Crypto altruism: Applying blockchain to charitable and humanitarian activities

Abstract

Charities and humanitarian organizations have come under closer scrutiny over recent years. Highly publicized financial scandals, together with criticisms concerning the cost, effectiveness, and underlying motivations of certain charitable and humanitarian activities, appear to have corroded public trust. Can recent innovations in blockchain assist in improving nonprofit effectiveness and, through it, trust amongst donors, beneficiaries, and broader communities? This paper deploys a “cost of trust” framework to assess blockchain potential in reinforcing trust in charitable and humanitarian operations. Blockchain has been touted by its advocates as a potential solution for charities to reduce the cost of trust, by: (i) enabling observable funding flows; (ii) enforcing conditions regarding funding disbursement and use; and (iii) facilitating direct giving. Despite a growing number of use cases, limitations of this technology in reducing the cost of trust are also recognized in respect of complex relationships between donating and trust perceptions in heterogeneous environments.

Introduction

Blockchain is a distributed, digital, peer-to-peer ledger that records, verifies, and validates data on its shared database immutably, and in some instances without recourse to any centralized authority, or intermediary. Highly powered incentive protocols are used to securely verify timestamped data blocks entered on the blockchain, ensuring that all parties reach consensus about facts needed to propagate economic, financial, and other projects. In practice, blockchain systems may be taxonomized in relation to their cost, consistency, functionality, performance, security, decentralization, and privacy characteristics (Alston et al., 2022). At one end of the spectrum are permissionless (public) blockchains in which there are no restrictions on access and usage, whereas permissioned (private) blockchains are maintained by an administrator (or administrations) with rights to determine who may access and use the network.

Blockchain is widely touted as a ledger technology suitable for transforming the operational and governance environments of business and government (C. Berg et al., 2019). What started out as the technology underpinning the Bitcoin cryptocurrency has mushroomed into fields as diverse as financial management, personal identity, property titles, supply chain relationships, even voting. Irrespective of their backgrounds, ideals, and interests, people can leverage the blockchain to develop robust and self-executing online contracts, track payments from sender to receiver in real time, and launch new investment projects. It is unsurprising, then, that blockchain applications have attracted the attention of public administration researchers (e.g. Chohan, 2022). A field of interest concerns how blockchain affects relationships between government agencies and civil society actors, such as nonprofits. Public administration scholars working on co-production place a substantial role for nonprofits, not only in terms of services delivery but information provision (Li, 2021), and with blockchain providing potentials for better integration (and contestability, where appropriate) between civil societal and public administrative systems. The effect of technologies upon public administration, including the kind and quality of relationships with other actors within society, has broader implications for the preservation of societal trust (Holzer, 2022; Liu, 2008).

Blockchain applications have more recently extended to activities conducted by the both sizeable and diverse nonprofit sector, including charity, and humanitarian organizations whose missions are to fundraise and assist certain groups of people, such as the marginalized, poor, and vulnerable, in need. ¹ I refer to these activities as, collectively, “crypto altruism.” Estimates for the overall size of crypto nonprofit activities vary, but there is little question that significant levels of investment (including with cryptocurrencies) have been undertaken to investigate uses of blockchain to fulfill an array of charitable and humanitarian objectives (Rangone & Busolli, 2021). For example, the donation pool allocated to The Giving Block crypto platform alone was estimated at U.S. $69 million in 2021 (Giving Block, 2021). Significantly, charitable, and related, activities on the blockchain have been rationalized to address a perceived problem plaguing the sector: trust, or the lack thereof.

Over recent years growing concerns have been expressed about the trustworthiness of charitable and humanitarian activity and organization. These concerns relate to the management of donated funds, as well as the realization of meaningful social impact attributable (together with the credibility of impact reporting). Issues are raised about the potential misdirection, if not embezzlement, of donated funds flowing from donors to beneficiaries through a charitable or humanitarian organization. Several high-profile allegations, and confirmed instances, of funds misappropriation have been documented, and related questions over the acceptable level of internal administrative expenditures within charities and similar entities have been aired. The trust problem for charities have been indicated in opinion polling. A 2015 poll in the United States for The Chronicle of Philanthropy found that a third of survey respondents believed that charities do a “not too good” or “not at all good” job in relation to spending money wisely (Perry, 2015). Only 13% of respondents believed that charities do a “very good job” of spending money wisely. Hems et al. (2018) reported results from an Australian survey showing a steady decline in “high levels” of trust in charities. Similar survey findings have been disclosed for the United Kingdom (Plummer, 2018) and New Zealand (Horizon Research, 2016). Whilst some question the extent to which charitable and humanitarian trust is in a “state of crisis” (e.g. Chapman et al., 2021), this issue has, nonetheless, warranted considerable publicity and academic interest.

The concerns raised here potentially speak to the difficulties faced by donors, other key stakeholders, and even members of the public, to monitor and scrutinize intermediary charities and humanitarian entities. Metaphorically, trust building is seen to rely upon piercing the seemingly impregnable “veil” of the organizational boundary enveloping a charity, to better understand who is doing what with donated funds. There have been a range of responses to galvanize trust in the sector, including third-party certification of charitable and humanitarian activity and the disclosure of performance ratings for individual bodies (Christie, 2020). Public policy environments also enter the trust picture. In addition to complying with generic laws—such as financial disclosure provisions, and the like—charities and humanitarian organizations may be legally compelled not to distribute funds as dividends, implying that profits should be dedicated to meeting underlying social missions (Hansmann, 1980). Of significance is that suggestions of a problem of trust have arisen in institutional contexts characterized by extensive third-party, and other, efforts to promote trust perceptions.

Several academics and commentators have touted blockchain as a solution for reversing the purported degradation of trust, not only for charities but for other entities in the care and gifting space. Perspectives abound that blockchain provides “trustless” architecture to the extent that the reputedly tamper-proof features of blockchain is seen as substituting for vulnerable third-party enforcement mechanisms provided by corporations and governments (C. Berg et al., 2022; Nakamoto, 2008). Critics of this trustless narrative indicate that the need to trust is by no means eliminated by blockchain ledger innovation but, rather, that the locus of trust is supposed to shift from fallible third-party trust enforcers and toward such actors as blockchain developers and users (Bratspies, 2018; Werbach, 2018). De Filippi et al. (2020) states that the trust associated with blockchain correlates with perceptions of confidence in its technological affordances in keeping data secure for all participant parties. To clarify, blockchain does not eliminate trust, thus creating literally a “trustless” architecture, but provides a digital infrastructure that reduces the cost of trust by economizing on the need to maintain conventional intermediaries, in this case regulating or managing charitable and humanitarian causes and affairs.

To what extent is blockchain seen to be useful, or even appropriate, to address the trust problems associated with contemporary charitable and humanitarian activity? The ability to cryptographically seal new data entries, and to overlay that with a consensus mechanism across a network of computers that achieves agreement over the provenance of such entries, is posited to promote trust in blockchain over a wide range of applications. For charitable and humanitarian causes, specifically, an ability to observe, and track funding flows on the blockchain, to enunciate contractual conditions over the use of funds, and engage in direct giving using cryptocurrencies, are seen to potentially reinforce trust. However, it is important to recognize that the design and enforcement of any computational, institutional, or other strategy to increase trust (and decrease distrust) is not costless. Accordingly, this paper outlines the potential implications of blockchain for charitable and humanitarian trust using the “cost of trust” framework, introduced in the blockchain economics literature by Davidson, Novak, and Potts (2018). As will be illustrated, the use of this framework allows researchers to provide a nuanced assessment of blockchain’s applicability to charity and humanitarianism, including recognition of benefits, as well as tradeoffs and risks, in both operational and institutional contexts.

The structure of the paper is as follows. The next section will provide a brief conceptual overview of trust, including the cost of trust, and refer to recent academic and policy discussions about trust perceptions toward conduct and performance. This is accompanied by case illustrations as to how charity and humanitarian blockchain users have introduced operational and governance strategies that are interpreted as efforts to reduce the cost of trust. Next, I will provide a critical assessment with respect to the extent of blockchain applicability to the charitable and humanitarian sector. Certain blockchain applications may reduce the cost of trust for certain kinds of charities and humanitarian entities, a range of complex issues encourages a cautious approach toward the implementation of blockchain across the sector. These issues include the heterogeneous mission and coverage of charitable and humanitarian activities, diverse institutional environments, and variegated perceptions concerning the appropriateness and legitimacy of technological aids to charity. The final section of this paper concludes.

Trust and blockchain: A cost of trust perspective

Trust in charity and humanitarian contexts

Trust has long been recognized amongst social scientists as a many-splendored attribute of human existence. At personal and small-group levels of human interaction, high degrees of trust are seen to correspond with consilience of expectations in response to events in the world. Relatedly, trust is considered to facilitate the taking of risks and embracing vulnerabilities when pursuing mutually-beneficial outcomes, in the face of potential zero-sum, opportunistic harms by others (Gambetta, 1988). In the words of Ryan (2019, p. 3), trust “works to cross barriers and calm fears.” A now-abundant economic literature acknowledges the macroscopic significance of trust for ease of exchange and coordination and, through it, economic growth and development (Arrow, 1972; Berggren & Jordahl, 2006; J. Berg et al., 1995; Williamson, 1993; Zak & Knack, 2001). Trust may generically describe a state or condition wherein a person (or persons) has a belief in the reliability, truth, or ability of someone (or something) else to perform, realize, or undertake a given objective or task, whether it be tangible or intangible (Davidson, Novak, and Potts, 2018). Choi and Storr (2022, p. 467) briefly summarize trust in hopeful terms: “[t]rust can be defined as having faith in something or someone.”

The way trust concretely manifests itself is dependent upon the specialized and, indeed, multifaceted contexts through which individuals and groups conduct their affairs. In the context of educational studies, Bryk and Schneider (2002) distinguish between organic, instrumental, and relational guises of trust. Organic trust refers to a form of trust associated with unstinting belief in the authority and credibility of a person, organization, or institution that, in practice, is difficult (although not impossible) to contravene. Instrumental trust describes trust embodied in the specification and performance of contracts, and other forms of structured agreements, that can be reached even by non-intimates but which may be contravened by observable breaches of agreement or non-performance of promises. Relational trust, according to Bryk and Schneider, refers to senses of trust forged between persons actively engaging in social exchanges with each other, and who foster deep, yet oft-tacitly experienced, bonds of interpersonal relations. Additional trust categorizations exist in the literature—in addition to interpersonal trust, for example, institutional trust identifies the presence, or lack thereof, of trust in institutional forms, with factors such as accountability, integrity, and performance seen as central to effective (and trustworthy) institutions (e.g. Kavanagh et al., 2020).

From time immemorial, human beings have engages in acts of provisioning for both relatives, friends, and strangers alike. A critical aspect of provisioning for others is the act of charity, invariably underpinned by altruistic, humanist, philanthropic, solidaristic, and similar “other-regarding” motives, and which entail “those things which need to be provided if human life is to be secure, comfortable, happy, adventurous, dangerous, heroic, and whatever else we may want it to be” (Boulding, cited in Garnett, 2007, p. 18). Specifically, charity and humanitarianism usually involve social assistance (ranging from financial transfers, and in-kind goods provision) aiming at specific purposes, such as temporarily supporting needy and vulnerable individuals, families, and individuals, or more durably equipping beneficiaries with the resources and skills to enhance their capabilities. Crucially for the argument which is to follow, the space of applicable human action is incredibly diverse in character, spanning small, volunteer-backed organizations operating locally, or regionally to large, professionalized entities providing services on a national, as well as international, scale.

It does not require a stretch of the imagination to conceive that charitable and humanitarian activity fundamentally rests upon trustful behaviors and relations. The broader environment of mutual assistance is undoubtedly complex and heterogeneous, but many actors, nonetheless, provide funds, goods, and services in favor of many vulnerable constituencies, with vulnerability oftentimes exhibited intersectionally, and with beneficiaries exhibiting an array of sensitive, and deeply personal, emotional, financial, and physical dependencies and needs. To effectively cater to beneficiary needs not only requires great care and skill, but an ability to foster and retain trustful relationships along several dimensions. In addition to the need to build trustful relational intimacies with beneficiaries, charitable, and humanitarian activity also demands attention to contractual and institutional trust-building with, and (where appropriate) through, donors, regulators, and the community. It is here that effective charity and humanitarian work has placed great stress upon trust which, inter alia, can help build reputational capital not only for individual organizations but for the sector. As described by economists with research orientations focusing upon the dynamic attributes of markets, the nonprofit mode of charitable and humanitarian operation, and the concomitant lack of reliance upon profit-and-loss mechanisms for economic calculations, relies considerably upon reputation as a signal of credibility and, of course, trustworthiness before an assortment of societal stakeholders (Boettke & Coyne, 2008; Chamlee-Wright & Myers, 2008; Goodman, 2022).

Cost of trust, and implications for charitable and humanitarian conduct and performance

In the previous section I referred to the prospect of opportunistic behavior by any given party to a relationship, irrespective of their temporality or ephemerality. From a relational standpoint, the trust that person (or collective) A extends to, or is perceived to be inherent in, B is informed by an ex-ante conviction that B will not betray A, or otherwise fail to meet expectations, in the delivery of a (stated or implied) commitment to A. Throughout the process of a transaction, or other exchange, taking place, A’s trust in B places the former in a vulnerable position, for B can obtain strategic advantage by disproving A’s trust in some way. For example, A could provide B payment for a good or service that is indicated to be delivered at a future date, but B could abscond with the payment and fail to deliver, thus proving untrustworthy to A. Thus, upholding a position of trust of one in another, amidst the uncertainty of opportunistic behavior, is understood to entail risk: “trust is warranted when the expected gain from placing oneself at risk to another is positive, but not otherwise. Indeed, the decision to accept such a risk is taken to imply trust” (Williamson, 1993, p. 463).

Both as a matter of theory and empirical observation, maintaining an environment conducive to trustful relations requires the commitment of a range of resources. Not only do those seeking to extend trust to another, such as A toward B, need to invest efforts to learn about the past contractual performance, character, and disposition of exchange counterparties, but a range of commitments, initiatives, and strategies may be necessary to hedge against trust failures associated with opportunism—that tendency to exhibit “self-interest with guile,” as Oliver Williamson once artfully exclaimed. Obviously, the promotion of environments conducive to trust are not costless and, indeed, as illustrated by Davidson, Novak, and Potts (2018), the costs associated with upholding trust in a large, complex economy of potentially opportunistic non-intimates is sizeable. Accordingly, there exists a cost of trust that needs reckoning within the broader gamut of discussions, intellectual or otherwise, about trust and the techniques necessary to maintain it. ²

By no means does the cost of trust nullify the preceding discussions about the nature of trust. Identifying the cost of trust serves to illuminate a broad array of actions and practices aimed at upholding trust in others in the world. Individuals and collectives (including governments) expend resources on reporting processes, insurance and contractual enforcement, advertising, obtaining credentials and favorable reviews, and cybersecurity and surveillance. Charitable and humanitarian entities, too, expend resources to uphold trustful relations and to ameliorate the risk of encounters with opportunistic actors, with the expenditure of such resources typically accounted for as administrative overheads. Furthermore, a range of specialists are employed to not only maintain trust-inducing systems, such as IT security and auditing functions, but to signal trust and, with this, project credibility and good reputation, to specific stakeholders and the general public. Entities may also attempt to signal their trustworthiness by spending money, training staff, and purchasing equipment in order to receive quality certification from an array of third-party assurance or ratings agencies, with some studies suggesting that certification is associated with perceptions of high trustworthiness and greater donations (e.g. Adena et al., 2019; Gordon et al., 2009). Similarly, charities and humanitarian organizations may seek to maintain at least a presence on digital platforms, forums, and other media through which stakeholders can provide performance review ratings.

Intermediation itself may be interpreted as a strategic response to the cost of trust. It is supposed that trust in an intermediary (and, by extension, those involved in, or affiliated with, this form of organization) substitutes for the exhaustive, and presumably costly, need to iteratively establish trust with disparate individuals (Kingston, 2011). There are at least two ways in which an intermediary is purported to uphold trustworthy relations. First, the charity or humanitarian organization brokers between donors and beneficiaries with respect to undertaking a certain social mission and, in so doing, reduces the need for donors and beneficiaries to search for, and interpret, finely-grained information about the trustworthiness of each other. The entity not only attracts altruistically-motivated persons to perform caregiving, gifting, and so on, for the benefit of those in need, but recruits professionals to scrutinize individual claims for assistance on behalf of donors. Second, the nonprofit governance structure of a charity or humanitarian organization is intended to signal a desire to check against self-interested, opportunism in a domain necessitating other-regarded motivations and impulses: “[t]he nondistribution constraint is presumed to limit any self-interested behavior, leaving nonprofits as trustworthy suppliers working for the welfare of their customers” (Hughes & Luksetich, 2018, p. 121). This constraint is seen to incentivize the mobilization of a sufficient pool of donated finances to allow a charity or humanitarian organization to realize its social mission. ³ Irrespective of its rationale, the operative point to make here is that intermediation, too, is costly.

The cost of trust, and the numerous undertakings made to uphold trust, does not necessarily guarantee that individuals and collectives in the space of social support and assistance will conduct themselves in a manner that is uniformly estimated as honest and trustworthy. Criticisms have been leveled, for instance, toward certain, non-robust forms of quality certification and ratings systems which might either be interpreted ambiguously or be at risk of manipulation altogether (Litman, 2013; Mayo, 2022). Researchers have also identified the prosocial motivations or strong value orientations of donors, volunteers, and other participants toward the provisioning end of the charity and humanitarian domain as an explanatory factor for the limited effectiveness of certificates and ratings (e.g. Schultz et al., 2019). It has been noted that conscious efforts by charities and humanitarian entities to maintain trust may additionally have unintended consequences. For example, it is possible that providing comprehensive financial disclosures would arouse criticism (if not withheld donations) over the level of administrative expenses incurred by the charity or humanitarian body (Wong & Ortmann, 2016).

Charitable and humanitarian organizations have gradually come under the shadow of surveilling intermediaries aimed at reinforcing trust, in addition to the likes of accounting and auditing firms and “watchdog” ratings organizations as described above. Added to this “intermediary stacking” over charities and humanitarian entities are government regulators, scrutinizing the former to prevent individuals and groups taking advantage of individual charities and humanitarian organizations and key stakeholder groups (Ortmann & Schlesinger, 2003). As has been illustrated by recent scandals, the existence of regulation itself (and, in fairness, it seems various non-state responses) appears insufficient to nullify misbehavior and opportunism contributing to the degradation of trust. It may be speculated that such insufficiency may result from such factors as the failure of charity or humanitarian staff or external auditors to comply with (admittedly complex) regulatory edicts, or the inadequacy of oversight and enforcement functions by regulatory bodies (Christensen & Lӕgried, 2006; Christie, 2020, p. 12).

Charitable and humanitarian organizations are posited to be vulnerable to mismanagement along several fronts, including financial, governance, and operational. To the extent that mismanagement of donated funds, and general inefficiencies, are identified, this may contribute toward a growing public mistrust in charitable and humanitarian models of social funding and delivery. The consequences of such mistrust could be dire, as it may lead toward a potential “donation strike” by donors, or perhaps demotivating volunteers to participate, which may have broader ramifications including increasing fiscal pressure upon governments to allocate taxation revenues toward social welfare. The issue, then, arises as to whether there exists yet alternative, and potentially innovative, solutions to arresting the potential for a downward spiral in charitable and humanitarian trust? Is there a technological response to the decline in trust that is asserted to be affecting charities and humanitarian bodies, and could technology operate in such a manner as to assist in reducing the cost of trust? The next section illustrates how blockchain may be applied to charity and humanitarian organization in ways that could engender trust.

Charity and humanitarian blockchain use cases

Recent contributions have stressed that blockchain is a response to demands to solidify trustful relations, with a range of technical features underlying this ledger innovation identified as reducing the cost of trust (Allen et al., 2021). Others have noted that blockchain architecture and operation appear suitable to conducting charitable and humanitarian activities (Christie, 2020; Reinsberg, 2019; Thomason, 2018), with technological advances holding out the potential to resolve trust dilemmas in gifting and similar social exchanges (Silvestri & Kesting, 2021). In what follows, I will attempt to reconcile these literatures by highlighting overlapping categories of blockchain use cases in the charitable and humanitarian space, and considering how those cases serve to reduce the cost of trust. In essence, blockchain is purported to reduce the cost of trust for charity and humanitarianism by: (a) promoting observability of funding flows and discerning social impacts; (b) enacting programmable conditionality in respect to the use of charitable and humanitarian funds; and (c) facilitating direct giving to a range of causes with cryptocurrencies, including initial coin offering (ICO) project seed-funding vehicles.

Observability

One facet of the trust problem that is claimed to affect charities and humanitarian organizations surrounds whether those involved with such intermediaries can effectively hold them accountable for the activities they undertake, and their overall performance. After all, charities and humanitarian entities qua intermediaries appear just as susceptible to trust failings experienced by other third-party entities, emanating from fraud, hacking, misappropriation, organizational slack, and so on. An implication of this is that “[d]onors . . . never learn how much of the donation reached the recipient, that is, how much charitable output was produced. Similarly, donors cannot verify the accuracy of feedback charities provide about their work and therefore, neither competition between charities, nor repeated interactions with a given charity can reduce the problem. Intermediaries may exploit this fact to spend donations on inefficient administrations, or even embezzle money for their own personal gain” (Chlaß et al., 2015, p. 2).

An accountability agenda has become prominent over the years, with growing demands upon charities and humanitarian organizations to make operations more transparent to the donors who support them and the communities they serve (Keating & Thrandardottir, 2017). Serving as a distributed ledger for recording facts pertaining to the management of charitable and humanitarian projects, the blockchain is seen is some as a mechanism to radically enhance financial transparency to donors and other key stakeholders (both internal and external). As indicated by Aste and Tasca, “[b]lockchain can be used to time-stamp anything and provide a digital or digitalized asset’s proof-of-existence at a given moment. . . . Blockchain . . . by eliminating the imbalance of information among agents . . . allows the move from post-transaction monitoring to on demand and immediate monitoring” (Aste et al., 2017, p. 20). Blockchain-facilitated observability is considered to reduce the cost of trust by providing a means of verifiability to donors and other interested parties that promised actions are being undertaken, or that otherwise ex-ante commitments are being fulfilled by the charity or humanitarian organization. Other things being equal, an intermediary that is more transparent in its operations, by being open to scrutiny and verifiability to others, is likely to be perceived as more accountable to its various constituencies, and thus would be seen by parties it engages with as being trustworthy.

It is suggested by some analysts that blockchain traceability and mapping functions could assist to establish the impact of social-betterment experiments (Lindmark, 2018). This aligns with calls to identify (including in a quantifiable sense), or at least to learn more about, the social impact of charitable and philanthropic activities, as illustrated, for instance, by the rise of the “effective altruism” movement (Duda, 2017). Blockchain is said to allow donors to benchmark and compare different social impact projects, enabling them to make informed decisions about how to allocate scarce donations and philanthropic funds more easily. An ability to use blockchain to better quantify the effectiveness of charitable and philanthropic ventures is also hypothesized to lend greater credibility to the use of reputation as a feedback signal for generating donor interest within charitable and humanitarian spaces.

Many blockchain developers in the charitable and humanitarian space claim to provide users observability functions to track the movement and progress of their donations. Given this, I will focus on one selected example: GiveTrack the GiveTrack platform (https://www.givetrack.org) was launched by the Bitcoin-based charity, BitGive Foundation, the latter being the first entity of its kind to enjoy U.S. tax-deductible 501(c)(3) status. The platform enables third-party nonprofit entities to receive donations and provide transparency and accountability to donors by sharing financial information and project results in real time (GiveTrack, n.d.a). GiveTrack provides donors the opportunity “to transfer, track, and provide a permanent record of the global financial transactions, tracked from inception to completion” (RSK, n.d.), and, as a result, reduce opportunism through fraud, as well as errors, in respect to the allocation of charity and humanitarian funding. In addition, there is the potential for time savings associated with the transfer of funding from donors to beneficiaries (Shin et al., 2020).

Over two dozen completed projects are listed on the GiveTrack website—including hunger relief projects in rural South Africa, water infrastructure projects in Nigeria and Uganda, Bahamas hurricane relief, and Covid-19 emergency relief funding. Numerous other projects are in progress. Additionally, arrangements exist for donors participating on the platform to reassign their donations for their selected charitable and humanitarian projects which do not receive full funding (GiveTrack, n.d.b). Initially, the GiveTrack platform only accepted donations in Bitcoin which limited its funding coverage. With integration with a financial services platform known as Uphold, donors have been able to transmit and covert a wider range of cryptocurrencies, such as Ethereum, Litecoin, and Dash, as well as fiat currencies (Uphold, n.d.) for the types of charitable and humanitarian concerns noted here.

Conditionality

In addition to the greater scrutiny and verifiability of donation transfers, and the prospect of impact assessments of charitable and humanitarian activity, blockchain is said to allow for the conditional activation of funding releases either to identifiable beneficiaries or upon the achievement of certain milestones by a charity. Charitable and humanitarian entities participating on the blockchain have engaged to some extent with so-called “smart contracts,” which digitally facilitate, verify, and enforce recorded agreements (contracts) between individuals and groups (including organizations). Specifically, a smart contract is “a computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs” (Szabo, 1994).

Certain blockchain applications facilitate the bundling of smart contracts, organizing action by multiple blockchain users in accordance with shared rules and procedures as defined by smart contract specifications and underlying code protocols. These “decentralized collaborative organizations” (DCOs), grounded in an assemblage of blockchain-enabled smart contracts, record the identities of individuals who relate to each other, by virtue of agreement to the rules governing the scope of their agreements to collaborate and the terms on which they do so. The DCO rules could either be mediated by human beings, or cover the deployment of “algorithms that can self-execute, self-enforce, self-verify, and self-constrain the performance of the contracts” (Aste & Tasca, 2017, p. 19). To galvanize trust in blockchain-enabled charitable and humanitarian activities, the contractual terms binding DCO activity could include triggers preventing the spending of monies on activities contravening the terms of agreement. The DCO structure could, furthermore, be designed to de-activate upon the ex-post attainment of ex-ante agreed social impact outcomes, which is inclusive of attainment being verified by “off-chain” third-party assessors. All in all, the objective of blockchain conditionality is to reduce the cost of trust by providing assurance that donated funds are being allocated efficaciously, if not as originally intended by the donors.

Alice (https://alice.si) is an Ethereum-based blockchain platform founded in 2016, enabling funded projects operating through the platform to be monitored and assessed with respect to milestones and objectives. Charitable and humanitarian project proponents using Alice are required to specify their social goals, and participation on the platform depends on the condition that the achievement of the goals must be independently verified and validated (Alice, n.d.). Funds to be earmarked for given charitable or humanitarian causes are held in escrow until project validators (independent human auditors, or using automated data feeds to verify goals) certify the achievement of milestones (Alice, n.d., p. 26). Essentially, the Alice platform supports a nexus of smart contracts pertaining to how impact data for each charitable and humanitarian project is to be created and shared (Alice, n.d., p. 24).

Social impact information not only reduces reporting costs incurred by any given charitable or humanitarian concern but allowing Alice participants to identify socially impactful projects. An example of the platform in action was a pilot project in conjunction with London-based homeless charity St. Mungo’s, which aimed to assist 15 people to find homes. Donations made out in fiat currency were held in a segregated account and represented on the blockchain as tokens; once the impacts were verified St. Mungo’s received the tokens which could then be redeemed for fiat currency held in the segregated account (Vanderwal & Hellrung, 2019, p. 20). Donors to the homeless appeal could identify when goals were being achieved—namely, ensuring that assisted individuals found and maintained a tenancy, and received assistance for mental health and substance abuse matters—and trace when their donations were being transferred to the charity (St. Mungo’s, 2017).

The maturation of smart contracting is reflected in the availability of numerous alternative offerings in charitable and humanitarian conditional blockchain programmability. The Giftcoin Ethereum-based platform (https://www.giftcoin.org) dually provides for a cryptocurrency that can be purchased by donors and whose transactions are amenable to monitoring by users, and disbursement of funds to charities contingent upon an impact verification process. Giveth (https://giveth.io) operates a nexus of smart contracts through the Ethereum blockchain, with donated funds released gradually to end-charities upon the agreed achievement of beneficial social impacts. Promise (https://www.promisegiving.com) and Endaoment (https://endaoment.org) are other examples of how blockchain platforms are constructed to facilitate conditional funding flows from donors to beneficiaries, such as charities and other nonprofit organizations.

Direct giving

The flow of finances and real assets in the charitable and humanitarian sector is predominated by management and handling by numerous third-parties. Assistance sent from donors to beneficiaries is presently filtered through charities and humanitarian organizations, but with involvements by financial institutions, government agencies, legal entities, accountancy firms, and so on. Flows of donations through clusters of intermediation increases costs, with concerns that full original donation amounts are being eroded by administration fees and charges through the charitable-humanitarian supply chain. The multiple handling of donations and other forms of aid also increases the risk of theft and fraudulence, with monies ultimately not being received by vulnerable people in need as originally intended by donor communities.

The generation and transfer of cryptocurrencies within blockchain not only potentially allows for cost reductions by removing the host of fee-extracting intermediaries conventionally associated with charitable and humanitarian conduct, but may avoid the security breaches often identified with vulnerable intermediaries in financial, legal, and regulatory systems. Participants in blockchain networks could directly transfer donations to others, regardless of location (Kshetri, 2017; Reinsberg, 2019), using cryptocurrencies such as Bitcoin, Ethereum, Tether, or Binance Coin, inter alia, or may participate in the work of a charitable or humanitarian DCO with the capacity to refrain from interactions with third-party organizations. Blockchain charity and humanitarian groups may have the effect of reducing the cost of trust by bypassing the established legacy, and potentially high-cost, intermediaries within the financial system that have shown themselves to be vulnerable to security risks. Furthermore, trust could be motivated should the application of direct giving through blockchain prove itself effective over time.

There have numerous developmental efforts in crypto space to introduce cryptocurrencies dedicated toward charitable and humanitarian causes, with the expectation that the combination of donor interest and value appreciation would provide a growing funding pool for the needy. One example of direct giving through the blockchain is provided by AidCoin, a fungible token supported on the Ethereum-back AidChain platform. The ICO was launched in early 2018 to support the development of AidChain, that aims to provide an ecosystem of services for nonprofit organizations, and the maximum amount of AidCoin tokens to the supplied is 100 million (AidCoin, n.d., Details of the charitable and humanitarian purposes facilitated by AidCoin, including reports on the tracked achievement of pre-determined milestones, are reported to users of AidChain.

Numerous intermediated blockchain solutions have been devised enabling charitable, humanitarian, and similar nonprofit organizations to accept funding in cryptocurrencies. Referring to an example cited earlier in this paper, The Giving Block (https://thegivingblock.com) is a blockchain platform supporting in excess of 1,000 organizations—as varied as the American Cancer Society, World Vision, YMCA, and more—to accept cryptocurrency donations, as well as provide strategic consulting and other forms of support to assist charities and humanitarian organizations maximize value from their donations (Giving Block, 2021). The range of cryptocurrency transactions supported by the Giving Block include Bitcoin, Ethereum, and Litecoin, and this portfolio choice provides charities and humanitarian concerns with an opportunity to ameliorate some of the risks of volatility affecting any given cryptocurrency. ⁴

The strategic orientation of Giving Block is to assist charitable and humanitarian organizations to bypass cumbersome and vulnerable methods of financial intermediation and, in doing so, provide alternative sources of funding. Consistent with this, the platform is also experimenting in the acceptance and disbursement of funding associated with donated non-fungible tokens (NFTs)—including hosting online auctions of NFT artifacts for charitable and similar causes. It is estimated that in 2021 over U.S. $12 million in donations were made from known NFT projects to dozens of charities through the platform (Giving Block, 2021).

The maturing environment of cryptocurrency operations has also led to some major charitable organizations to directly accept cryptocurrency donations. Prominent entities such as Red Cross, Save The Children, The Water Project, UNICEF, and United Way have adopted this approach in recent years (UNICEF, 2020; Waltman, 2019). Save The Children have been one charitable organization standing as an early adopter in the crypto space, accepting cryptocurrency donations as part of their response to Typhoon Haiyan, which devastated The Philippines in 2013. More recently, Save The Children have launched an emergency appeal to assist children affected by Russia’s invasion of Ukraine, and this includes acceptance of over 60 kinds of cryptocurrencies including Bitcoin and Ethereum (Templeman, 2022).

How effective will blockchain be in reducing cost of trust: On the need for context

By all accounts, the size and depth of the crypto altruism ecosystem is not economically trivial. The diversity of use cases in existence, including the selective sample outlined in this paper, suggests that a range of actors are willing to experiment with blockchain in efforts to reduce the cost of trust associated with charitable and humanitarian activity. Drawing upon insights from institutional economics, blockchain may be more fundamentally conceived as an infrastructural technology enhancing cooperative efficacy amongst those dedicated to promulgate charitable and humanitarian objectives (Nair & Sutter, 2018). However, in the appraisal that is to follow, blockchain is not elevated necessarily as a panacea for negotiating trust issues within the charitable and humanitarian sectors, given the heterogeneity of assistance, care, and gifting behaviors in modern, complex societies together with some technical limitations of blockchain.

A distinctive feature of the charitable and humanitarian domain is the sheer extent of variegated projects and ventures occurring across time and place. Martin and Petersen (2019, p. 7) speak of poverty alleviation effort as a “socially embedded phenomenon associated with difficulties related to physical and mental health, social networks, cultural norms, access to legal services, political influence and public services.” Acts of charity and humanitarian, more broadly, are typically grounded in voluntaristic means of provisioning catering for diverse preferences and contingent knowledge: “[i]n the end, a good society is not so much the result of grand designs and bold decisions, but of millions upon millions of small caring acts, repeated day after day, until direct mutual action becomes second nature and to see a problem is to begin to wonder how best to act on it” (Cornuelle, 1983, p. 196).

These reflections lend themselves to appreciating the radical complexity of charitable and humanitarian activities. Beneficiaries, whether they be individuals or groups, have specific needs and interests, as do donors and other stakeholders, but what those differences are will vary across situations. Added to this is the idea that different actors involved with charity and humanitarian entities will possess finely-grained, and differential, knowledge and perspectives about what problems exist that need solving, and variegated perspectives about effective means to resolve problems. Furthermore, perceptions of need are likely to change over time. Part of the trust offering of blockchain is that it records ineradicable facts on the ledger, as well as provide potential for conditional smart contracts. These attributes could prove problematic, or render blockchain irrelevant, for certain charities and humanitarian organizations aiming for great flexibility and responsiveness toward fluid, indeed uncertain, conditions of need on the ground in which the informational environment may be subject to frequent and drastic change.

As for smart contracts it is not clear that these arrangements can necessarily achieve a reduction in the cost of trust by eliminating the need for intermediators from the auditing and oversight scene. As suggested by the preceding case study descriptions, the convenors of certain permissioned charity and humanitarian blockchains have involved intermediators, even traditional charities, to assess the achievement of agreed social impacts, ex ante, prior to final funds transfer from donors to beneficiaries. The inability of blockchain to automatically extract data, including impact outcome information, from the world thus has necessitated the deployment of “oracles”—for example, human assessors, or artificial assessment as provided by data algorithms—for the important act of verification (Becker & Bodó, 2021). Even so, it is difficult to instrumentalize or quantify charitable and humanitarian impacts, especially using a singular measure, and patterns of causality may obviate abilities to attribute social impact specifically to an identifiable act of charity or humanitarianism. These issues may hamper efforts to establish credible, or full-proof, smart contract protocols in charitable and humanitarian environments.

Diversity in charitable and humanitarian spaces is not merely reflected in the recent impetus to establish a blockchain presence. A sense of animus toward traditional charities, which have been widely reported as being susceptible to financial and other misadventures, may also culminate in the development of highly informal, “street level” guises of social assistance, such as mutual aid, commoning practices, and solidaristic supports (e.g. Spade, 2020; Varvarousis, 2020). It is conceivable that participants involved in these counter-hegemonic forms of charity and humanitarianism would largely be inhospitable toward perceived “surveillance” and “panoptic” tendencies surrounding blockchain, particularly efforts to reduce the cost of trust through improved observability (Howson, 2021). Depending upon the circumstances, blockchain (or other kinds of) observability could demotivate giving and volunteering, as it is interpreted as a signal of low trust (or distrust) between parties (Ferrin et al., 2007). In general terms, it is possible for co-participants in charitable and humanitarian contexts to arrive at their own mutually agreeable arrangements, at a level of scale acceptable to them, with accompanying (blockchain or non-blockchain) transparency and related protocols in place as they see fit.

As described in this paper, understanding trust requires an acknowledgment of the human element of respectful relations in which promises are kept, and expectations met. Notwithstanding empirical efforts to itemize the cost of trust (Davidson, Novak, and Potts, 2018), ultimately the cost of trust is properly appreciated as a subjectively-perceived phenomenon on the part of individuals who choose to bear which kinds of cost burdens in order to uphold trustful relations, and to what extent they seek to do so. This subjective basis underpinning the cost of trust is consequential, given that the “trust proposition” of blockchain is confidence or faith in humanly-constructed technological artifacts together with human action conducted using the artifacts. Regrettably for crypto advocates, blockchain, too, appears to be affected by trust problems, with evidence of data fraud and token thefts on crypto exchanges, certain permissioned databases, and other prominent blockchain spaces (Hendrickson, 2022; Ramaswamy & Lurie, 2022; Werbach, 2019). For participants involved with charitable and humanitarian causes, the potential for blockchain to economize on the cost of trust using traditional systems must be counterweighed by the potential for trust failures particularly in non-permissionless blockchain domains. Different individuals and groups will presumably possess different subjective assessments about the merits of blockchain risks, which may be combined with other factors such as confidence with navigating ledger innovations, and so on.

If we accept that the cost of trust is a subjectively perceived phenomenon, assessments over the applicability of blockchain to charity and humanitarianism will vary from one participant, or group, to another. In this context it is useful to acknowledge key limitations and trade-offs in galvanizing trust in charitable and humanitarian activity, owing to the unique operational and institutional contexts in place. Whilst the preceding considerations suggests the need for consider blockchain adoption carefully, this is not to be interpreted as an absolute case against blockchain. As blockchain economists have indicated, blockchain may be suitably interpreted as a technological instantiation of a broader process of experimentation and learning that is part and parcel of a dynamic, open society (Alston et al., 2022; Davidson, de Filippi, and Potts, 2018).

Blockchain as a discovery procedure with respect to operations and institutional governance helps people discover what will work well in which charitable and humanitarian contexts, and what does not. Furthermore, individuals can discover who will (and will not) use this technology to serve others well in a variety of social provisioning contexts (Choi & Storr, 2022). Consistent with this, scholars have recognized that the growth and development of blockchain itself is also seen to approximate a complex, nested polycentric order populated by multiple centers of activity and decision-making (Alston et al., 2022). Whilst the process of discovering how blockchain may be used to promulgate crypto altruism, and through this reduce the cost of trust, is not guaranteed to be error free, this very same process provides opportunities for charitable organizations, foundations, and related civil societal entities to experiment and learn about how to better use blockchain affordances (including emergent development, and self-enforcement, of rules, and codification of trust) to aid others (Rozas et al., 2021).

As a final note, the ability to be alert to discoveries, and the capacity to formalize them, is also influenced by the degree of policy accommodation toward blockchain. A more “crypto-friendly” policy environment, all else being equal, is likely to correspond with a willingness of charitable and humanitarian organizations to perform blockchain experiments, and to find new strategies and techniques conducive to reducing the cost of trust (Novak, 2019). The connection between the extent of crypto altruism and the state of blockchain policy is an area ripe for future research, as are broader inquiries using blockchain as an intellectual pivot to connect nonprofits and public administration research.

Explication of the cost of trust as it affects the crypto altruism space suggests additional research opportunities. To what extent do individuals with prosocial motives and strong value orientations become involved with blockchain projects, and how so? What are the impacts of blockchains upon the recipients of assistance and giving? Do certain blockchain practices compromise recipients’ senses of agency and empowerment? How do nonprofits and similar entities contend with risks associated with blockchain orchestration of disbursements to recipients? Do efforts to use blockchain displace, along various margins, conventional practices that are widely regarded as building trust, such as face-to-face network building? There may be further opportunities to longitudinally examine blockchain practices by charitable and humanitarian concerns, as well as comparative analyses regarding the cost of trust borne by blockchain participants versus those entities which continue to abstain.

Conclusion

Blockchain has increasingly intersected with charitable and humanitarian activities, forming the basis of an emergent crypto altruism. This development is not only owing to innate human curiosities to experiment with what is new and attracting attention, but is considered to reflect a specific concern to arrest perceptions of declining trust in charity and humanitarian ventures. Although opinions vary about the extent of trust problems in this area, there is a school of thought that charities and humanitarian organizations are suffering a decline in trust and that remedial action needs to be taken to reassert trust. However, trust is costly to achieve, let alone maintain, and so specific remedies must reckon with the cost of trust amongst a broad array of considerations.

The involvement of charitable and humanitarian organizations on the blockchain is articulated in this paper to potentially reduce the cost of trust, at least relative to existing intermediation, reputational signaling, and other costly forms of upholding trust. Firstly, the transparent sharing of data on blockchain is considered to promote observability of donations, providing an element of rigor to the earning of reputational capital by charity, and humanitarian outfits as well as facilitating disclosure about social impacts. Secondly, smart contract protocols available through certain blockchain platforms are seen to encourage the codification of conditions with respect to charitable and humanitarian funding, thus providing additional assurance that funds go to their intended targets. Thirdly, and finally, an array of natively-generated crypto assets can be used to manage charitable and humanitarian funds through the blockchain, and without recourse to costly, yet vulnerable, financial institutions, regulators, and other third parties that have subverted trust in the eyes of some blockchain participants.

There is little doubt that crypto altruism is increasingly taking hold within the broader charitable and humanitarian space of activity, governance, and operation. Whilst several blockchain developers and users have grasped their opportunities to achieve social objectives, the beneficial impacts of blockchain for a range of nonprofits seems to remain elusive. Technical limitations associated with humanly designed and maintained blockchain systems have persisted, and, in any case, it is presumed that blockchain would be relatively unattractive to certain charitable and humanitarian concerns seeking to provide alternative forms of largely non-digitalized care and support for others. All in all, blockchain may not be the one-size-fits-all trust solution for all applications to date, but what it has provided is depth and complexity to the architecture of social provisioning. At the very least, distributed ledgers are likely to contribute toward societal understandings about the technological underpinnings of charitable and humanitarian efforts in the 21st century.