Is Bitcoin a Powerful New Friend to the World's Poor? Some Funders Hope So

Last month, a Bitcoin development project won a Grand Challenges Explorations grant from the Bill & Melinda Gates Foundation, a $100,000 grant to work on Bitcoin development in Kenya. It's a big milestone for the Bitcoin movement that a major foundation with so much influence and clout in development work is taking an interest in the movement to cryptocurrency. 

This phase one grant will go to Daniel Bloch, who will work in Kenya to develop a money platform called Bitsoko, which uses "Blockchain technology for low-cost transactions mediated by bitcoins." Bloch will also create "simplified options for paying household bills and payrolls" and use the project to evaluate the security of the platform. 

The Gates Foundation opened itself up to working with Bitcoin when it issued a Grand Challenge Exploration in September of 2014 to "Enable Universal Acceptance of Mobile Money Payments." Daniel Bloch is perhaps just the first of many Bitcoin developers who will be reaching out to Gates and other funders interested in financial inclusion. The bigger picture here is that there's a huge amount of interest right now in finding low-cost ways to enable the world's poor to access the kinds of financial services that people in developed countries take for granted. 

A major obstacle to serving the unbanked, who have very little money, is that it's not profitable to do for financial companies. Bitcoin could conceivably be a game changer in this regard. In an interview with CoinDesk, Kosta Peric, deputy director of the Financial Services for the Poor initiative at Gates, said:

The very powerful thing about Bitcoin in general and especially the technologies behind it, is they are essentially leapfrogging all the technology and providing a new system for processing these huge amounts of transactions for very small costs.

There's nothing to match support from the Gates Foundation when it comes to mainstream respectability. But another foundation specifically devoted to Bitcoin development, the Bitgive Foundation, has been working this ground for a while, and is pushing hard to change the way business is done in philanthropy as well as all other sectors of the global economy.

At a recent conference in Chicago called Inside Bitcoin, Connie Gallippi, founder of the BitGive Foundation, presented a video demonstrating the impact of the bitcoin charity’s efforts in Kenya. The presentation was the inauguration of a new phase of BitGive’s philanthropic mission and fundraising called Bitcoin Charity 2.0.

Just what is Bitcoin? As we explained back in December, Bitcoin is a virtual money counted in a different form. The movement to use Bitcoin started in 2009 and has been gaining traction and legitimacy ever since, despite some notable difficulties and concerns. The advantage of Bitcoin compared to other money is that it needs no central exchange for distribution. Bitcoin is exchanged peer-to-peer and is based on open source software, so anyone with a smartphone can access it.

Philanthropy has been buzzing about Bitcoin's impact for over a year. Last June, an article in the Chronicle of Philanthropy explored how other nonprofits were experimenting with Bitcoin, and quoted the venture capitalist Fred Wilson, who said that Bitcoin was even bigger deal than current crowdfunding platforms, because Bitcoin could bring the overhead costs of donations down to zero.

The Bitgive Foundation's new video, which was shown at the Bitgive 2.0 kick-off event, was produced as a joint effort between BitGive and the Water Project and sponsored by BitPesa and Libra. It tells the story of a well that was funded with donations from the Bitcoin community for the Shisango Girls School in remote western Kenya. The well is a very real representation of how the virtual currency of Bitcoin can dramatically change vital infrastructure in a community. It is also another success story about how Bitcoin and blockchain technology can transform philanthropy.

"I'm so excited to share with you how bringing clean water to their school has changed their lives," says Ms. Gallippi in the striking video about how the water project impacted the community in Kenya.

How does Bitcoin improve the donation process? By cutting costly middlemen out of philanthropic transactions.

The Bitgive Foundation has built a strong alliance with the Water Project, a nonprofit that does work in Africa and accepts Bitcoin for donations. Its president and founder, Peter Chasse, recently discussed why Bitcoin is so powerful, and how it could impact philanthropy in a positive way. He details how donation money gets chipped away in the process of donating to countries like Africa, with processing fees, banking fees, costly overseas transfers, and dilution of currency through trading arbitrage and commissions, then more local bank fees once the money gets to Africa.  

But with Bitcoin, he says, "A system this open tends to be harder to manipulate and skew in favor of one population or another. When you look at the disadvantages the poor so often face in traditional banking, this one potential benefit becomes central to cryptocurrency’s appeal for me, especially in emerging economies."

Chasse also notes the "end-to-end transparency" that Bitcoin enables, so that donors are more connected to how their money is actually spent.  With purpose and profit becoming more closely aligned, it's exciting to see how organizations and businesses are figuring out how to work with Bitcoin.

Related: Can Bitcoin Change the Face of Philanthropy? The Bitcoin Foundation Thinks So