100% transparent charity, made possible by bitcoins.
Version: Draft, License: Public
Fiat-currency based charities suffer from a number of problems, most of which stem from the lack of financial transparency. These include: high “administrative” costs, inadequate use of funds, or pure corruption.
There are countless reports about bad charities today, this CNN report pretty much sums it up: http://edition.cnn.com/2013/06/13/us/worst-charities/
This lack of transparency causes lack of trust, further reducing willingness for people to donate to charity funds in general.
Bitcoin has a unique feature that solves the transparency problem. Every bitcoin transaction is permanently recorded in a public ledger, the blockchain. Using this property, one can create 100% financially transparent charity organizations. We believe this will have a positive impact on charity organizations around the world.
A few other properties of bitcoin will greatly benefit charity organizations as well. One, transactions are simple. One only needs a public address (like this: 1P3LfDBhaKct65PZhb1wPBgXn8ngxEtnMH) to send money. Two, bitcoins are borderless. Anyone in the world can donate to anyone else, regardless of country, language and banking barriers. Three, anonymity can easily be offer to the donators.
The rest of this paper will focus on transparency and attempt to outline an approach for fully transparent charity organizations.
The guiding principle for bitcoin-based charities is 100% transparency. This is the only responsible way to handle other people’s donation money. We feel this feature alone will outshine most existing fiat currency based charities.
How It Works:
The bitcoin blockchain is a public ledger. It is distributed, secure and permanent. It provides a perfect place to record donation transactions. The details of how the blockchain works can be found at: https://en.bitcoin.it/wiki/Block_chain.
The donators may donate publicly or anonymously.
Once the funds reach the charity organization, all outgoing spending must be:
- Recorded on the bitcoin blockchain
- Reach the final beneficiary in a limited number of transactions. We commend a maximum of 2 transactions
With these two simple rules, they ensure all spending of the charity fund are publicly traceable, thus achieving full transparency.
To ensure there is no fraud at the last mile, the final beneficiary must be uniquely identifiable to a person or entity. In the case of a person, the private information should not be disclosed to the general public for privacy reasons. A separate database can be setup so that public information such as why the person received the donation can be viewed publicly, and private information can only be accessed by a network of Certified Volunteers, who will be randomly selected to verify no fraud is involved.
Some charities require a certain level of administration costs to operate efficiently. This is not a problem as long as transparency is maintained for these costs. For example, if a Charity claims it requires 8% admin costs, it is now easily verifiable. It would of course be best if the Charity can maintain 100% transparency on how it is spending the admin costs too. The more transparent a charity is, the more likely they are going to get more donations.
While the concept is very simple, a few tools will make the implementation and tracking of the bitcoin charities much simpler.
A simple web or mobile-based tool can be setup to track any Bitcoin Charity address. The tool will be able to track:
- Donations has been received by the address
- Donations that have gone out from the address
- If any transactions violate the rules set in place
- % spending on admin costs
A separate database shall be setup to track the beneficiary information, with the cause of receiving donation make public. Private information will be only accessible to Certified Volunteers, who will be randomly assigned by the system to check on the beneficiary to ensure there is no fraud.
Both of the above tools should require minimum implementation effort. The cost can conceivably come from part of the “admin costs” of the first bitcoin-based charity fund.
We hope with this simple concept, charities can easily achieve fully financial transparency and do more good for the world!
Changpeng Zhao. First Draft. 2014/04/15 http://cpzhao.com/a-bitcoin-charity-concept/
Image taken from http://bitcoinsymbol.org (Free Art License)