Startup AidCoin aims to transform the charity sector using blockchain and cryptocurrencies. Can it succeed? Chris Middleton investigates.
Trust in charities is at an all-time low. In 2016, for example, the UK government reported that 43 percent of people no longer trust charities, citing negative media stories, a lack of transparency about where the money goes, and aggressive fundraising techniques. In 2018, more negative media coverage seems to have dented that trust still further.
This means that the charity sector and the cryptosphere now have a lot more in common than some people realise, not least of which is the backlash against both for poor governance and misuse of funds.
However, cryptocurrencies and blockchain technologies could have potential applications within the charity or third sector – ironically, by helping to reinforce trust in spending. At least, that’s the aim of a new platform, AidCoin.
The startup aims to deploy distributed ledgers to track transactions, cryptocurrencies to transfer funds, and smart contracts to ensure that donations are spent correctly, in order to make the nonprofit sector more transparent for donors and aid recipients.
AidCoin itself is a token that aims to become the preferred method to donate transparently via the Ethereum blockchain, and to access the organisation’s new AIDChain platform, which is currently in Beta.
A chain of visibility?
AIDChain provides an ecosystem of donation services via a simple Web interface, connecting nonprofit organisations to members and donors, while allowing what AidCoin describes as “full transparency and traceability of donations”, via the blockchain-based system.
“The AIDChain platform is a space that allows users to connect to charities worldwide, a way to find interesting projects, make straightforward donations, and a simple way to track your contribution,” said AidCoin in an announcement.
“Transparency in spending is an issue the entire third sector has grappled with lately, but AIDChain provides a way for the blockchain to offer optimal support to an industry on the brink.”
Strong words. Yesterday, AidCoin announced new partnerships with TokenStars and the LastMinute Foundation in order to, in its words, “weave through the blockchain labyrinth together” – which is perhaps a less wise choice of words for a new trust-based system.
“With a joint ambition to encourage a wider audience to consider the crypto world a safe and transparent way to donate to charities, the new partnerships with both companies are on track to be facilitated by the launch of AidChain Beta,” continued the startup.
“Both the third sector and the crypto world are simultaneously facing current scrutiny due to high-profile scandals and fraudulence.These new collaborations signal a change in attitude towards donating to nonprofits, NGOs and charities.”
So who are the new partners?
Marketing or giving?
Founded by lastminute.com, the LastMinute Foundation is a charity that deploys its parent company’s IT and marketing resources to give nonprofits the tools to gain exposure and attract funds. It started out as a volunteering project to push IT skills in countries that have limited resources for technology education.
In this sense, it could be viewed as being in line with the popular CSR trend among many corporations, from Salesforce and Google to coffee giants such as Costa, to create foundations that put resources and technology to social use – while, at the same time, benefiting from the positive messaging within their mainstream businesses.
Meanwhile, TokenStars is another blockchain-based platform which “connects sports and showbiz stars with fans and advertisers”, according to AidCoin. ACE and TEAM tokens from TokenStars provide fans with “opportunities to interact with their favourite athletes and celebrities as well as to support their careers”, it said.
LastMinute Foundation and TokenStars will shortly be available on the AidChain platform.
This strong subtext of marketing, show business, and leisure/retail may, on the one hand, encourage some people to take part and donate – particularly young people – but on the other, make others wary of these organisations’ motives of appearing on a charitable platform in the first place. Is this fundraising or soft marketing?
At the time of the AIDChain Beta launch, Alice For Children, a Kenyan children’s charity, and the Laureus Foundation, a sports charity focusing on supporting poorer communities, will both be available on the platform. AidCoin hopes they will soon be joined by other organisations.
“The Beta version currently available allows users to contribute to their chosen charity while being able to track the donation flow,” explained AidCoin. “Following on from this, the next focus will be on AIDPay, an embeddable widget that will enable charities, crowdfunding websites, and other fundraisers to easily collect donations in top cryptocurrencies at their website without having to arrange the process themselves through numerous crypto wallets.
“This will allow more fundraisers to enter the cryptosphere confidently, while increasing the demand for the AID token, as all donations going through AIDPay will be automatically converted into AidCoins.”
The organisation concluded by saying, “By merging blockchain technology with the charity sector, the new AidCoin developments are positively using the decentralised and transparent nature of the blockchain to reinstall faith recently lost in both industries.”
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Internet of Business says
This is undoubtedly a well-meaning and positive venture, which signals the new types of platform and distributed-ledger-based systems that are likely to emerge over the next few years, facilitating the flow of digital tokens and currencies. (Some of those, will be autonomous and self-governing, as Internet of Business revealed recently.)
Importantly, these systems will hide technology and processing complexity from the general public, who simply want to be able to spend their money wisely and safely. But it must be said that hiding complexity is what got both the charity sector and cryptosphere into trouble in the first place, and so this is not as simple a solution as it may seem on the surface.
As was reported recently on Internet of Business, the Bitcoin blockchain is polluted with a range of illegal material and, in effect, digital junk and coder graffiti. Nevertheless, the open blockchain underpinnings of the system – which can be investigated by researchers and law enforcement agencies – have pushed some criminals away from Bitcoin and towards other coins and systems, such as Monero, and AidCoin’s preferred platform, Ethereum.
Any privacy-based system may be more transparent and secure in one sense, but is far harder to audit and investigate in another. Last autumn, EU law-enforcement agency Europol warned that “cryptocurrencies such as Monero, Ethereum [sic] and Zcash are gaining popularity within the digital underground”.
• Ethereum is the distributed application platform, and Ether is the digital bearer asset that clients of the system use to pay for computing resources.
Any system that encrypts recipients’ addresses and obscures the sender’s details – as Monero does, for example – effectively anonymises funds. In this way, the cryptosphere could become a fertile ground for a range of criminal activities, which can either be hidden (via encryption and obfuscation) or exposed (by the distributed ledger) within the blockchain system, depending on how you look at the problem.
Systems such as Monero and Ethereum also attract cybercriminals in other ways. This year, hackers exploited an insecure plugin to use WordPress sites to mine for Monero. While last year, 30,000 people fell prey to Ethereum-related cybercrime, losing an average of $7,500 each, according to this report on Fortune.
Welcome to the future. Who are you going to trust with your cash? Place your bets now.