The modern convenience of Alibaba enables rapid, on-demand consumerism that’s worth tens of billions of dollars. Virtually any material good can be ordered by mobile phone in minutes, with the payment deducted in a friction-less manner from the customer’s account.

Alibaba’s value doesn’t come from the warehouses of goods in its possession, but rather the software layer that powers it all. So what if Alibaba — and its competitors — turned the technological might that it used to develop modern Chinese consumerism over to developing modern Chinese charity?

A charity’s success is largely based on its transparency, accountability and availability to receive donations. Charitable institutions worldwide are no stranger to scandals, and potential donors are ever more skeptical about where their donations are ending up. The use of blockchain technology to facilitate the receipt and tracking of charitable contributions is emerging as a solution to this trust issue.

For the charity and philanthropic sector, blockchain presents two primary opportunities:

  1. Increased transparency of how donations are used
  2. New donation channels through cryptocurrency payments

In China, blockchain’s use case in the charity and philanthropic sector is almost entirely focused on the former.

bayu 4ZVqqDAZD2o unsplash
Blockchain can help improve transparency in charities, improving trust and efficiency

Transaction Transparency

According to the CAF World Giving Index 2018, China has the third-largest number of donors in the world. The increasing number of charity organizations and volunteers has also attracted donations from wealthy individuals and corporations thanks to tax incentives.

Pushing donation tracking to the blockchain would also help charities save on overhead. Hiring a reputable accounting firm to do an annual audit is an expensive endeavor. By having all of this data already on the blockchain, the auditor’s role would be greatly reduced to a mere formality for legal reasons.

The Chinese government, through the Ministry of Civil Affairs, has also shown its support of the adoption of blockchain technology within the philanthropic sector to boost the public’s confidence. According to its white paper published in September 2018, the ministry plans to “build a tamper-proof charity organization information query system and enhance the authority, transparency and public trust of information publishing and search services.”

This is largely in response to public outcry over allegations that the Red Cross extensively misused funds in its response to the Sichuan earthquakes in 2008 and 2013. The ministry’s action plan for 2018–2022 aims to use blockchain and other technology to improve transparency of social services and tracking of donations for charity.

A health care donation platform called Qingsongchou, for example, is using blockchain to create an autonomous and decentralized community of social entrepreneurs and organizations by licensing its digital fundraising platform for free to small social organizations. Social organizations use the platform to launch their fundraising campaigns independently, but access to the donations are restricted, and may only be received by their beneficiaries through peer-to-peer transactions. The platform has helped small organizations to improve their visibility and credibility to the public.

charl folscher iZ2v4FwtMLc unsplash
Beneficiaries of donations may have better access through blockchain-enabled charities

Private companies such as Binance, Alibaba and Tencent have also shown their support with regard to the use of blockchain for charity through the creation of their own charity platforms. In 2016, Ant Financial created a private blockchain to record charity donations linked to Alibaba’s online payment platform, Alipay. However, access to said platform was limited to Ant. Three years later, in 2019, Alibaba and Ant Financial launched Charities on the Chain (CoC), offering a blockchain donation platform to charitable organizations for free.

See related article: Kaleido CEO: How ConsenSys’ blockchain provider tackles production hurdles and data silos

The goal of these companies in China is not to promote the use of cryptocurrency, but rather donation authentication and tracking through blockchain. In an interview with Caixin Global, Alibaba said it would use CoC to track donations and prevent the fraudulent inflation of the amount of donations by donors, as well as the manipulation of the amounts received by charities. Tencent, on the other hand, has yet to release any system similar to CoC, but has promised to regularly monitor and audit the donations made through its own charity platform.

Trailblazing for Global Use Cases

In China, neither the government nor private entities seem averse to the potential risks of blockchain use. With the exception of cryptocurrency, China is embracing the technology and keeping itself a step ahead of the world with regard to practical uses of blockchain, and promotion of transparency and accountability in philanthropy.

Moreover, the use of blockchain in philanthropy has created a community-based model of charity that encourages participation from social organizations, businesses and the government to collaborate in improving social welfare.

Globally, firms from various industries are starting to adopt blockchain to optimize their operations and increase their profitability, but few are incorporating the technology for charitable endeavors. Netherlands-based Airbus, through its opensource project Heritage, is one of the few large companies outside of China to adopt a blockchain platform for philanthropy.

China is embracing the technology and keeping itself a step ahead of the world with regard to practical uses of blockchain, and promotion of transparency and accountability in philanthropy.

China is starting to reap the benefits of blockchain in its philanthropic sector, but the technology is still immature and has yet to be widely adopted. While transparency in charity is essential to increasing the flow of donations, collaboration from all sectors is still crucial. The distributed ledger technology is a tool that can improve accountability, but monitoring the data would still require human participation and government regulation.

At present, Chinese companies remain at the forefront of this innovation. This gives China the opportunity to showcase the best use cases of the technology to encourage more firms globally to exploit its practical use as well as for the promotion of social good and the success of humanitarian efforts.

This article is part of Forkast.Insights’ China Blockchain Report.