Using blockchain and AI for assessing a charity’s impact

It’s easy nowadays to make intelligent investment decisions. We can work out the value of a house compared with others on the market, the performance of a particular pension fund, or the ratings and results of a particular university.

The investments people make in charities, in the form of donations, are less certain though. It’s rarely clear what happens to their money, and whether the investment has led to a positive impact. This lack of transparency is one of the biggest barriers to people redistributing their wealth to good causes. Charitable foundations too, although they do have ways of assessing the impact of the grants they make, still face significant impact assessment challenges in certain situations.

But imagine if anyone in the world could refer to an online “impact ledger” that records every piece of value or positive impact a charity creates — ensuring transparency about the charity’s use of donations.

As well as enabling the public to monitor what happens to their money, the beauty of the system would be that it empowers people to make informed judgments on whether to donate or not based on the past performance of that charity. Rather than worrying the money they donate goes into a black hole, they could donate with certainty. This certainty could lead to a surge in donations and support for charities.  

Over time, an impact ledger would ensure donations made their way to charities which produce results. Charities which fail to get results or squander money would see their donations dry up. Meanwhile, corrupt charities would all but disappear.

Accurate information about the impact every charity has would also be a valuable source of data for the charity sector itself. By being able to analyse data on this impact ledger, charities would be able to learn from each other and improve their planning and decision making for future projects.

Trust in blockchain

The good news is blockchain technology allows us to create incorruptible digital ledgers of economic transactions – effectively a huge spreadsheet duplicated on thousands of computers across the world, which no one can alter.

But how could we trust the information stored on the blockchain? How could we know that a certain number of elderly people were looked after throughout a winter, that a certain number of children attended a camp over a summer, or that a certain number of patients were cared for by a hospice.

Firstly, to participate in a project, a charity service provider would have to first prove their identity and their credentials for carrying out the project — based on a verifiable claim that has been issued to them by a recognised credentialing authority.

Secondly, an impact ledger would need a trustworthy evaluation protocol to confirm a project has carried out its stated aims.

Simply relying on an army of evaluators dotted around the world wouldn’t work – it would be ruinously expensive and we wouldn’t know whether to trust them. But high performance computing, AI (artificial intelligence) based evaluation mechanisms and software oracles can help us bring together data sources to perform intelligent evaluations.

These mechanisms would work alongside human evaluation agents who would be financially incentivised (more on how one would do that later) to make the right decisions. Their evaluation work would be under constant review from evaluation peers and intelligent software and consensus systems, ensuring the right decisions are made.

So, for example, a charity which raised money to build a community centre would be able to fill in details of the project on the ledger, and use an appropriate evaluator to confirm it had been carried out. Other qualified evaluators would also be incentivised to oversee the entry.  Meanwhile, AI systems would also be looking out for spurious claims which set off alarm bells. A series of checks, balances and incentives for evaluators would ensure that the right information was being entered.

Just like the artificial intelligence systems used by insurance companies are becoming more skilled at rooting out false claims, this system would become more and more intelligent as time goes by, reducing the need and expense of human involvement.

Once an impact has been judged to have been made, this data could then be cryptographically hashed — in other words, digitally signed — in ways that can be independently verified.

Then a record could be stored on a public blockchain for the whole world to see in a universally standardised format. A charity would be able to prove to the world the good work it was doing, building a stellar reputation over time, and making it easier to attract donations and grants. Meanwhile, companies, members of the public and funding bodies would be able to make informed judgments on the charities they allocated money to.

Incentivising everyone to participate

So hopefully we’ve established that valuable, accurate information could be held on a global impact ledger. But we haven’t discussed how everyone taking part in this “operating system for doing good” is incentivised.

For example, why would human evaluation agents use up their valuable time verifying impact projects? An even bigger question is: How can we use blockchain technology to incentivise as many people as possible to use their skillsets to help others?

A token economy

Blockchain technology not only allows us to store information, it gives us the mechanism and infrastructure to create a value exchange mechanism — with Bitcoin-like tokens at its its heart.

Before we look at how this works, let’s first remind ourselves why money has value. In years gone by, Peter might spend 200 hours of labour raising a cow. Mary else might spend the same time end effort raising 40 chickens, and Heidi might spend the same time and effort building a house. When it became too complicated for Peter, Mary, Heidi and everyone else in the world to swap asset for asset, gold was used as a medium of exchange. Gold was judged to have value because it took time and effort to find it and mine it.

That’s why Bitcoin has value in people’s eyes. It takes a lot of time, effort and resources to solve the cryptography puzzles needed to generate a bitcoin (and it has valuable utility because it’s an easily exchangeable digital currency).

Now, what if tokens could be generated whenever someone, or a charity, delivers a positive impact? The rehoming of 100 stray cats is an inherently valuable result. And when we have evidence of it taking place, this evidence can become a valuable digital asset.

Why is it an asset? Because so many parties – from individual donors, to charities, to government agencies – want to be able to track and value the impact of contributions to the world.

So each valuable charitable service carried out could effectively mint a certain amount of tokens, which can then be used to fund further projects.

Effectively, the value of the initial funding for a particular project could be multiplied exponentially as it morphs into a token, which can be used to fund further projects. These tokens could also be used as a way to distribute funds and incentivise people and organisations to provide valuable services that benefit communities.

The service provider could also use this token to pay for services provided by the impact operating system we have talked about. Similarly, tokens could be used to incentivise human evaluation agents to do their jobs well.

A tradable asset

These tokens could became a valuable, tradable asset – like Bitcoin or everyday currency. People everywhere would have a good reason to believe in this currency and invest in it because its very existence would be a force for good in the world. As it took on value, it wouldn’t be benefitting a nation state (like the dollar, euro or sterling does), it would be delivering value to people in need across the world.

Let’s look at the concept of carbon credits to explain in another way how these tokens could take on value. Businesses across the world are now paying carbon credits — effectively tradable permits that “allow” them to release carbon dioxide into the atmosphere.

Meanwhile, carbon-dioxide mitigation projects can actually generate carbon credits, which can be used to finance carbon reduction schemes around the world.

In short, carbon credits have become a valuable, tradable asset. The trade of these credits acts, in theory, as a market mechanism that encourages businesses to limit the emission of carbon.

The blockchain age

Previously, it was almost impossible to ascertain what matters for charities, and to value what counts. So making decisions on which charities to allocate funds to was difficult. Creating an asset class based on positive impacts was impossible.

Blockchain technology gives us the opportunity to build tremendous value out of the certainty that good is being done in the world. Impact tokens could tell the story of a positive impact that has been delivered. They could help charities everywhere do good work, be recognised for that work, and generate value that can reinvested in further projects.

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