Article
How blockchain and cryptocurrency affect the not-for-profit sector
Jan. 11, 2022 · Updated Feb. 18, 2022 · Authored by Ali Chalak
Technology is advancing at a rapid pace — most recently in the form of a quickly growing blockchain movement, which has resulted in the proliferation of cryptocurrency. There are currently more than 1,000 types of cryptocurrency — Bitcoin is a popular example — and not-for-profit organizations are more likely to accept cryptocurrency contributions due to its growing popularity.
To understand how a not-for-profit organization can benefit from these technological advancements, it’s important to first understand how blockchain technology works.
How does blockchain technology work?
Blockchain is an encrypted database similar to a general ledger that’s promoted as being transparent, tamperproof, and secure and also has sets of consensus rules.
If a transaction violates those rules, the transaction is rejected; once a transaction is completed, it can’t be modified.
In more detail, blockchain technology is a distributed database where the data is stored on nodes or digital ledgers. These nodes are basically computers connected to the blockchain, which create a peer-to-peer network. When a new transaction or information is added to the blockchain, each node simultaneously downloads the information and then validates and verifies it before it’s added to the shared ledger. The benefit is data that’s continuously reconciled and verified.
Once a new block is added to the blockchain structure, the previous block is locked and can’t be altered or changed. Because the data is held in an interlinked network of computers, the information is owned by the users — although only the intended recipient can view and process the data.
Key benefits
- It’s a decentralized technology, which means a clearinghouse or manager isn’t needed to process, clear, or complete transactions
- Transactions are processed in a secure manner
- It’s more efficient to process information, enter contracts, and analyze or follow data
For a not-for-profit organization, blockchain technology can be used to integrate operating and accounting functions. It also means organizations will no longer be bound by geographic regions or traditional intermediaries, such as banks or investment managers, to conduct business.
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