Blockchain technology will drive changes in public welfare charities
Overview Overview
Public welfare and charitable organizations have repeatedly produced trust crises, leading to serious consequences and creating a vicious circle. In this article, we discuss the use of blockchain consensus mechanism and token mechanism to solve this problem. The program introduces a restrictive relationship to protect the interests of all parties involved (including institutions and the public), uses a token mechanism to isolate asset management and operation management, and ensures safe and effective use of donations through multi-signature and token exchange.
Report report
Report report
Current Situation of my country's Charity Market
In recent years, my country's charitable organizations have developed rapidly. According to the data in the Charity Blue Book released in 2019, as of the end of 2018, the total number of social organizations in the country was 816,000, an increase of 7.1% compared with 2017, and the total value of social welfare reached 3265.2 billion. However, due to the high barriers to entry and low management efficiency of charitable organizations in our country. Some charitable organizations have problems such as lax management and improper operation of funds. Especially in recent years, especially in recent days, the negative information about charitable organizations has continued to emerge, causing the public to question charitable organizations widely. And led to an unprecedented crisis of trust in charitable organizations.
In 2016, the actual social donations across the country were 145.8 billion yuan, and in 2017, the total actual social donations were 152.6 billion yuan. In 2018, the total amount of social donations in China is estimated to be about 112.8 billion yuan, down 26.1% from 2017. Although the amount of social donations has increased significantly, 43.5% of volunteer organizations still face insufficient funds for volunteer services.
With the continuous growth of charity, our country's existing laws and regulations on charitable organizations show various deficiencies. It was not until September 1, 2016 that China officially issued a charity law. Compared with the United Kingdom and the United States, which enacted the "Charitable Trust Act" and "Entertainment Charity Act" in 1954 and 1958 and continued to improve their charity laws in the 21st century, the "Specific Non-profit Activities Promotion Act" was promulgated in 1998 and began in 2008. Japan, which has implemented a new public interest legal person system, has lagged behind by more than ten years.
In my country's existing charity management, problems such as insufficient external supervision and imperfect internal governance mechanism can be seen everywhere, and charitable organizations have shown many defects in information disclosure. Information disclosure is the main way for the public to understand the operation and management process of charitable organizations. At present, it is difficult to meet the regulatory needs and voices of the society, which eventually leads to the public losing confidence in public charity, which leads to the public's "want to donate but is afraid of being cheated" question.
Current status of charities
According to the status quo of domestic charitable organizations, the existing non-profit organizations in my country can be divided into three types: grassroots non-profit organizations, unformed non-profit organizations and statutory non-profit organizations. The so-called grassroots non-profit organizations refer to non-governmental non-profit organizations that have not been formally accepted and recognized, do not have a certain legal status, and carry out activities that are voluntary and that have not been registered. Unformed non-profit organizations refer to some new or other types of social organizations that are undergoing transformation, and the more classic ones are network groups and public institutions in transformation. Statutory non-profit organizations are social organizations that are registered and filed through normal means and carry out various activities in accordance with laws and regulations, including some organizations that are exempt from civil registration but have legal status.
By the end of 2018, the total number of social organizations in the country was 816,000, an increase of 7.1% compared with 2017, and the growth rate has declined; among them, there are 7,027 foundations, 366,000 social organizations, and 443,000 social service agencies, respectively. In 2017, it increased by 11.4%, 3.1%, and 10.8%. According to statistics from the Foundation Center Network, as of December 31, 2018, the total number of foundations nationwide was 7,015, an increase of 631 from 6,384 in 2017, with an annual growth rate of 9.8%.
Crisis of confidence is key and leads to further deterioration
With the rapid development of my country's economy and society, the difficulty of public governance is also increasing. Charitable organizations have unique and important advantages in participating in social governance and extending government functions, and can even play a role in filling the "vacuum" of government functions in certain periods. In my country, the administration of charitable organizations once existed as a double-headed problem. The registration management belonged to the civil affairs department, but the business management did not belong to the civil affairs department, but was undertaken by other government functional departments. As a result, regulatory responsibilities cannot be clearly defined in practice. At the same time, due to the absence of laws, information disclosure is not a statutory obligation of government supervision.
The lack of effective supervision of charitable organizations, the lack of legal status of non-governmental charitable organizations, and the opacity of information are important problems currently facing domestic charitable organizations, which together lead to a crisis of trust in charitable organizations.
How serious is the impact of "distrust"?
We use various data after the "Guo ** Incident" in 2011 to illustrate.
According to the core data of "2011 China Charity Donation Report". Institutions most affected by Guo Meimei, the system received about 2.867 billion yuan in social donations in 2011, a decrease of about 59% compared to 2010. In contrast to the sudden drop in donations received by the organization, in 2011, the total amount of social donations in my country totaled about 84.5 billion yuan, a drop of 18.1% compared to 2010.
Looking at the public annual audit report data of the most affected organization, the numbers speak for themselves. The donation income is as follows:
People's Daily News in 2011
image description
2012 China Economic Net News
What is more dangerous is that the crisis of trust begins to intensify
Starting from distrust, a series of logical evolutions will lead to a more vicious circle. distrust -> ... -> more distrust. for example:
No trust -> more doubts to deal with -> less energy to handle donations -> less effective resolution of incidents -> less trust
No trust -> less amount donated -> harder to get help in difficult areas -> slower development in areas -> more people needing help -> affects overall economic development -> less amount donated -> less trust
There are many more similar logical evolutions...
Charities lack effective supervision
The "Guo ** incident", "China-Africa Greek * project", "Shang * fraudulent donation", "Song *ling stone statue", "4 * Jin girl" and various other incidents have been questioned by the public, and they seem to be charged for management Fees and invoicing become a profitable behavior. Every year, high management fees go into the pockets of managers. Because of their official background, external supervision over them is in name only, and the public’s supervision on them can only stay in appealing to public opinion, but often such articles cannot be preserved. too long. As an external supervisor, the government fails to implement effective supervision, but directly participates in the daily operation of charitable organizations in an administrative manner.
We can see the leopard from the measures taken by the government after various recent events. This method of "being both an athlete and a referee" has exacerbated the difficulty of supervision. Charitable organizations with an official background use the authority and credibility of the government to obtain resources and carry out operational activities, but administrative supervision cannot effectively manage them. In the end, when a crisis of trust occurs, what is lost is the credibility of the government.
Non-governmental charitable organizations lack legal status
The most important aspect of the credibility of charitable organizations is their legitimacy. Legal endorsement is the most effective way to quickly gain public trust. Legitimate means having the support of the public according to accepted traditions and norms. Charitable organizations must obtain a certain legal status in order to obtain public recognition, and public recognition is the most important way to obtain social resources. Under this consensus, non-governmental charitable organizations have a natural need to obtain legal status. But in fact, the ambiguous relationship between non-governmental charitable organizations and private non-enterprise units and foundations, the uncertainty of the regulators, and the ambiguity in determining the nature cannot win the trust of the public. Statistics show that more than 80% of non-governmental charitable organizations in our country belong to the "illegal existence".
One Foundation is a typical example. This private equity fund, which officially operated in Beijing in 2007, is affiliated with other organizations and can use the name of other organizations to publicly raise donations from the society. However, due to legal reasons, it was once in danger of being interrupted. The One Foundation, affiliated to the Red Foundation, has no legal personality and no official seal, so it has been severely restricted in matters such as in-depth cooperation with enterprises and transfer of funds. After the Wenchuan Earthquake, the One Foundation tried to allocate 4 million yuan from donations for post-disaster reconstruction. However, due to the need to go through a series of complicated approval processes by those institutions, the 4 million yuan was still used after being allocated from Beijing to Sichuan. No, and finally called back to Beijing. In the end, the One Foundation had to wait for the donation process to go through, and the team first paid in advance in their own name to carry out the preliminary disaster relief work.
On the other hand, the law sets too high a threshold for the legalization process of non-governmental charitable organizations, and some legalized non-governmental charitable organizations are bluffing and deceiving under the guise of charity, which further reduces the credibility of charitable organizations. After the establishment of the Smile Angel Fund, the first task is to find a suitable designated hospital to cooperate in the rescue of children with cleft lip and palate. However, in the early days of the establishment of the charity foundation, Li Yapeng put forward "three major conditions" for the hospitals. Most public hospitals could hardly accept these requirements. Li Yapeng was completely at a disadvantage to the public hospitals and had almost no chance of winning. Under pressure, Li Yapeng could only choose private hospitals as partners. To give another example, Han Hong’s foundation has been actively donating money and materials since the Wenchuan earthquake. The Han Hong Love Charity Foundation was established in 2012, but it did not obtain the legal public fundraising qualification until 2019.
With the passage of time, private charity has also ushered in a certain degree of favorable policies. The cumbersome process of the foundation was finally eased after the promulgation of the "Charity Law of the People's Republic of China" in 2016. The passage of the Charity Law provided a new fundraising channel for non-public fundraising foundations, and also provided optimal support for charitable organizations. Private charity The problem of organizational legalization has been alleviated to a certain extent.
Information is opaque
In recent years, although the transparency index of charitable organizations in my country has increased year by year, most charitable organizations still fail to provide some important and sensitive information, such as the salaries of managers and managers, audited financial statements of charitable projects, etc. .
Even if there is such an Internet-based centralized information release platform, it does not mean that it is the best channel for charitable organizations to disclose information. The original text of various information reports cannot be obtained in a timely and convenient manner. The websites of some charitable organizations still disclose information that is not comprehensive, timeliness is not strong, and the disclosed information cannot be verified.
Wu Wenhu, a professor of communication at Jinan University, said, "In an environment where class gaps appear in society and monopoly groups rely on privileges to realize their desires, the sense of deprivation of the bottom groups can easily be enlarged and intensified, and sensitive people quickly form collective distrust, so , the more opaque the system and stand, the easier it is to become a powder keg that detonates public grievances.”
How to gain credibility
So how can charities regain their credibility? To solve this problem, we must first understand the mechanism of credibility generation. A professor of sociology at the University of California, Los Angeles (UCLA) that the author admires wrote in his paper "Production of Trust: The Institutional Basis of Economic Structure": Trust comes from the process of communication, from organizational characteristics, and from the legal system.
He believes that the historical reputation of the exchanges between the two parties will give each other trust, and it is easy for two parties with similar social nature to build trust. The legal system provides protection for human behavior and can also generate trust.
First, in terms of the credibility of charitable organizations, charitable organizations with a good past history and reputation can easily gain the trust of the public. There are two main bases for the public to judge the reputation of charitable organizations: 1. First-hand information from charitable organizations. 2. Secondary information from public opinion. Both will affect the public's trust in charities.
For example, many charitable organizations invite donors to participate in project inspections, with the purpose of allowing donors to obtain first-hand information. In the continuous interaction and communication history between charitable organizations and donors, both parties can quickly accumulate trust through positive feedback. At the same time, in the second-hand information, the media, self-media and experts play a key role. Based on the accumulation of information obtained through these channels, the public will form a judgment on the charitable organization. Charities that play a positive role in the media tend to gain the trust of the public.
If charitable organizations want to gain the trust of the public, they must try to make the public obtain authentic, authoritative, and reliable information from inside and outside the charitable organization. However, the way of information transmission determines whether the real information of charitable organizations can reach the public, and thus determines the degree of public trust in charitable organizations. Because there are omissions and distortions in the process of information transmission, and the more information transmission links, the more information omissions, so first-hand information and second-hand information have different impacts on the credibility of charitable organizations. For the general public, they seldom rely on first-hand information, and most rely on second-hand information to judge whether to give trust, and the information that the public refuses to trust is mainly second-hand.
Second, people base their trustworthiness on certain social characteristics of charities. The more similar the values of the public and charitable organizations are, and the more charitable organizations meet public expectations, the more the public will trust charitable organizations.
Trust and expectations are linked together, the greater the trust, the higher the expectations of the trustee; the smaller the trust, the lower the expectations of the trustee. People's long-term expectations of social roles will be solidified into the behavior rules of the role. If the role does not meet everyone's expectations, it will be considered dishonest and punished accordingly. Even if everyone's expectations for the role are unreasonable, the role will be sanctioned by everyone for not meeting expectations. If the behavior of the trusted person meets or exceeds the expectations of the trustee, the relationship between the two parties will be consolidated or strengthened, and the trustee will continue to trust the trustee in the future. Charitable organizations need to understand what the public expects of them. When donors entrust valuable funds and materials to charitable organizations, they also give charitable organizations the expectation of making good use of the donated funds and materials.
Third, the law provides strong coercive guarantees for both parties, and those who break their trust will be punished by the law. In this way, when the law performs its duties, the public will have more trust in charitable organizations.
The "Charity Law" promulgated in 2016 solved the problem of "unlawful compliance" in the charity industry. However, due to historical reasons, the issue of "strict law enforcement" expected by the public is still being implemented. The problems accumulated during this period broke out. Public dissatisfaction with law enforcement. When charitable organizations fail to respond to the reasonable expectations of the public, or even do evil intentionally, they can be punished according to the law, which will not only improve the credibility of charitable organizations and increase the cost of breaking the law, but also improve the credibility of government departments.
Therefore, to obtain credibility, it is necessary to introduce control mechanisms (regulations, participants, etc.), ensure information disclosure, and meet public expectations.
Blockchain Solution Discussion
The essence of the blockchain is to solve the problem that transactions can still be conducted with each other under the condition of distrust. In the field of public welfare and charity, the blockchain consensus mechanism and technical means can be used to achieve the above-mentioned solution "introduce restriction mechanisms (regulations, participants, etc.), ensure information disclosure, and meet public expectations." Simply solving superficial issues such as information transparency and legislation cannot solve the problem of trust. This kind of solution is the method of "treating the head when you have a headache, and treating the foot when the foot hurts". If the essential problem is not resolved, a crisis of trust will inevitably occur.
Data transparency and disclosure is not the crux of the problem. It can be said that any charitable organization has a corresponding information system, which publishes all kinds of information, but the trust problem still exists, and it broke out again recently. Obviously, in 2019, information technology or information system construction is much better than in 2011. Has the problem been solved?
Laws and regulations are also not enough to solve the problem. As mentioned above, there was no charity law when the "Guo Meimei incident" occurred in 2011, but on September 1, 2016, China officially promulgated a charity law. By 2019, the crisis of confidence broke out again. Has the problem been solved?
For a blockchain solution to be effective, it should be as mentioned above: "Introduce a restrictive mechanism (regulations, participants, etc.), ensure information disclosure, and meet public expectations." What does such a blockchain solution look like? Our vision is as follows:
The POS consensus mechanism of the blockchain is used to make regulatory agencies, large donors, asset trustees, etc. become super nodes, and change the original single jurisdiction of public welfare charities into a node consensus voting mechanism. This will make the main participants a common interest group, and the interests of this group are consistent with the interests of the general public. Guaranteed by the consensus mechanism, the interests are consistent and cannot harm other participants (or the cost is so high that it is not feasible);
The management of public welfare institutions is separated from the management of funds, and the token exchange model is adopted to eliminate black-box operations and improve operational efficiency. The donor gets the tokens allocated by the public welfare organization, and the asset custody institution transfers the funds to the bank account of the donor according to the token holdings of the donor. The blockchain will ensure that the transfer of funds is open, transparent, traceable, and can be exchanged in real time;
Tokens and corresponding fund management are guaranteed to be valid using multi-signature technology. The transfer of tokens is signed by asset custody institutions, public welfare organizations, and large donors.
Problems Blockchain Can Solve
The birth of blockchain technology reduces the cost of reducing trust, because its essence is a distributed ledger, which can perfectly solve the trust crisis in the information system. The current main problems and solutions are as follows:
Problem: Unrestricted use of fundsSolution: POS multi-signature makes the cost of breach of contract extremely high through the consensus mechanism and multi-signature mechanism
Problem: opaque flow of fundsSolution: data on-chain
Problem: Inefficient use of funds and materials
Solution: smart contract digital asset transfer
The blockchain adopts the POS consensus mechanism and the alliance chain with limited participation. Large donors, public welfare organizations, regulatory authorities, and asset custody institutions are all super nodes. Through the token system of the blockchain itself, the operation management and asset management of public welfare organizations are separated, and the asset custody agency issues tokens to the recipients. The recipient uses the token exchange mechanism to exchange funds with the bank.
illustrate
illustrate
Through mechanisms such as decentralization, asymmetric encryption, and distributed storage, the blockchain ensures that all nodes in the system can automatically and securely exchange data in a trusted environment, and this mechanism saves time and money, and can automatically match, Enforcement, compared with other time-consuming and labor-intensive tools, has more advantages.
Since Bitcoin, the blockchain technology has been developing continuously. In 2014, Ethereum further derived a smart contract technology with various new functions, which writes the smart contract into the blockchain in a digital form. The characteristics of the technology ensure that the entire process of storage, reading, and execution is transparent, traceable, and unchangeable. It can solve the trust problem between individuals, between individuals and organizations, and between people and the Internet of Things.
Under the influence of technological developments such as the Internet, big data, and blockchain, the public will increasingly realize the importance of credit, because once a contract is breached, it means that everyone can know the public's past dishonesty, and at the same time It will directly affect the public's use of these credit services in the future, and to some extent will promote users to cherish their own credit more and more, thereby enhancing the trust between people in the whole society.
Conclusion
Conclusion
