Bitcoin Charity Concept

Bitcoin Charity Concept
100% transparent charity, made possible by bitcoins.

Version: Draft
License: Public

Overview

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.

100% Transparency

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 donors may donate publicly or anonymously.

Once the funds reach the charity organization, all outgoing spending must be:

Reach the final beneficiary in a limited number of transactions. We commend a maximum of 2 transactions
Recorded on the public bitcoin blockchain, with an unique identifier to the final beneficiary
With these two simple rules, they ensure all spending of the charity fund are publicly traceable, thus achieving full transparency.

Organization

A two-level charity organization shall be setup. The top level charity fund consists of one bitcoin address that receives funds from donors.

This top level charity then selects and donates to other charity organizations that work directly with final beneficiaries. The 2nd-level charities must follow the rules established here, if they want to receive the funds.

This is the reason we recommend max two-transactions for the funds to reach the final beneficiary.

Final Beneficiary

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 information such as why the person received the donation can be viewed publicly, while private information can only be accessed by a network of Certified Volunteers, who will be randomly selected to verify no fraud is involved. The identifier in this database will be recorded into the public bitcoin blockchain for each donation to any beneficiary.

Certified Volunteers

A network of Certified Volunteers is needed as described earlier. These volunteers will be managed by the top level charity and assigned randomly to ensure there is no fraud at the last mile. These volunteers are completely independent from the 2nd level charities and final beneficiaries.

Admin Costs

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 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.

Implementation

While the concept is straight-forward, a few tools will make the implementation and tracking of the bitcoin charities much simpler.

Tracking

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, up to 2-levels
If any transactions violate the rules set in place
% spending on admin costs

Beneficiary Database

A separate database shall be setup to track the beneficiary information, with the cause of receiving donation made public. Private information will be only accessible to Certified Volunteers.

Both of the above tools should require minimal implementation effort. The cost can conceivably come from part of the “admin costs” of the first bitcoin-based charity fund.

Summary

We hope with this simple concept, charities can easily achieve full financial transparency and do more good for the world!

Author(s):

Changpeng Zhao. First Draft. 2014/04/15

Credits:

Image taken from http://bitcoinsymbol.org (Free Art License)
This post is also available in: Chinese (Simplified)

If you want more information, please see the website: http://cpzhao.com/bitcoin-charity-concept/