Study | Charities in Epidemic Need Blockchain More

Overview

At present, the credibility of charitable organizations is widely questioned, mainly due to the lack of effective supervision of charitable organizations, the lack of legal status of private charitable organizations, and opaque information. In view of this situation, this article proposes the idea of constructing a blockchain charity organization's information disclosure framework, with a view to helping charitable organizations improve their credibility.

Report

China's Charity Market Status

In recent years, China's charitable organizations have developed rapidly. According to data published in the Charity Blue Book released in 2019, as of the end of 2018, the total number of social organizations nationwide was 816,000, an increase of 7.1% compared to 2017, and the total value of social charities reached 3265.2 100 million yuan. However, due to the difficulties of high entry barriers and low management efficiency in China's charity units. Some charitable organizations suffer from poor management and improper funding. Especially in recent years, especially in recent days, the negative information of charitable organizations has continuously emerged, causing the public to question charitable organizations widely. And it has led charities to an unprecedented crisis of trust.

The actual social donation in 2016 was 145.8 billion yuan, and the actual social donation in 2017 was 152.6 billion yuan. China's total social donations in 2018 are estimated to be about 112.8 billion yuan, down 26.1% from 2017. Despite the significant increase in social donations, 43.5% of volunteer organizations still face insufficient funding for volunteer services.

With the continuous development of philanthropy, China's existing laws and regulations on charitable organizations show various deficiencies. It was not until September 1, 2016 that China formally promulgated the Charity Law. Compared with the United Kingdom and the United States, which enacted the Charitable Trust Act and the Entertainment Charity Act in 1954 and 1958 and continued to improve the charity law in the 21st century, the Law on Promotion of Certain Nonprofit Activities was promulgated in 1998 and began in 2008 Japan, which has implemented a new public interest corporation system, has fallen behind by more than ten years.

In China's existing charity management, problems such as inadequate external supervision and inadequate internal governance mechanisms can be seen everywhere, and charitable organizations have shown many deficiencies in information disclosure. Information disclosure, as the main way for the public to understand the operation and management process of charitable organizations, is currently difficult to meet the regulatory needs and voices of the society. Eventually, it leads to the loss of confidence of the public in public charity. problem.

Charity status

According to the status of domestic charitable organizations, several existing non-profit organizations in China can be divided into three types: grass-roots non-profit organizations, undefined non-profit organizations, and statutory non-profit organizations. The so-called grassroots non-profit organizations refer to some non-profit non-profit organizations that have not been formally accepted and recognized. They do not have a certain legal status, and their activities are spontaneous, and they have not been registered. Undefined non-profit organizations refer to some social organizations that are undergoing transformation and are new or other types. The more classic ones are network groups and institutions in transition. Statutory non-profit organizations are social organizations that register through regular means and carry out various activities in accordance with laws and regulations. They also include some organizations that are exempt from civil registration but have legal status.

As of the end of 2018, the total number of social organizations nationwide was 816,000, an increase of 7.1% compared to 2017, and the growth rate declined. Among them, there were 7,027 foundations, 366,000 social groups, and 443,000 social service organizations, respectively. In 2017, it increased by 11.4%, 3.1%, and 10.8%. According to statistics from the Foundation's central network, as of December 31, 2018, the total number of national foundations was 7015, an increase of 631 from 6,384 in 2017, with an annual growth rate of 9.8%.

Among social organizations, as of December 31, 2018, there were 5,285 charitable organizations nationwide registered and recognized by civil affairs departments; of these, 945 were social groups, accounting for 17.9%, and 246 were social service agencies, accounting for 4.7%. There are 3818 foundations, accounting for 72.2%, and 276 Red Cross Societies, accounting for 5.2%. Among the registered charitable organizations, 1451 have obtained public fundraising qualifications, accounting for 27.5%, of which 440 are social groups, accounting for this type. 46.6% of the number of charitable organizations, 7 social service agencies, accounting for 2.9%, 731 foundations, accounting for 19.2%, and 273 Red Cross associations, accounting for 98.9%.

Issues facing charities

With the rapid development of China's economy and society, the difficulty of public governance continues to increase. Charitable organizations have unique and important advantages in participating in social governance and extending government functions. In certain periods, they can even play a role in filling the "vacuum" of government functions. In our country, the administrative management of charitable organizations had a problem of double-headed administration. The registration management was attributed to the civil affairs department, but the business management was not vested in the civil affairs department, but was borne by other government functional departments. As a result, in practice, the responsibility for supervision is unclear. At the same time, due to the absence of law, 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 opaque information are important issues facing domestic charitable organizations. They have collectively led to a crisis of trust in charitable organizations.

Some examples are inconvenient, but the restrictions on private charitable organizations in these days should be obvious to all. Similarly, the public's kindness and mobilization ability are also obvious to all. In this case, the efficiency of all parties is hindered, which delays valuable Rescue time.

Lack of effective oversight of charities

The "Mui Guomei Incident", "China-Africa Hope Project", "Shangde Fraudulent Donation", "Song Qingling Stone Statue", "43 catty girl" and various recent events have been widely questioned by the public. It seems that collecting management fees and issuing invoices have become one. This kind of profit behavior. Every year, high management fees are put into the pockets of managers. Because of their official origin, external supervision is not well-known for their supervision. The public can only supervise them by appealing to public opinion, but often such articles cannot be retained. Too long. As an external supervisor, the government failed to implement effective supervision, but directly participated in the daily operations of charitable organizations administratively.

We can peep at the government's measures after recent events. This "being an athlete and referee" approach has increased the difficulty of supervision. Official background charities rely on 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 event of trust occurs, the credibility of the government is lost.

Private charities lack legal status

The credibility of charitable organizations is mainly composed of legitimacy. Endorsement by law is the most effective way to quickly gain public trust. Legitimacy means public support in accordance with accepted traditions and norms. Charitable organizations must obtain a certain legal status in order to obtain public recognition. Obtaining public recognition is the most important way to obtain social resources. Under this consensus, private charitable organizations have a natural need to obtain legal status. However, in fact, the ambiguous relationship between private charitable organizations, private non-enterprise units and foundations, the uncertainty of the regulator, and the vagueness of the nature of the determination cannot win public trust. Statistics show that more than 80% of China's private charitable organizations are "illegal existence".

One Fund is a typical example. This private equity fund, which officially operated in Beijing in 2007, is attached to the name of the Chinese Red Cross, and can use the name of the Chinese Red Cross to raise funds publicly. However, due to legal reasons, it was in danger of being interrupted. The One Foundation, which is attached to the name of the Red Foundation, does not have legal personality and has no official seal, so it has very limited restrictions on deep-level cooperation with the enterprise and the transfer of funds. After the Wenchuan earthquake, One Foundation tried to allocate 4 million yuan from the donation for post-disaster reconstruction. However, due to the need for the grant to go through a series of complicated approval processes through the Chinese Red Cross, 4 million yuan was transferred from Beijing to Sichuan. It still did n’t work, and finally returned to Beijing. In the end, while the One Fund had to wait for the fundraising to go through the process, the team first contributed funds in advance in the name of an individual to carry out the preliminary disaster relief work.

On the other hand, the law sets too high a threshold for the legalization of the identity of non-governmental charitable organizations, and some legalized non-governmental charitable organizations have beckoned under the guise of charity. After the Yanran Angel Fund was established, the first task was to find a suitable designated hospital and cooperate to complete the rescue of children with cleft lip and palate. However, in the early days of the charity foundation, Li Yapeng put forward "three conditions" to the hospital. Most public hospitals have difficulty accepting these requirements. Li Yapeng is completely in a weak position with public hospitals and has little chance of winning. Under pressure, Li Yapeng can only choose private hospitals as partners. As another example, Han Hong's foundation has actively donated money and materials since the Wenchuan earthquake. The Han Hong Love Charity Foundation was established in 2012, but it did not get legal public fundraising qualifications until 2019.

Over time, private charity has also ushered in a certain degree of favorable policies. The cumbersome process of the foundation was finally eased after the enactment of the "Charity Law of the People's Republic of China" in 2016. The passage of the charity law provided new fundraising channels for non-public foundations, and also provided optimized support for charitable organizations. The issue of legalization of the organization has been alleviated to some extent.

Information is not transparent

It is reported that the China Foundation Transparency Index was launched in 2012 and is currently the most authoritative and professional third-party transparency evaluation system in China. The Tsinghua University Integrity and Governance Research Center provides consultation. In its 2018 Transparency Index, China Red Cross Foundation ranked first with a score of 100 out of more than 5,000 foundations participating in the nation's evaluation. It's clear that some events at the end of 2019 have further shattered the standard of transparency about "real" information. The non-disclosure and opaqueness of the information has not resolved the public's doubts, which has led to overwhelming feedback from the public. It is also a long-standing public question about the credibility of charitable organizations.

In recent years, although the transparency index of Chinese charities has improved year by year, most charities still fail to provide some key and sensitive information, such as remuneration of principals and managers, and audited financial statements of charitable projects. .

Even if there is such a centralized Internet-based information publishing platform, it does not mean that it is the best channel for charity organizations to disclose information. The original texts of various information reports were not readily available in a timely and convenient manner. The websites of some charitable organizations still have incomplete information disclosure, timeliness, and the information disclosed cannot be verified.

Wu Wenhu, a professor of communication at Jinan University, said, "In a society where class divides exist and monopolistic groups rely on privileges to realize their desires, the sense of deprivation of the bottom groups can easily be expanded and exacerbated. Sensitive people quickly form collective distrust. The more opaque the system and position, the easier it is to become a gunpowder that provokes public grievances. "

Causes of Trust Crisis

Based on the above, we can draw a conclusion: the lack of effective supervision of charitable organizations, the lack of legal status of private charitable organizations, and the opacity of information have led to a crisis of trust, which has led to a decline in the credibility of charitable organizations.

How to gain credibility

So how can charities regain credibility? To solve this problem, we must first understand the generation mechanism of credibility. A professor of sociology at the University of California, Los Angeles (UCLA), which the author highly respects, wrote in his thesis "Production 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 both parties will give trust to each other, and that two parties with similar societies will easily 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 history and reputation can easily gain public trust. There are two main reasons for the public to judge the reputation of charitable organizations: 1. From the first-hand information proactively released by charitable organizations. 2. Second-hand information from public opinion. Both affect public trust in charitable organizations.

For example, many charitable organizations invite donors to participate in project inspections in order to give donors first-hand information. In the history of continuous interaction and interaction between charities and donors, both parties can quickly build trust through positive feedback. At the same time, media, self-media and experts play a key role in second-hand information. The accumulation of information obtained by the public through these channels will form a judgment on this charity. Charitable organizations that play a positive role in the media often gain public trust.

In order for charitable organizations to gain the trust of the public, they must try their best to make the public obtain authentic, authoritative and reliable information from inside and outside the charitable organization. However, the way in which information is transmitted determines whether the true information of the charity can reach the public, and thus determines the degree of public trust in the charity. Because there are omissions and distortions in the process of information transmission, and the more information transmission links, the more information is omitted, so first-hand information and second-hand information have different effects on the credibility of charitable organizations. For the general public, they rarely rely on first-hand information, most rely on second-hand information to determine whether to give trust, and the information that the public refuses to give trust is mainly second-hand.

Second, people determine whether a charitable organization is credible based on certain social characteristics. The more similar the values of the public and the charity, the more the charity meets the expectations of the public, the more the public will trust the charity.

Trust and expectations are linked. The greater the trust, the higher the expectations of the trusted person; the smaller the trust, the lower the expectations of the trusted person. People's long-term expectations for a social role will be solidified into the role's behavior rules. If the role does not meet everyone's expectations, it will be considered dishonest and will be punished accordingly. Even if everyone's expectations for the role are unreasonable, the character will be punished for failing to meet expectations. If the behavior of the trustee 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 give the trustee trust in the future. Charitable organizations need to understand what the public expects of them. Donors entrust valuable funds to charitable organizations, and at the same time give charitable organizations good expectations of donated funds and materials.

Third, the law provides strong and compulsory guarantees for both parties, and those who break faith will be punished by the law. As a result, when the law implements its duties, the public will trust the charity more.

The "Charity Law" introduced in 2016 solved the problem of "unreliable" in the charity industry. However, due to historical reasons, the "law enforcement must be strict" problem that the public expects is still being further implemented. Public dissatisfaction with the enforcement of the law. When charitable organizations are unable to respond to the public's reasonable expectations, or even intentionally do evil, they can be punished according to law, which will not only improve the credibility of charitable organizations, increase the cost of breaking the law, but also increase the credibility of government departments.

Therefore, gaining credibility needs to proceed from three aspects: information disclosure, meeting expectations, and improving the legal system.

Improving the legal system requires the efforts of legislative and law enforcement agencies. Meeting the expectations requires well-managed internal management, transparent operation, and the integrity and honesty of the staff of charitable organizations and diligence in observing the law. This requires strict internal rules and regulations. What we can solve is from the perspective of information disclosure, let the public implement external supervision, so as to regain the trust of the public.

Discussion on Blockchain Information Disclosure Framework

Problems that blockchain can solve

Blockchain has unique advantages in public welfare and social assistance.

On October 24th, the Political Bureau of the CPC Central Committee conducted the eighteenth collective study on the current status and trends of blockchain technology development. The general secretary emphasized when conducting the study that the integrated application of blockchain technology played an important role in new technological innovations and industrial changes. To explore the application of "blockchain +" in the field of people's livelihood, and actively promote the application of blockchain technology in the fields of education, employment, pension, precision poverty alleviation, medical health, commodity security, food safety, public welfare, social assistance and other fields, for the people The masses provide smarter, more convenient and better public services.

The birth of blockchain technology reduces the cost of reducing trust, because it is essentially a distributed ledger that can perfectly solve the trust crisis in information systems.

The blockchain uses mechanisms such as decentralization, asymmetric encryption, and distributed storage to ensure that all nodes in the system can automatically and securely exchange data in a trusted environment, and this mechanism saves time and money, can automatically match, Enforcement has advantages over other time-consuming and labor-intensive tools.

Since Bitcoin, blockchain technology has continued to develop. In 2014, Ethereum further derived a smart contract technology with a variety of new functions. The smart contracts were written into the blockchain in a digital form. The characteristics of technology ensure that the entire process of storage, reading, and execution is transparent, traceable, and non-tamperable. It can solve the problem of trust among individuals, between individuals and organizations, and between people and the Internet of Things.

Because humans are fickle and complex species, and humans always make mistakes, and blockchain technology is an intelligent trust that cannot be tampered with. Humans may violate regulations to falsify, but technology will not deceive the public.

Under the influence of technological developments such as the Internet, big data, and blockchain, the public will increasingly appreciate the importance of credit, because once a contract is breached, it means that everyone can know the public's untrustworthy behavior at the same time. It directly affects the public's use of these credit services in the future, and will to some extent promote users to cherish their credit more and more, thereby enhancing the trust between people in the entire society.

The role and significance of the framework

Due to data fragmentation and the existence of data islands, a large amount of data appears fragmented and discrete. This has caused the network to reduce the cost of information transmission while increasing the cost of integrating, analyzing, and applying information. In this regard, this article believes that the advantages of the framework can reduce the overall cost, and can figure out where the key to solving the trust problem lies, and who should be responsible for the problems that cannot be solved.

According to the "Charity Law", civil affairs departments at all levels of the government, as the main body building a unified platform for information release, shall assume legal obligations. However, this does not mean that these departments must have professional qualifications and capabilities in dealing with related matters, nor may they be able to guarantee effective results. Using the government's blockchain platform in the framework can greatly reduce the cost of collecting and processing information while improving its operational efficiency.

The composition of the frame

The whole framework is divided into three parts: goals, execution steps and functions.

The goal of the framework is to solve the problem of information disclosure of charitable organizations, thereby improving the credibility of charitable organizations.

The implementation steps are mainly based on the principle of disclosing information in accordance with the law. When providing public services, they should communicate to the public and accurately disclose relevant information about tasks, goals, planned activities, finance and governance to win public support.

The expected functions are to integrate the platform's internal supervision functions with the help of the platform to reduce the cost of supervision and expand the scope of supervision. Functions. Supervision and evaluation require public participation. Finally, the platform's service content will be expanded to the dynamic and proactive release, real-time tracking of charity project information, and intelligent matching of charity resources.

What blockchain should the framework adopt?

However, what blockchain to adopt is still an issue that needs to be addressed.

Public blockchain

Public blockchains use complex algorithms to reach consensus among network participants, but in many cases it may not be suitable for companies because their privacy protection is limited compared to private blockchains. In the traceability process of the public blockchain, the quality of products is controlled by different nodes. Relevant participants in the supply chain record all product information in public channels, and all nodes confirm the information through a consensus mechanism and receive rewards in digital currency.

Alliance Blockchain

The alliance blockchain is a blockchain with several institutions or organizations jointly participating in the management. Each participating institution or organization runs one or more nodes in it. The data in it is only allowed to be read by different institutions in the system. Write and send transactions, and collectively record transaction data. Through the cross-validation of participating institutions, the traceability, query, and falsification of commodity information can be realized.

Private blockchain

Private blockchains designate network participants by using an access control layer, and typically use high-throughput consensus mechanisms. This is by far the most likely structure for charity self-monitoring.

Depending on the type of blockchain platform used, the blockchain can be designed to provide different levels of access to data on the blockchain. This means that it can both increase the transparency of data and maintain privacy as necessary.

Participation method

Source: Standard Consensus

Take a national charity as an example. For internal supervision, local branches establish private chains for internal review. This part requires operational efficiency and timely announcement. Therefore, private chains are the lightest and fastest way. At the same time, the local branch will act as a node of the entire national institution to perform the query verification function. The information of all alliance chains will be aggregated into the higher-level alliance chains, and will be reviewed by the alliance chain consisting of the grantee, the donor, the government supervision department and the media. Such a framework can not only disclose information efficiently, but also be traceable and cannot be faked.

In improving related supporting policies, consideration should be given to setting up corresponding rewards and punishment measures for charitable organizations. The incentive measures are proactive assistance, and those who actively cooperate with the platform to build open information channels should be publicized and praised on the platform, which can help charitable organizations to raise more charitable resources, thereby forming a virtuous circle.

At the same time, since the formation of a blockchain framework is still more completed through professional institutions and social resources, more market-oriented means and market-oriented institutions should be introduced in the middle and late stages of the formation of the framework. Participation has gradually evolved into policy participation. With the help of professional and social forces, the release and dissemination of charitable information is accelerated.

Challenges of the framework

Participation

For example, donating supplies involves many independent participants, including donors, transporters, charities, grantees, and regulators. They may not trust each other, and this distrust will greatly limit the efficiency of the whole chain collaboration. For example, these participants may be reluctant to share data or restrict the sending of data, or leave it to all parties to verify and coordinate the data. In this case, regulators, donors and beneficiaries are willing to actively contribute data. Transporters may access the blockchain to contribute data, but the opinions of charities play a decisive role.

Costly data reconciliation process

Many of these parties end up with identical copies of documents (such as certificates, shipping orders, bills of lading, goods, etc.) and data out of sync, making it difficult to identify the original version or decipher its accuracy. In many cases, these reconciliation processes are still based on manual and paper carriers, and errors and data duplication will increase reconciliation costs and increase the complexity of the blockchain.

Lack of product traceability

The main challenge of traceability is the ambiguity of product information-this is caused by product characteristics that are difficult to trace and uncertain. Poorly maintained records that complicate the supply chain and lag in identification may be the reason for this problem. When more than one product is stored, transported, or when semi-finished or finished products are made from raw materials, traceability becomes extremely difficult. For example, donors donate 1 ton of vegetables, 100 masks and 200 kg of beef at the same time. This non-standard product also has traceability issues when the identifier or ownership is changed, repackaged, or the method of naming and labeling is changed.

Conclusion

This article can only technically propose a solution that together provides a feasible means for charity organization information disclosure, self-regulation and external supervision, but its implementation still faces difficulties. Therefore, while thinking about the reasons for the problem and proposing a solution, the problems in this article still have problems such as lack of understanding of laws and regulations, content details, and insufficient understanding of the true operating procedures of charity electronic systems. These remaining issues will be presented as further discussion in the future.

risk warning:

Beware of illegal financial activities under the banner of blockchain and new technologies. The standard consensus firmly resists the use of blockchain for illegal fundraising, online pyramid schemes, ICOs, various variants, and dissemination of bad information.

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