Benefits
What most people don’t realize about blockchain is the fact that it can link any number of entries in a digital ledger. What if it were possible to link a contribution to a charity, the charity’s use of those funds, and the government regulation that allows the contributor to take a tax benefit?
Such a ledger entry would preserve all the information relevant to the contribution at that precise moment in time; something even accountants with decades of experience might have trouble doing, especially if they are trying to reconstruct accounts from months or years past.
When a charity makes a public request for support, being able to show potential contributors a continuously audited and secure record of every dime that has gone to beneficiaries is priceless. Again, that third level of verifiable data comes into play when that pledge becomes part of the ledger.
Consider crowdfunding. What if the expenditures were tracked on a continual basis like the contributions? What if that could all be accomplished on a non-profit basis with tax advantages attached? The possibilities are rather compelling.
Like the IBM PC of the early 1980s, blockchain technologies are in their infancy. There can be no doubt they will improve rapidly. While it remains to be seen how it will advance and bring new innovations like digital currency, distributed record-keeping, and data mining into the charity world, the technology’s applications for financial transactions are both clear and practical.