In 2015, $373.25 billion was given to charitable organizations. That’s 2.1% of the world’s GDP. While that’s an impressive figure, there’s still room for improvement. Charity DAO, created by Slock.it, would like to increase the efficiency and transparency of charitable donating. They plan to do this through utilizing a decentralized governance structure, based on Ethereum. A decentralized autonomous organization, or DAO, is like a traditional corporation, except there is no centralized board of directors. Everyone involved in a DAO votes on the direction of the organization.
Charity DAO plans to use this structure to improve on the current model most traditional non-profit organizations use. Using a DAO style of governance, there is no central administration, so fraud and embezzlement risk is mitigated. By hosting the organization, and everything it does, on Ethereum’s blockchain, every move they make is public and highly transparent. Through Ethereum’s smart contract technology, donors will know exactly where their money is going, and even when it’s going. The automated nature of computer code-based smart contracts means there’s less potential for human error.
One of the biggest benefits of hosting a charitable organization on the blockchain would be the elimination of management fees. With no salaries to pay, donor money goes directly to charitable causes. Charity DAO has no core operating costs, and they’re being bootstrapped by pro-bono individuals, so it truly is a not-for-profit charity.
Charity DAO would function in the same way most DAOs do: through voting. Donors remain in control of their funds at all times. They are able to vote directly, or through a nominated delegate, on what projects they want to fund. Charitable projects will be vetted and approved by a set of trusted curators. These projects will then commit themselves to a payment schedule controlled by smart contracts, being able to specify daily, weekly, monthly payments, or whatever they code into the smart contract. A major benefit of hosting all of this on Ethereum, due to the nature of digital currency, is fast, worldwide transfer of value. By cutting out banks, fees are eliminated for international transactions, and money is able to be sent almost anywhere, very quickly.
Charity DAO isn’t the first organization to have this idea, and they’re well aware of other projects in the Ethereum community. They’re actively looking to cooperate with startups like Giveth, benefactory.cc, and alice.si. Each of these organizations is looking to work with crowdfunding for charitable causes, and collaboration among them should only help to better serve more charities.
In line with their goals of unparalleled transparency, Charity DAO is 100% free, open source software. Anyone can join their project, and coders are welcome to contribute at their GitHub repository. This type of idea really seems like the future of charitable donating. Through the transparency and decentralization provided by Ethereum, it’s guaranteed your funds go exactly where you want, in their entirety. This is a great use case for blockchain technology; a use case that could actually have a positive impact on the world around us.