A new type of coronavirus has swept across China. As is expected during this alarming epidemic, the Red Cross Society of China is playing an active role.

However, news from the humanitarian organization has been anything but positive. Whether it’s medical masks being sent to hospitals that don’t need them, protective suits not being delivered, understaffed warehouses, and the mishandling donations, the credibility of the Chinese Red Cross Society, and other aid agencies is at stake.

Public Welfare Problems

Public confidence is unpredictable and transparency is insufficient, which is the reason why public trust of welfare organizations in China is waning day by day.

Difficulties in public welfare have emerged due to the following two difficulties:

  • Transparency regarding both the source and the flow of money and materials
  • The authority of charity and supervision of third-parties

There are four roles in a donation: donor, the charity, finance and logistic organizations, and the recipients. Each role can be compromised when there is a lack of transparency.

Donor

The most likely problem here is fraudulent donations. Although charity is an excellent way to help and show compassion, it has also become a tool for gaining profits.

In China, there have been reports of celebrities such as the popular Li Meng who was unwittingly part of a fraudulent donation scheme. Furthermore, regardless of whether the donations are honest or fraudulent, they are never made transparent to the public. This has had the unfortunate effect as celebrities, like Li Meng, are unable to provide strong-enough evidence of innocence.

The Charity

The problem here is in the flow of money and materials. During the outbreak, the Hubei and Wuhan Red Cross Societies caused a large controversy due to problems in the allocation of received donations and materials.

On January 29 and 30, the Hubei Red Cross announced the use of the first batch of donated materials for the prevention and control of Covid-19, the official name for the once dubbed coronavirus.

The Wuhan Union Hospital on the front line only received 3,000 masks, whereas nearby Renai Hospital, which does not treat fever patients, received 16,000 masks. During this time, the doctors of Wuhan Union Hospital appealed to the public over Chinese micro-blogging platform Weibo: “There’s a shortage of medical supplies, help!”.

On February 1, the Wuhan Red Cross released information regarding all material that was distributed up to January 31, however, the specific amount of materials for the Wuhan Union Hospital was not publicly listed.

An update on February 3 revealed that the Wuhan Union Hospital was finally receiving material from the Red Cross, however, the number of masks was still unclear.

Public charities are of great concern for the people of China. The Red Cross Society of China’s reputation was greatly damaged following the 2008 Sichuan earthquake. Reportedly $457 million USD (2.9 billion RMB) was donated, however, the Red Cross Society of China has publicly admitted to redirecting more than 80 million RMB that was once intended for an art school and other reconstruction projects.

Further eroding trust was the controversial case of Guo Meimei, a popular Weibo blogger who claimed to be working for a subsidiary of the Red Cross, yet regularly shared photos posing in luxury resorts or flaunting designer handbags. While it was later proved she had no connection to the official organization, damage to the image of the Society was already done.

Although many organizations will disclose public information and financial statements on time, most of them lack the supervision of an authoritative third party, and a means as to how to guarantee transparency.

Financial or Logistic Institutions

The circulation of donations and materials will inevitably pass through financial or logistic institutions, which will inevitably generate additional costs. This results in the final donation or the materials sent to recipients being less than what was originally donated.

The Donor

There is the practice of using the kindness of strangers to illegally collect money. In other words, people on the Internet in China have fabricated false stories and even created fake medical records in order to defraud unsuspecting individuals and groups.

Rebuilding Public Trust with Blockchain Technology

Is there any way to keep the information transparent when donating goods and materials, reduce extra expenses, and effectively monitor the entire process?

Yes, all these are possibly with blockchain.

When we talk about the blockchain, the first things we think of are its characteristics of openness, transparency, immutability, decentralization, traceability, and peer-to-peerage. If you think about it, these are not unlike what is expected for a charitable organization.

Charities which involve collecting and donating funds and materials can use the blockchain as a means of being more transparent and efficient. Here’s how it could work:

Blockchain + Capital
All donation information is recorded on the chain, from project establishment to audits, or from fundraising to the final donation. Every step is open and transparent. This can effectively reduce disputes and sort out mistakes and omissions.

Blockchain + Materials

Cross-sector and cross-region data are uploaded to the chain to realize the data integration of materials available from all sectors of society. From here it can be used to understand the real-time amount of assets and inventory, and to track transportation nationwide.

Furthermore the place of origin, direction, and storage of materials can be recorded in real-time on the chain, the data can be stored at multiple points, and the public can check it at any time.

Based on the characteristics of blockchain, combining blockchain technology with aid agencies will also have the following advantages:

More Efficient Contract Execution

The uneven distribution of resources between Wuhan and the Hubei Red Cross Societies is also largely due to inefficiency caused by a lack of manpower and experience.

Blockchain smart contracts can solve this problem to a certain extent.

After the conditions and requirements are set, the contract can automatically perform related operations and give feedback, so that manual intervention can be reduced to a considerable extent and efficiency can be improved.

Openness and Transparency Promote Truth

As the blockchain is essentially a public distributed ledger, transactions will be broadcast across the network, and the behaviors of users or organizations will be uploaded after encryption. Each node has the authority to maintain this ledger.

If any user or organization submits false data, it will be disclosed on the chain. In this way, everyone is a supervisor, and the whole process is naturally transparent.

At the same time, because the data information is recorded on the ledger of each node, even if the data of one or several nodes is tampered, it will not affect the data records of other nodes. Instead it will allow other nodes to quickly identify fraudulent behavior, as well as providing data as evidence of bad behavior.

Breaking Data Silos On The Chain
Nonprofit organizations are like data silos. The actual distribution of donations and materials is only known within the organization, so even if the information is publicized on time, it’s somewhat self-congratulatory.

When stored on the chain, it means that the data is truly exposed to those that want to see it. Storing on the chain will also promote different organizations and departments to cooperate with each other, share data, and to reduce the waste of time and resources caused by untimely communication. When charities are accountable to the public, the trust of the public will be restored.

The downsides are that the data uploaded by non-profit organizations cannot be completely guaranteed, and that decentralization can result in an increase in counterfeiting (not to mention the increase in costs that are a result of that).

However, compared with a centralized model, there are now more nodes to upload data, the scope of effective supervision widens, and the number of people involved increases the trustworthiness of the data.

Blockchain + Charities

In the Wuhan epidemic, Alibaba’s financial arm Ant Financial has continued testing their new blockchain.

For anyone donating through the Alipay app’s Go Wuhan page, the information of all donated items has been written on the blockchain to achieve greater transparency.

Regrettably though, the distribution and allocation of these donated items is still carried out by public organizations. As a result, the process will suffer some of the limitations highlighted in this article.

In modern Chinese society, platforms such as Alipay and WeChat, while playing a vital role, are merely third party platforms. At the moment, they can not transparently supervise the distribution process of funds or donated goods.

Fortunately in the future, these issues will be minimized, with greater accountability and transparency allowed thanks to blockchain technology.

For now, we can do our best to support those in Wuhan. At PPIO we’re doing our best to support many of our family and friends currently fighting the virus across the country. 加油武汉!