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Managing charity 4. 0 with Blockchain: a case study at the time of Covid-19 - PMC As a library, NLM provides access to scientific literature. Inclusion in an NLM database does not imply endorsement of, or agreement with, the contents by NLM or the National Institutes of Health.

Int Rev Public Nonprofit Mark . 2021 Mar 3;18(4):491–521. doi: 10.

1007/s12208-021-00281-8 Managing charity 4. 0 with Blockchain: a case study at the time of Covid-19 1 University G. D’Annunzio of Chieti-Pescara, Viale Pindaro, 42, 65127 Pescara, Italy Find articles by Adalberto Rangone Find articles by Luca Busolli 1 University G.

D’Annunzio of Chieti-Pescara, Viale Pindaro, 42, 65127 Pescara, Italy Received 2020 May 20; Accepted 2021 Feb 3; Issue date 2021. The Covid-19 emergency is demonstrating the need to follow new solutions that can support the important role played by non-profit organizations around the world.

Contrary to what should have happened to further combat the effect of pandemic, the majority of philanthropic organisations had a negative impact on fundraising, suffering a substantial decrease. Today, the Blockchain can play a pivotal role to re-establish pre-pandemic standards and enhance the development of global philanthropy.

However, it is still too little considered due to the criticalities encountered during the launch and development of the initiatives as well as for a general incomprehension of its technology. Therefore, this work aims to demonstrate the Blockchain impact on the development of charity 4. 0, especially in an extremely dramatic historical moment marked by the Covid-19 pandemic.

The objective is achieved through the case study of Charity Wall, an emerging Italian social marketplace appreciated by important business associations for its innovative solutions in the charity 4. 0 sector and for the important support provided to NPOs during their traditional function as well as against Covid-19 in Italy.

Through a benchmark analysis, this work succeeds in highlighting the innovative solutions proposed by Charity Wall compared to the charity 4. 0 systems on the market.

More specifically, through the Charity Wall case study it is possible to demonstrate which aspects of Blockchain technology can be used to strengthen the philanthropic system by avoiding cases of fraud to the detriment of beneficiaries, receivers and donors as well as to create a closer network between the various philanthropic players to support charitable initiatives against the Covid-19.

Keywords: Innovation, Blockchain, Fundraising, Digital transactions, Development strategies The available literature provides countless insights that can allow us to investigate the evolutionary trends and the quality of the flows of donations to non-profit entities over time and under numerous perspectives. Authors such as James ( 2018 ); Mainardes et al.

( 2016 ); Bekkers and Wiepking ( 2011 ) provided important studies on donations flows by analyzing qualitative and quantitative as well as social aspects. Some authors instead pleaded an approach related to psychological principles, often due to the evidence of donations already made (Jacob et al. 2018 ) or the empathy of donors and the emotions aroused (Dickert et al.

2016 ). Furthermore, in such a context, the analysis of the motivations for giving has also come to lower and more practical principles; Wong and Ortmann ( 2016 ); Bekkers ( 2010 ); Karlan and List ( 2007 ); Vesterlund ( 2006 ) clarified some aspects related to material incentives and how price could influence the purpose of giving.

Nevertheless, in the context of the literature review, in our opinion some analyses emerged more than other. They clarify the close correlation between the legitimization factor (Diez 2018 ) the ability to create serious and efficient donation models (Wojciechowski 2009 ) as well as the reputation of non-profit organizations (Balsam and Harris 2014 ; Mews and Boenigk 2013 ; Maxson and Kuraishi 2011 ) and an increase in donations.

These studies – together with the numerous scandals related to the traditional charity processes that affected the way public perceives charity and increased the mistrust in charitable organizations – have provided an important starting point for delimiting the scope of our research.

In fact, in the last years and still today, charitable organisations must face several criticalities such as declining donations (NonProfit Quarterly 2019 ), skepticism over CEO pay (Charity Navigator 2016 ; Balsam and Harris 2014 ) and concerns about where donations end up (Charity Today 2020 ). This worrying situation is compounded by the dramatic criticalities brought about by the Covid-19 pandemic.

In fact, while donations for the Covid emergency increased due to the public and private interventions, on the other side, the usual charitable flows were drastically affected. There are numerous sources from the United States and the European Union that have dealt with this critical aspect. As reported by CAF America: “Nearly all, 94.

38% of the responding organizations, reported being negatively impacted by the coronavirus global pandemic. Over 70% of the respondents have seen a significant reduction in the contributions they receive and had to suspend programs involving travel or events” (CAF America 2020 ).

According to the Association of Fundraising Professionals: “More than half of charitable organizations in the United States are expecting to raise less money in 2020 than they did in 2019, and an equal percentage believe the same will occur in 2021” (AFP 2020 ).

Unanimously with the AFP’s survey, during an online press conference the Italian Institute of Donation (IID) showed that on the first quarter of 2020 the 81% of NPO suffered a negative impact on fundraising and 40% of them reports a decline of more than 50% (Alvaro 2020 ). The same situation is perceptible in U.K. as well, where charitable organisations have been widely affected by the Covid situation.

The third sector has been impacted significantly with services being postponed and fundraising efforts scaled back. Small U.K. charities/nonprofits working overseas are facing innumerable challenges. A survey taken by Small International Development Charities Network highlighted that: 45% of charities working overseas will have to close this year without additional funding.

15% of charities working overseas will have to close within six months without additional funding. 77% of charities surveyed say that COVID-19 is already affecting their finances in this financial year. 59% said they had already or were currently accessing their reserves during the pandemic.

72% of charities surveyed said they had an increased demand for their services during the pandemic. 57% of charities surveyed said they have had to postpone programmes/projects during the pandemic. 66% of charities surveyed say they are responding to COVID-19 directly and a further 23% say they are responding in part.

64% of charities have found new ways to deliver services. Just 11% of charities say that they have been able to continue their work overseas as normal (Small International Development Charities Network 2020 ).

For this reason, as published on 20th of May, the U.K. Government has pledged £750 million to ensure VCSE (voluntary, community and social enterprise) can continue their vital work supporting the country, including £200 million for the Coronavirus Community Support Fund, along with an additional £150 million from dormant bank and building society accounts (Gov.UK 2020 ).

Therefore, while events, meetings and courses have been in the past an important element of the delivery strategy of charities, today innovation and increasing use of digital media and applications are helping to fill the gaps that the cessation of physical gatherings has left. At the same time, they can enable the charities to operate with reduced costs.

In fact, due to the self-isolation and lockdown volunteers are not able to collect on the streets; furthermore, the cancellation or postponement of mass events and individual or small group activities have brought community fundraising to a juddering halt.

The level of need is certainly not the same for every charity but depends from their particular mix of income sources as well as from the specific impact of Covid-19 on their operating models; however, the numerous sources analysed clearly demonstrate the homogeneity of the negative impact. In such a context, Blockchain technology is really strategic in order to improve the credibility of charities.

The Blockchain’s added value for philanthropy consists in transparency and accountability as well as in the clear evidence of the goals achieved (Wang et al. 2019 ).

Furthermore, as we will demonstrate in this work, the Blockchain technology is able to: create a transparent relationship with donors and recipients as well as with other stakeholders; reduce the administrative costs through automation and through the smallest number of intermediaries; improve efficacy reaching the right people; acquire funds rapidly through crowdfunding; create a wider and complete synergy between the numerous players in the philanthropic system.

A further and specific aspect strictly related to the use of Blockchain for philanthropic purposes consists in cryptocurrencies’ advantages. In the last years hundreds of millions of dollars in cryptocurrencies have been donated, with notable donations including over $100 million to Fidelity Charitable, $29 million to Donors Choose, $4 million to The Ellen DeGeneres Wildlife Fund and many more (Youssef 2020 ).

According to Nonprofit Tech for Good’s 2019 “Global NGO Technology Report”, cryptocurrency donations represent 1%–5% of the payment methods used within the charity sector, with over 100% growth in some countries (Nonprofit Tech for Good 2019 ). Transactions in crypto currency, in fact, are immediate and without borders (Huberman et al. 2019 ).

They are accepted even in countries where the banking system is less developed and eliminate the need for intermediaries. Furthermore, the transactions have no limitations of any kind and have a much lower cost than that of other traditional systems because factors such as the size of the transaction, the number of other transactions carried out simultaneously or the computational complexity of a smart contract are considered.

Crypto currencies are traceable (Easley et al. 2019 ; Yang et al. 2019 ).

Donors can verify the different transactions and, therefore, verify where their funds have gone and if they have actually fulfilled the purpose for which they were collected. This allows donors to better choose where to allocate their future donations. Traceability is an incentive for non-profit organizations to operate better, to reduce costs and to channel the greatest possible flow of money to beneficiaries.

As we will see, the accountability and cost reduction of charitable organizations is also increased by the specific and most used characteristic of Blockchain: the documentary and notarial function that allows greater efficiency in the exchange of documentation, an empowerment of entities, an increase in the security of documents that cannot be tampered with or deleted and of their staff and a reduction in printed paper.

Therefore, in order to spread the use of the Blockchain in the charitable sector as, also encouraging the development of charitable initiatives 4. 0, it is necessary to explain the potential impact of this technology. This work is structured in such a way as to demonstrate the impact of Blockchain technology on the development of the charity 4.

0 sector. In order to better define the application context and the current challenges as well as the future ones, the authors considered it appropriate to analyse also the panorama in which Blockchain is already used and the criticalities that new initiatives encounter in the launch phase of their projects.

Therefore, for a better understanding of the reader, the paper is structured in such a way as to: define the current status of the Blockchain, identifying the main areas of application.

highlight the critical issues that are currently holding back the development of Blockchain initiatives and can therefore slow down the specific impact of this technology in the charity sector, through the literature analysis define the specific application of the Blockchain in charity 4. 0, highlighting its strengths compared to traditional systems. demonstrate the important innovations that can enhance the charity 4.

0 sector through the case study provided by Italian Charity Wall. highlight the need to increase charity 4. 0 initiatives due to the pandemic spread of Covid-19 define the important solutions provided by the charity 4.

0 sector that can support the fight against Covid-19 through the Charity Wall case study. The current status of Blockchain The main areas of application Over the last years, the promises of new technologies have revolutionized the social sphere thanks to the countless innovation incubators (Etzkowitz 2002 ; Smilor 1987 ) that are constantly experimenting new approaches in various fields (Hillemane et al.

2019 ; Lacity 2018 ; Al-Mubaraki and Busler 2017 ; Holiday 2014 ). This has led to hundreds of new organizations, businesses and initiatives focused on Blockchain (Richards 2019 ; Laplume 2018 ; Nofer et al. 2017 ; Nguyen 2016 ; Czepluch et al.

2015 ). To date, the main areas of application that the Blockchain has been able to permeate are best summarized as follows: Governance and Democracy; Agriculture and Land Rights. The study of these areas (Park et al.

2018 ; Galen et al. 2018 ; Lacity 2018 ; Elsden et al. 2018 ; Manski 2017 ; Casey and Wong 2017 ; Kokina et al.

2017 ; Park et al. 2015 ; Thomas and Schwartz 2014 ; Christopher 2011 ) has allowed to deepen several cases of application. The rapid spread across the many areas is most likely due to the fact that organizations have discovered that the Blockchain is a reliable and accurate technological solution to address their daily challenges (Fischer 2018 ; Elsden et al.

2018 ; Gervais et al. 2016 ). According to several studies (Durnev et al.

2018 ; Manski 2017 ), the Blockchain has provided significant added value for achieving the social impact objectives of organizations. As evidenced by a study promoted by the Stanford University and the Center for Social Innovation (Galen et al.

2018 ), 66% believe that the Blockchain is an improvement over other methods, while 20% believe that it is necessary to solve their problems; only 14% think that it is a way to solve the problem, but that the other non-Blockchain solutions can be better. The use of the Blockchain varies between the sectors due to the many intrinsic characteristics of them (Kamat and Seo 2019 ; Kamath 2018 ; Novo 2018 ; Kokina et al. 2017 ; Elgar et al.

2015 ; Nakamoto 2008 ), however, some general trends can be identified. As shown in Table 1 , the most commonly found cases of use are “record and verification” and the use of the Blockchain for “payments and money transfers”. This indicates that this is a major problem between the different sectors.

In the first case of use the Blockchain offers efficiency improvements (Qu et al. 2018 ; Deshpande et al.

2017a , b ) and implementation (Manski and Manski 2018 ; Manski 2017 ) in the archiving (Miraz and Donald 2018 ) and simultaneous verification of records on multiple computers (Lee and Lee 2017 ) reducing the risk of data falsification (Zhu and Zhou 2016 ) and allowing individual users to access, track and share their data (Chen et al. 2017 ; Pilkington 2016 ).

Potential critical consequences deriving from cases of fraud Immediate consequencies: Revision of the transactions Control over all invoices and accounting movements Check of bank accounts to estimate false payments Recourse to legal assistance for the recovery of stolen funds Critical Operation Consequencies Loss of credibility with donors Total revision of management systems Establishment of specific financial control committees Loss of collaborations with partner organizations Source: authors’ elaboration In the second field of application, i.e. payment and money transfer systems, Blockchain technology is optimal for building peer-to-peer networks (Gao et al.

2018 ; Peters and Panayi 2016 ) aimed at transferring money without relying on many intermediaries in the financial system (Dimitri 2019 ; Monaco 2015 ; Kiviat 2015 ; Dong et al. 2014 ). However, the study of the literature has shown that the launch of activities using the Blockchain has been more difficult than expected, whether for profit or non-profit initiatives.

The main critical issues encountered during the launch and development of Blockchain-based initiatives As is often the case in the launch phase of a new technology, the use of the Blockchain has its own critical issues that in some cases can turn into real challenges.

These challenges relate to both internal and external aspects of organisations working with Blockchain technology, i.e. aspects that relate to the so-called sub-systems (Consorti and Venditti 2017 ) with which organisations come into contact on a daily basis (Rangone 2020 ) and which define the economic landscape of the various initiatives.

The analysis of the literature has, in fact, made it possible to highlight countless problems (Fig. 1 ). The criticalities coming from the regulatory aspect are those most widely highlighted.

The literature study and the clear evidences suggest that government regulations are not adapting quickly enough to properly incentivize (Smorgunov 2018 ) or facilitate growth (Deshpande et al. 2017a , b ) of the Blockchain technology related initiatives, especially those one that can have a social impact.

The improvement of policies and regulations in different areas of application of the Blockchain could catalyse more innovation (O’Dair and Owen 2019 ; Dong et al. 2014 ). A “hostile” regulatory environment or unclear regulations push organizations to operate in a “grey area”, or even in a lack of rules (Kim and Justl 2018 ).

Main criticalities found in the use of the Blockchain by the study of the literature. Source: authors’ elaboration Some have also reported that in their view regulators do not fully understand the technology and its potential impact (Deshpande et al. 2017a , b ).

Therefore, it is worth repeating, important policy measures are urgently needed to resolve this regulatory gap (Dierksmeier and Seele 2018 ) not only for the sake of a greater social impact (Johnson and Post 1996 ) but also to allow organizations working with Blockchain technology in compliance with a well-defined regulation (Werbach 2018 ).

A further aspect that is highlighted among the critical points is related to the most typically productive area, namely the difficulty of finding technicians who are really prepared and who can contribute to the development of sophisticated projects. This aspect, closely linked to the technical difficulties of the Blockchain, is far from slight.

It depends on countless factors both internal and external, not only from the degree of technological acceptance by the companies of an area, the so-called techno-corporate gap (Rangone 2020 ), but also from the incentive to open innovation systems (Bijaoui 2015 ; Breunig et al. 2014 ; Fu 2012 ) and even more from the levels of education in the technical-informatics field (Zhuang et al. 2019 ; Zhao and Wang 2015 ).

Further problems that define the top of the pyramid structure of critical issues in terms of impact are related to the costs of the initiatives and the level of financial support available on the market. The improvement of the organization or its ability to expand still depends too often on its ability to attract capital (Laplume 2018 ; Xia and Minshall 2013 ; Ahsan 2010 ).

Apart from important private equity firms (BarNir 2012 ), too many organisations are in a difficult situation to raise the capital needed for investment because the traditional banking system does not consider it appropriate to invest in their projects (Coleman and Robb 2012 ).

Therefore, start-ups with an admirable initiative in the field of technology are forced to make up for the lack of capital by competing in public contests promoted by international organisations and with public development funds at stake. The use of Blockchain in charity sector Donation and social impact platforms encourage social organisations (social enterprises, NGOs, charities) to manage projects in a transparent way.

Blockchain solutions are designed to reduce financial and legal intermediaries and consequently also costs and time. In order to better understand the potential impact of Blockchain technology, it is essential to understand the system in which donations take place more generally.

At the moment there is a great interest in the third sector because at a social level there is a great attention to humanitarian causes and people always respond strongly and reactively to difficult situations.

The reasons for donating can be intrinsic: in order to contribute to a collective good; in order to respond to ethical and moral codes; in order to have a moral satisfaction (warm glow); economic incentives and material rewards; because they’re convincing (action of fundraisers). However, it is right that everyone can be certain that their contribution has been successful.

Too often it is possible to hear of scams and deceptions that not only leave the bitterness in the donor’s mouth, but in general damage the private charity sector of which today a modern state cannot do less. Today a “right to donation” should be guaranteed, as donation is a way to build the common good and to develop a community based on principles of reciprocity and unity. However, this right is not always respected.

And it implies a progressive lack of confidence in the third sector with an increase in requests for transparency from donors and public administration and a consequent reduction in donations and public tenders. Let’s take a practical example. A substantial number of people have felt the desire to donate for the recent corona virus pandemic.

Surely, they have wondered how their donations were used, whether for the stated purposes or for others. Thus, the purpose of the introduction of the Blockchain in the charity sector is to always be able to answer these questions and to avoid hearing from the media that money has not reached its destination, but has been used for something else.

Technology against fraud cases at the expense of beneficiaries, receivers and donors Too often it is possible to detect cases of fraud in the charity sector (AICPA and CPA Canada 2017 ; Greenlee et al. 2007 ) in which a coordinator of the charity association, a financial director or an operational supervisor in the implementation of humanitarian aid programmes misappropriated substantial funds.

In this sense, as highlighted by the British Government in 2018 with the study of countless cases, the fraud at the expense of donors, beneficiaries and receivers can be numerous: the fraudster may be responsible for the payment of charity invoices without being an authorised signatory to the beneficiary institution’s bank account.

Being able to access the credentials of the senior management team’s bank account to set up false beneficiaries, the fraudster can then transfer the funds to his bank account.

The invoices are falsified and the fraudster uses the bank’s access data to authorise the false invoices (Gov.UK 2018 ); the organization’s management fraudster may improperly manage the distribution of donated amounts by manipulating the relevant accounting records (Gov.UK 2018 ); the operator supervising the charitable actions may divert sums fraudulently by means of deliberate overpayments for goods and documents which the beneficiary groups have not received.

Often even false purchases have been charged to the charity program (Gov.UK 2018 ). In these cases, the critical aspects following the fraudulent fact are numerous (Table 1 ) but above all they can affect the many players operating within the charity sector, encouraging distrust in donations to charity (Farber 2004 ). The Blockchain instead provides a clear system for tracking and certifying the use of funds in donations.

This allows donors to constantly monitor, comment and verify the development of each specific social project. The aim is to ensure that, through a system of transparency and traceability, it can increase donor confidence in the third sector by encouraging donations in projects with a social impact that guarantee transparency and ensuring that donations actually reach those who need them.

Empirical evidence on the application of the Blockchain in the charity sector Charity Wall (CW) is the most advanced and complete tool to trace and notarize the use of donations using the immutability and security of the Blockchain. Charity Wall combines a Social Marketplace and an Automated Audit Solution for the charity sector. Through the Blockchain, Charity Wall traces and notarizes the use of donations.

Furthermore, it allows donating in total security as well as monitoring, commenting and constantly verifying the development of each specific social project. We can use the word Social to describe it both because it is oriented to serve the charity sector, and because it allows donors and receivers to create a story around the various social projects that any registered user can view and comment on.

Donations can be money and Charity Wall traces the contribution from the donor to the receiver and how it is spent. The donation can be also goods, in this case Charity Wall traces the fund-raising, the purchase, donation of goods and receipt by the non-profit organization and their use.

CW aim is to ensure that, through a system of transparency and traceability, the trust of donors in the charity sector can increase, favoring donations to social impact projects that guarantee transparency and ensuring that donations actually reach those who need them.

Charity Wall wants to trace through Blockchain and make public all the documentation related to the activity of non-profit institutions and also to trace and convey in a complete way the donations flow among the various stakeholders.

CW applies the Blockchain to the fintech sector, to document notarization uses and to its utility token for the exchange and traceability of goods and services, giving the change to donors to monitor and comment each passage of the donation.

Charity Wall is addressed both to donors that want to donate in total security and have the evidence how their money is used, and to non-profit organizations that want to transparently demonstrate the use of donations and with which they can also receive donations. Charity Wall add a layer of transparency to the total flow of donations.

It can reduce the costs of charity by removing intermediaries, the papers of the stakeholder’s internal processes and improving digitalization and accountability. Furthermore, CW can reduce the costs by developing higher efficiency and faster procedures as well as enhanced donor base like crypto-donors.

Although still a start-up, Charity Wall’s reality is therefore very young, it demonstrates a hacking growth (Ellis and Brown 2017 ; Ellis 2010 ) and the contribution it can make to the social sphere through the processes of donations has already attracted countless leading players. Assolombarda, for example, is the most important association of the entire Italian industrial system, called Confindustria.

The partnership is under definition and it will allow Charity Wall to reach about 6300 companies of all sizes, national and international, producers of goods and services in all product sectors. CW was selected to pitch in 2019 at Blockland Solutions in Cleveland (U.S.A.) and invited in December 2020 as speaker for the charity sector.

CW was also selected as one of the most promising European Blockchain based startups by the European program Block. IS inside Horizon 2020. The core of Charity Wall is the marketplace where donors can meet virtuous NPOs and in which non-profit institutions can indicate the projects that need to be financed.

Through the marketplace donors and NPOs can show the projects they realized with the link to their project page, their pictures, videos, blogs and any kind of file related to the developed project. Donations, that can be either a money (30 crypto and 27 FIAT currencies) or goods ones, are supported by documents or files Blockchain uploads and certifications.

Charity Wall can trace in Blockchain all the passages of each donation, either money or goods one, thanks to its notarization system that allows to certify any kind of file in Blockchain. Charity Wall certification system allows knowing exactly who and when uploaded the file, giving the chance to share it and to make it downloadable, guaranteeing its immutability and its modification-proof across the time.

Charity Wall is the tool to exchange, share and download all the documents and files of each social project. Donations receivers must upload into the Charity Wall portal all the documents to trace the donation in Blockchain, and decide whether to make them public or to whom to show them and who allow to download them. In case of money donations, they must upload all financial transaction documents to be traced in Blockchain.

Donations receivers can also certify non-accounting documents to give greater clarity on how money is used and the results obtained. Certified documents will be visible on project or receivers’ page, published in the Charity Wall marketplace (example: photos of airline tickets, or photos/videos of the assisted people thanking for the help, estimates that justify the choice of a supplier, etc.).

Donations receivers can advertise their projects with photos, videos, and blogs and receive feedback, questions, and comments by donors. They will also receive a rating according to the proper use of Charity Wall by the Charity Wall algorithm. Charity Wall, by Ethereum and VeChain Blockchain, then, traces the money flow for and from the association and produces a complete document flow.

Documents must match each other and - as they are public - they can be checked by users. In this way a false document or a modified one can be easily revealed. The potential of innovation promoted by charity wall As also schematically identified in the benchmark prospectus provided by the figure n.

11, the strengths of Charity Wall from a technical point of view are numerous: Utility Token and marketplace; Blockchain transaction certificate; Money flow control both for income and expenditure; CharityPay (Charity Wall’s Payment system for donations); Donations from third parties’ websites; Double Blockchain System (Ethereum and VeChain); Donations in crypto and fiat; Certificate of advance donation; All these features make Charity Wall a complete tool to focus on the actual use of the donations and their traceability.

Charity Wall introduces a new and innovative way to donate, never seen before in the world of donations, through the marketplace and by its utility token CWC (Charity Wall Coin). In the marketplace all stakeholders can donate and swap physical good and services with CWC. Charity Wall wants to broaden the donation base of virtuous non-profit institutions.

This is possible thanks to CharityPay which allows donations also in crypto currencies and not