Finance

Blockchain for good: Donorcoin makes your money count

By Kitty Knowles 20 January 2017
Summary

London Blockchain Week: Crack down on corruption - and help the causes you care about most.

The jihadist group Boko Haram are notorious in Nigeria.

“The women and children who cross the border in Borno – after Boko Haram has killed all the men – they are skin and bones,” Donorcoin creator Rudi Kruger told The Memo.

The sheer scale of the violence, including the kidnapping and sexual abuse of schoolgirls, has prompted people around the world reach into the pockets and donate funds to help stop the terror.

“But then you see the fat cats in their Learjets, who’ve taken the money that was meant to help,” says Kruger. “It’s not right.”

A broken system

It’s this injustice that has caused Kruger, charities, and the people who donate to them, to despair.

When you give money to a cause, you want to make sure it’s reaching people in need. And far too often this isn’t happening.

“There is massive financial leakage in the world including donor funding,” Kruger explains.

“Trillion of dollars are misappropriated: it is used for other causes, it’s stolen through over invoicing, it’s stolen under delivery, it’s a misused and applied to other causes.”

“Something like child rape we can respond to, but corruption we can’t.”

That’s why Kruger is creating Donorcoin – to ensure your donations actually reach the causes you care about…

A well built by UNICEF in the Democratic Republic of Congo. Pic: UNICEF USA.
A well built by UNICEF in the Democratic Republic of Congo. Pic: UNICEF USA.

What is Donorcoin?

“The name Donorcoin is actually a misnomer,” says Kruger, who’s leading the project through his company INDeX Innovation.

“It is not a coin like Bitcoin or any other coin. It could be a token or an idea.”

What Donorcoin is, is a way of sending funds to causes in way that is both transparent and corruption-proof.

“Once money is in a country’s coffers it disappears or they give it to charity to NGO and then they lose track of it,” Kruger explains.

“To kill a fire the quickest, you need to remove the oxygen, and the only way to fight financial leakage is to remove the money – you have to remove the cash.”

How it works

The beauty of Donorcoin is that no ‘real’ money is transferred until a job is done – until a vaccine is delivered, or a new well is constructed, for example.

Instead, a cash equivalent – a token – is sent, which can’t be stolen because it has no wider worth.

“Money is prepaid with Donorcoin, and once a contractor complies, or they deliver, we release payment,” says Kruger. “It is maybe paid in staged payments, but as they reach their milestones we pay them – you can’t cook the books.”

Bill & Melinda Gates in India. Pic: Bill & Melinda Gates Foundation.
Bill & Melinda Gates in India. Pic: Bill & Melinda Gates Foundation.

Transparency for all

Because tokens can be sent using transparent blockchain systems like bitcoin, everyone can see what funds lie where. This will help stamp out fraud by validating genuine suppliers, says Kruger:

“You can’t say ‘well I’m buying fuel from ABC fuel company’ that doesn’t actually exist – part of the solution will also be an identity solution.”

At present, big charity organisations employ auditors to try and keep tabs on where money has changed hands.

“But you don’t want to have auditors reporters saying all the money’s been stolen,” says Kruger. “I want to prevent people from stealing the money.”

Without a need for auditors, charities are also able to cut back on admin costs. It’s a win-win for everyone (except, perhaps, the auditors).

Good for future

Donorcoin isn’t just some distant pipedream, it could be a reality before the end of the year.

Kruger is already in talks with the likes of the Bill & Melinda Gates Foundation, and will be formally unveiling the project London Blockchain Week, which kicks of today.

The businessman hopes that in the future, his idea will not only help charities make the most of the funds they are donated, but that it will allow more people to feel comfortable making donations in the first place.

“For the first time people will feel that that their intent is being honoured – if they give a dollar, that whole dollar spent,” he explains.

“If we can fast track payment, make it less bureaucratic, make it more transparent, we can make every dollar count.”

Would Donorcoin encourage you to dig a little deeper?

Attend London Blockchain Week from 20 – 26 January. More info here.

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