Slow, bureaucratic processes often hinder the efficiency of traditional charity institutions when tackling their causes. At the same time, budget crime and manipulation are the result of a lack of transparency when allocating donor funds.
Beincrypto spoke with Sandep Nailwal, co-founder of Polygon Labs and founder of Blockchain for Impact, about how blockchain technology can decentralize philanthropy, speed and transparency and remove the need for intermediaries.
Funds of mismanagement in traditional charity structures
Various events in recent years have emphasized the shortcomings of traditional models for giving charities. A lack of transparency in the donation process has created an environment where some non -profit organizations have not misused and spent budgets, leading to public control.
In 2016, for example, a CBS research shown that the Wounded Warrier project, a charity that is intended to connect American war veterans with sources for mental health care, has wrongly killed user funds.
Leaders have abused tens of millions of dollars of the annual donations of $ 300 million in extravagant editions. Former employees revealed that donations were spent on lush meals and stay in expensive hotels.
Only 60% of the funds were spent on experienced services. This reality arose after journalists had obtained the tax forms of the charity and sieved by piles of public registers.
The Wounded Warrior Project is one of the various organizations that are subject to allegations of the Fund for the wrong allocation. Other recent examples are the Cancer Fund of America, the Trump Foundation, the American Red Cross and the Kids Wish Network.
“The challenge in traditional philanthropy is that donors often rely on reports from organizations instead of having direct visibility in how funds are used.” Nailwal told Beincrypto.
According to a charity fraud investigation from 2024, conducted by the British company BDO, 42% of the 139 individual respondents reported bodies of fraud. Individuals within the charity have committed 50% of the fraudulent activity. At the same time, the most reported type of fraud was the eclipse of cash or assets.
Distiping cash or assets is an important cause of charity fraud. Source: BDO UK.
In view of these weaknesses, charitable organizations and non -profit organizations have turned to other mechanisms to ensure that donor funds successfully reach their sample causes.
Improving trust and efficiency through blockchain
In addition to his role as co-founder and executive chairman of Polygon Labs, Nailwal has launched various initiatives that investigated decentralized philanthropy. Nailwal has effectively applied blockchain technology to streamline the donation process through projects such as blockchain for impact, formerly known as the Crypto Relief Fund.
“Blockchain has the potential to improve philanthropy in two important ways: increase trust and improve efficiency. Nowadays, when you donate, you usually rely on the guarantees of an institution that funds will be used effectively. With blockchain, in theory any transaction can be registered, traceable and unchangeable – from donation to commitment – that bring the need for blind trust in light, “said Nailwal.
Blockchain can make the donation process more efficient by reducing the time between receiving and issuing funds. This is especially important for charities that devote themselves to time -sensitive causes.
“Speed is another important factor. In crisis response situations, such as natural disasters or pandemies, delays in fund distribution can have life -threatening consequences. Blockchain has been investigated as a way to take on this challenge by making faster and more transparent fund flows possible, ”Nailwal added.
Administrative obstacles often reduce the efficiency of fund management in traditional charities. In times of crisis, these bureaucratic delays can delay the assistance of the help. According to Nailwal, smart contracts can automate different mechanisms that contribute to these delays.
“In theory, smart contracts can make automatic payment of funds possible on the basis of real-world triggers-such as verified disaster reports or emergency situations that helps with the faster of emergency,” he said.
Some important charities have already started implementing these tools.
Traditional Charities Embrace Blockchain
Since 2015, the level of the Bill and Melinda Gates Foundation Blockchain’s decentralized ledger technology has applied, building on more than a decade of exploration to the potential of technology.
The Bill and Melinda Gates Foundation also launched Mojaloop in 2017 to serve the Unbanked. This open-source payment platform promotes interoperability between financial institutions, payment providers and other companies, as a result of which financial services are expanded worldwide.
In 2022, the UNHCR launched a blockchain -based payment solution for displaced Ukrainians after the Russian invasion.
This system supplies aid money directly to displaced Ukrainians via digital portfolios, giving them quick and safe access to funds. The pilot program uses USDC Stablecoin and makes cash recordings possible at Moneygram locations. According to the first press release from UNHCR, this effort is aimed at improving the delivery speed, transparency and accountability of assistance.
Despite these promising solutions, Nailwal remarks different issues must be addressed before fully decentralized philanthropy can be achieved.
Build a more resilient philanthropic system
Nailwal, a resident of India, launched the Covid-Crypto Relief Fund in 2021 during the Second Gulf of the Pandemie in India.
“During the COVID-19 crisis in India, we financed 160 million spraying for the India vaccination program via UNICEF, which means that we are completed in days, which usually takes months of international bank procedures,” Nailwal told Beincrypto.
Leading that initiative also showed Nailwal the barriers to implementing Web3 technology within charity organizations.
“Although we already implement some principles of decentralized giving – such as working with partners to provide efficient help – full decentralization remains an ambitious goal. There are regulatory, technical and operational challenges that must be tackled before blockchain-driven philanthropy can become mainstream, “he explained.
During the spray campaign in India, the long -term attitude of legal and financial frameworks for fund expression by traditional auxiliary mechanisms was clearly clear. Although Blockchain could have streamed the process, certain traditional steps were inevitable.
“While blockchain-based solutions were being investigated, the legal and compliance requirements meant that a hybrid approach was traditional banking mechanisms with fast response parties,” said Nailwal.
Although blockchain philanthropic transactions can streamline with more speed and transparency, the scaling of these solutions compliant remains a challenge.
As the regulations for blockchain technology continue to develop, the most proactive approach to integrating these tools in philanthropic organizations will require a mix of traditional and emerging frameworks.