Source: Academy.moralis

There are, however, inevitable challenges the charity sector needs to address, such as donors being asked to settle with a subscription-type model. Also, the lack of accountability. Whilst some charities only spend 5% of donations on administration and overheads, other charities take as much as 40%  The lack of transparency and, in many cases, poor accountability can be a veritable barrier and reason why more money and/or time is not given to charities. The recent information regarding that a $6million house in Malibu California by the charity Black Lives Matter has raised questions as to the use of the charity’s funds. Questions concerning the accountability of charities and their movements are starting to take the centre stage. If unanswered, the patronage enjoyed by the industry will run the risk of diminishing since people rightly want to ensure their donations are used for the right purposes. 

Unlike many traditional methods, NFTs offer the potential to make transactions can happen with almost immediate effect and at a lower cost (even on a global basis). This is particularly relevant when charities are raising money in the event of global natural disasters or in war-torn zones, which are often thousands of miles from the donors themselves. Given that blockchain transactions can be available for all participants to see on the blockchain, the cost of keeping participants updated is practically inexistent. By using smart contracts, it is possible to ensure that donations are released once pre agreed targets/objectives have been achieved. All transactions and funds are both visible and traceable when using NFTs, whereby helping donors and stakeholders to renew their trust in charities. 

However, challenges do exist when using blockchain technology. One of these is, that certain blockchains have high transaction fees whilst others can utilise a large amount of energy to process transactions due to the way they operate; damaging for the environment since they have a high carbon footprint. These climate change issues are demanding for those wishing to support good causes but are unable to due to the lofty prices of some of the transaction fees. Although different blockchains are striving to address these issues, they remain a potential barrier to using certain blockchains. According to Citigroup: “The global value of philanthropy (i.e., donated time and money) is $2.3trillion p.a., or just under 3% of global GDP”. Without doubt NFTs can help the industry and, given the size of the philanthropic sector, the impact could be significant to those arguably most in need, even if used by only a small number of charities. Already, there are a number of firms developing solutions using blockchain technology, such as Charity Token. Charity Token has a DeFi platform which helps charities and individuals raise investment capital and new revenue streams. Those organisations on Charity Token’s platform have the details of their received donation available for the general public to see. They can also incentivise donations by tying them to NFTs, thereby making the auctioning of the NFTs to a global audience through OpenSea.

Source: CharityToken

ChaT, the token assigned for the Charity token, is a multipurpose governance token and allows for owners to govern the platform. ChaT is to be housed on the Polygon network to reduce the energy load, allow for serious transactions, low-cost transactions and its accessibility to OpenSea. Charity token has, in more ways than one, paved the way for others to follow. DoinGud is another such project offering an NFT marketplace enabling creators, curators, collectors and charities to support worthy causes. Every sale on the DoinGud NFT platform donates 5% of the value of each sale to the giving economy.

Source: Platinumcryptoacademy

It is certainly encouraging to see the charity sector embrace new ways, use different technologies to help raise awareness and position themselves to be more relevant (especially to younger donors). It will be interesting to witness how the use of NFTs in the charity sector evolves, since at the moment the small number of philanthropists who have delved into NFTs have a certain exclusivity. Meanwhile, time and resources will be required to educate the donors, as well as those charities looking to both raise capital and improve their accountability and transparency. The use of NFTs in the charity sector surely offers a set of new digital tools……

Digital wallets

How, where and why are blockchain technology and digital assets being used in Africa?

Of the 51 countries to have banned cryptocurrencies and digital assets in their regions, as published by the Library of Congress, 23 are in Africa. Africa itself is a continent with 56 countries, so for there to be 23 this is a sizable amount. The future for digital assets might look bleak, but that is not the reality on the ground since the blockchain industry in Africa has been expanding. A report from Swiss venture capital firm, VC CV, (in partnership with Standard Bank) found $millions are starting to be allocated to Africa in the form of blockchain financing. Within the report, it stated: “Companies raised $91 million in Q1 of 2022, a staggering 1,668% YoY increase from Q1 of the previous year.”

Where blockchain technology is being used in Africa

Source: Blockchain projects in Africa by sector, according to PositiveBlockchain.io

Meanwhile, according to Quartz Africa: “Africa now accounts for 70% of the world’s $1 trillion mobile money value. The value of Africa’s mobile money transactions edged up 39% to $701.4 billion in 2021 from $495 billion in 2020, highlighting the future of African banking is mobile.” These growth rates also indicate that Africans are not afraid of change, making it is easier to understand why there has been so much interest in digital wallets and digital assets across the continent. Of note, a report from Chainalysis found that, between July 2020 and June 2021, Africans received $105.6 billion of cryptocurrency payments - a rise of 1200% compared to the previous year. Furthermore, Chainalysis established that Kenya, Nigeria and South Africa made it into the world’s top ten in terms of crypto users and, despite 65% of adults in sub-Haran Africa being unbanked, they are also embracing digital payments. Yet financial services are not the only sector in Africa to be embracing blockchain technology. It is being used in other sectors too, as follows:

• Agriculture - in Tanzania, World Mobile has installed a solar-powered wireless internet connection for a remote fishing village. This has enabled the farmers to begin exporting their catches of crab to Europe and sell fresh fish to hotels and restaurants, as opposed to selling dried fish which is what they had mainly done before. As a result, it has allowed fisherman to increase the income they receive as it has given them access to new markets where they can see the true worth of their catch.

• Identity - in Sierra Leone, the Hyperledger blockchain is being used to help address the challenges around personal identity by using a national identity number and a thumb print. This helps reduce fraud and corruption, making transactions more efficient for all parties involved.

• Education - a partnership between Cardano and the Ethiopian government has created a blockchain-based national student and teacher ID and attainment recording system. The platform allows for the verification of grades and remote monitoring of school performance, with the intention to boost education and employment across the country. The partnership hopes to reduce the amount of fraudulent university and job applications by making sure the students have blockchain-verified digital qualifications. It also enables employers to authenticate employee credentials faster and in a more efficient manner. 

• Wi-Fi - the Zanzibar government is working with the blockchain firm, World Mobile, to create a free metered Wi-Fi internet access for those government institutions which are engaged directly with its citizens - such as local government offices, bus stops, the airport, shipping ports, fish markets, municipal offices, municipal or state housing estates and hospitals and clinics.. This is the first blockchain mobile-powered and run by World Mobile Token ($WMT) owners. 

• Logistics documents - in April 2021, the government of Egypt announced it had partnered with blockchain start-up, CargoX, using the Ethereum blockchain to create National Single Window for Foreign Trade Facilitation (NAFEZA). The blockchain-powered platform is designed to streamline the sharing of maritime and transportation documents which is accessible by all participants in the trade. This way traders and businesses can forward all required documents to customs, control and port authorities. 

In the Philippines, a large number of people play in the GameFi industry (especially Axie Infinity) and in Africa, the most used digital asset is Bitcoin because of its widespread adoption in other parts of the world thus enabling Africans have access to the goods and services that historically they have been unable to access easily. Much of Africa has suffered in the past from poor infrastructure in terms of fixed telephone lines and power supplies, as well as a lack of trust due to high levels of fraud and corruption. Blockchain technology is known to be able to bring greater transparency and trust. Furthermore, having the ability to be operated using solar power and wirelessly, this technology offers the potential to radically transform the lives of millions of Africans. This is not merely beneficial for Africa but also for other countries looking to export goods and services to Africa, thus helping to boost the global GDP. Although many may believe “Africa needs blockchain technology”, the continent has the youngest population in the world, and also the most unbanked population globally, so is it actually the case that, “Blockchain and digital assets need Africa”? Could wide-scale adoption of blockchain technology and digital assets in Africa further demonstrates commercial opportunities and roles in society and business, and potentially teach other jurisdictions a lesson or two…….?

Blockchain technology is helping to improve ESG credentials, in part given its ability to maintain a decentralised database of records which are tamper-resistant in nature. Therefore, it works as an assurance of accuracy and transparency of information. In effect, blockchain-powered platforms can act as a skeleton, interacting with other technologies, such as Internet of Things (IoT), so as to transfer the data of smart infrastructure or devices to the blockchain network, satisfying both transparency and privacy. Furthermore, via the use of smart contracts, it becomes possible to verify the consistency between the final ESG report and the raw data that has been used to create the report. As mandatory corporate and sustainability reporting becomes more commonplace, accurate and verified documentation to support transparency becomes crucial. Therefore, blockchain technology can help with compliance of ESG standards in two major areas: reporting of data and supply chain transparency.

Reporting of data

Access to accurate, standardised information is key. Blockchain-enabled reporting tools give companies a chance to collect verifiable data and produce trustworthy reports that demonstrate their ESG credentials. Blockchain enables data standardisation, whilst also providing the platform needed to support data transparency. The automation of data collection from IoT allows various devices to communicate with each other and therefore share data and information without the need for human intervention. Utilising blockchain technology offers assurance that all the data transferred between devices is genuine and properly encrypted to prevent any alteration without authorisation. An example of this would be the use of a blockchain-powered platform to monitor the carbon footprint of a global group of independent organisations. According to a report from the EU: “Blockchain technologies can transform individual efforts of companies into a networked effort. And it can clearly pinpoint the contributions individual actors make to reduce their carbon footprint. The spirit of competition and market-based incentives create a win-win situation for all. Clean technology start-ups play a critical role in this process. They develop blockchain-enabled platforms that bring together all stakeholders, including companies, government and citizens”.

Supply chain transparency

An essential part of achieving viable goals is by improving supply chain sustainability. Blockchain technology offers the potential to transform supply chain management. Using distributed ledger technology, it provides a digital system and database to record the transactions along the supply chain, whereby bringing transparency, efficiency, traceability and reliability to supply chain management. Blockchain platforms, using IoT, can automate data collection across different points of a company’s supply chain. The relevant data does not have to be checked from potentially error-prone suppliers so companies can therefore have greater knowledge and potentially control over their environmental impact. This automation and real-time availability of information can help companies detect issues faster and also reliably trace the problem back to the source. Blockchains can play a role in terms of responsible and ethical sourcing. The transparency it offers is crucial in tracking the materials and goods from source to end-use and helps ensure security for all participants by allowing them to access the records of transactions at any time. An example of this has been the deployment of a blockchain-powered platform being used by Coca Cola, which aims to promote “supply chain due diligence and working conditions”.

Drawbacks to using blockchain and digital assets to enhance ESG credentials

There has been much negative press regarding the vast amount of energy being used to power the Bitcoin Blockchain. When Elon Musk ceased accepting Bitcoin as payment for the Tesla Range, he stated that “Tesla would stop accepting the cryptocurrency as payment because the so-called mining of the coins used too much fossil fuel-generated electricity.” Even with the current dip in the cryptocurrency market, a single Bitcoin is worth around $30,000. There has, however, been widespread awareness of the impact that investments in these can have on the environment. Given these environmental concerns surrounding cryptocurrency and the increasing importance of ESG, an appropriate question to ask is whether these two developments are compatible. 

Source: Sustainanalytics

As reported by the University of Cambridge Centre for Alternative Finance, Bitcoin mining consumes more energy than the UAE or the Netherlands. It consumes about 0.4% of global energy and up to 150 TWh of electricity per year. This immense energy usage has generated considerable concern, especially as the focus on climatic change increases. In defence, however, there are other blockchains using much less energy than the Bitcoin blockchain, and many blockchains actually use renewable energy as their power source. In addition to this, another consideration is the social plan; blockchain and ESG conflict in their social plan. The social component of ESG includes human rights, diversity, financial inclusion and consumer protection. However, although blockchain protects the vulnerable from oppressive governments and allows anybody with an internet connection to purchase cryptocurrencies (thereby promoting financial inclusion), it may also promote illegal conduct, such as evasion of exchange regulations and tax fraud. The exchanges on which cryptocurrency transactions are made can often be poorly regulated and leverage can be provided by shadow banks that may not be regulated, both potentially violating consumer protection. Due to their loose regulatory and enforcement structure, cryptocurrencies are appealing to those people who wish to boycott the network of regulations and fines that control traditional financial markets. Furthermore, unfortunately the decentralised nature and pseudo-anonymous structure of blockchains make them a useful tool to avoid financial sanctions. 

Blockchain technology has far-reaching possibilities, not least of which is being able to increase transparency and handle and share date securely. Although there are certain incompatibilities and challenges, there is the potential for blockchain technology to assist in a green transition for addressing ESG concerns, which is one of the many various impacts the increasing interest and popularity this technology has brought to light.