Be honest, you don’t know what Blockchain is, or exactly how it works.
Facebook recently introduced Libra, a cryptocurrency built on blockchain and there are some very direct connections and implications for nonprofits.
Before we get to what this could mean for nonprofits, here is a simple introduction to blockchain, and to cryptocurrency.
What is blockchain?
At the highest level, it’s a decentralized, publicly available warehouse of transaction data. This warehouse relies on a vast network of computers to encrypt or “hash” the personal particulars, verify details and validity, and then add each transaction to a “block” that is inserted into the chain that connects all the blocks.
What makes this a more secure solution? Here’s a great explanation from Investopedia:
“Let’s say a hacker attempts to edit your transaction from Amazon so that you actually have to pay for your purchase twice. As soon as they edit the dollar amount of your transaction, the block’s hash will change. The next block in the chain will still contain the old hash, and the hacker would need to update that block in order to cover their tracks. However, doing so would change that block’s hash. And the next, and so on.
In order to change a single block, then, a hacker would need to change every single block after it on the blockchain. Recalculating all those hashes would take an enormous and improbable amount of computing power. In other words, once a block is added to the blockchain it becomes very difficult to edit and impossible to delete.”
Cryptocurrencies like bitcoin, Litecoin, Ethereum, and the aforementioned Libra are essentially digital currency. But, what really distinguishes cryptocurrency is the fact that it is not issued by any central party and therefore is not subject to regulation by any government or regulating authority.
Yes, that does make it a channel that seems custom built for money laundering – but we will ignore that for now.
[Sidebar] Does anyone out there watch Ozark? Somebody ought to clue Jason Bateman’s Marty Byrde character in on cryptocurrency – they can’t keep buying funeral homes and rundown resorts forever.
Satoshi Nakamoto is credited with inventing cryptocurrency, referring to it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
However, Satoshi may or may not exist. He hasn’t been seen or interviewed; Satoshi could be multiple people, or a pseudonym. But he is credited with writing the whitepaper that introduced the idea of bitcoin and clearly doesn’t want to be found… he’s encrypted himself. 😉
What makes Libra most interesting to those of us in the nonprofit space is the inclusion of a couple large nonprofits amongst the founding members: Mercy Corps and Women’s World Banking.
But what does Libra (or cryptocurrency generally) mean for nonprofits?
For one thing, moving money from the people who give to the people in need can be done quickly and with significantly lower processing fees, a huge benefit.
In developing countries where aid and support are most needed most, the unbanked or underbanked often comprise the majority. For context, here is a chart provided by the World Economic Forum.
According the World Bank Group, almost 60% of those without bank accounts cite lack of money as the reason.
There are 1.7 billion people in the world without bank accounts, but a percentage of these people do have inexpensive smart phones; the ability to get money to them and allow them to transact without the burden of fees could have a significant impact.
Do we need to start accepting cryptocurrency in our appeals? Probably not yet.
But the gradual integration of cryptocurrency into the global market and our day-to-day is certainly something worth watching.