This is what blockchain technology is – and how it is changing nonprofits

Imagine a time not too far in the future when nonprofits could serve clients in completely new ways. 

A homeless person could access credit by leveraging his consistent interactions with outreach team members as proof of his ability to pay back a microloan. Donors could track their gifts from #GivingTuesday to implementation. The government could pay nonprofits through “smart contracts” that release funds as soon as services are provided – and no budget deficit, bank holiday or double-talking politician could stop it. Examples like these are how more and more people believe blockchain technology could revolutionize the nonprofit sector.

“It’s not just technical possibilities that make it better, but also ethical,” said Amanda Graham, COO and co-founder of Blockchain for Change, in an interview.

The New York City-based startup has implemented its own designs on shaking up homeless services through an app called Fummi. A pilot initiative is being pursued with Bronx-based nonprofit Part of the Solution, which uses an Android phone app to send and receive surveys to and from clients, which can then be used to better understand when and where to use resources, according to Graham.

“If the organization can get immediate feedback on how well they’re doing, more information about their user, but it’s done through the tip of a finger and on a phone, it makes it much easier and much faster,” she said. “And then more exciting for me is increasing communication and management.”

Startups have also taken notice of blockchain for servicing demands. Meetups have been held. New apps promise to shake up everything from accountability to customer service, and an optimism continues to spread across the nonprofit sector that blockchains will one way or another change how organizations operate – whether or not the technology fails succeeds or fails in other forms.

So how does it work? 

The most prominent use of blockchain technology is currently cryptocurrency. A user digitally stores her funds in a smartphone app. When she wants to make a gift to her favorite nonprofit, all she has to do is provide access to those funds through an online donation form. From her perspective, it’s not too different from how debit cards currently work. But for the vendor, it’s a whole new world. A group of computers don’t check in with Visa or Mastercard to receive the money, instead computers all over the word verify the provenance of the funds on a public ledger called the blockchain, which has previously received batches of already-processed transactions that form a link along the blockchain. 

Put another way, the blockchain is a series of digital accounting ledgers that everyone in a network can access and see. They can never be altered because that would upset the balance among what was recorded before and after during an immutable process. By chaining the transactions together, every transaction is more secure.

Though not everyone is optimistic about the effect that blockchain technology will have on the world, a consensus has emerged that it’s here to stay. Beyond the volatility of cryptocurrencies, privacy concerns about blockchain-published magazines and the seeming inevitability of greater economic efficiencies at massive scales, are the possibilities to better help people – but only after nonprofits and for-profit companies alike are willing to fail along the way, according to Jason Kaplan, general counsel at Blockchain for Change.

“There needs to be first movers and first actors to create this technology,” he said in an interview. “Maybe we won’t be here but there will be other people who will use the work that we have done, to create greater values for nonprofits, and for the users and the community.”