How Blockchain Technology Is Revolutionizing Philanthropy
It all started with an unknown individual, or individuals, named “Satoshi.” In early 2009, as the world was in the early stages of one of the deepest recessions in recent memory, Satoshi unleashed a new invention to the world: Bitcoin. Designed as a decentralized global currency, Bitcoin started trading at pennies on the dollar and has recently grabbed headlines worldwide as its value has skyrocketed. But what many people are unaware of is that Bitcoin and the technology behind it, known as blockchain technology, are opening up new opportunities in the world of philanthropy.
What is Cryptocurrency and Blockchain Technology?
A cryptocurrency is defined as “a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency.” Bitcoin was the first cryptocurrency to be invented, joined by newer ones including Ethereum, Litecoin, and Monero, amongst others.
The technology that enables the use of cryptocurrencies is referred to as blockchain technology. Without getting into the technical details, a blockchain is a distributed, public accounting ledger that allows anyone to view transactions on the network. Blockchain enthusiasts tout the technology as a means to create a more decentralized world, one in which trusted institutions, such as banks or governments, are no longer necessary in order to carry out person-to-person transactions. Entities across the globe, including those in the philanthropic sector, are currently exploring the potential uses of this technology beyond cryptocrurrencies.
Immediate Opportunities for Fundraising
So, you may be asking yourself, “What does all this have to do with philanthropy?” The first thing to consider is that the vast wealth created by Bitcoin and other cryptocurrencies has created a new class of would-be philanthropists. (Think the Bill Gates and Mark Zuckerbergs of the crypto community.) This offers a unique opportunity for innovators in the nonprofit sector to cultivate new donors with unique interests.
According to the article, “How Cryptocurrency and Blockchain Are Changing Philanthropy: Expert Take,” many charities have already started experimenting with cryptocurrency donations, including such big names as the United Way, the Red Cross, and Save the Children. In fact, the Fidelity Charitable donor-advised fund received a total of $69 million in cryptocurrency donations in 2017 alone.
One way that nonprofit organizations can take advantage of these new opportunities is to directly target those who have made their fortunes in the crypto space. The article “Bitcoin: What Nonprofits Need to Know and How It Might Give Your Fundraising a Competitive Advantage” provides some concrete suggestions on how to identify and strategically target individuals and companies operating in the blockchain sphere. In order to facilitate contributions from these new donors, the article recommends that nonprofits accept cryptocurrency donations using a platform such as Coinbase or Bitpay, which allow
501(c)(3) organizations to minimize their transaction fees.
Another fundraising method involves using crowdfunding platforms that accept donations in cryptocurrency. BitHope is a crowdfunding platform that enables individuals to donate Bitcoin and other cryptocurrencies to their favorite campaign. Nonprofits simply submit an application with their campaign idea, and if approved, the campaign is publicized on the platform. Helperbit is another similar crowdfunding platform.
Newly Minted Foundations
In addition to increasing donations by individuals, the wealth created by cryptocurrencies has also led to the creation of new foundations.
The Pineapple Fund, created by an anonymous early Bitcoin investor operating under the pseudonym of “Pine,” was established for the sole purpose of “donating $86 million of Bitcoins to charity” because “once you have enough money, money doesn’t matter.” The article entitled “About That Mysterious Donor Giving Millions in Bitcoin to Charity” explores the Fund’s giving and even goes so far as to coin the term “cryptocurrency philanthropy” to capture the phenomena of this new type of grantmaker. (Unfortunately, the Pineapple Fund is no longer accepting applications.)
Other cryptocurrency-related foundations, such as the Bitcoin Foundation, the Ethereum Foundation, and the newly created Ethereum Community Fund, aim to foster development and technological innovation in the blockchain sphere itself.
Envisioning the Future of Charitable Donations
The advent of blockchain technology opens up a host of new possibilities for both the philanthropic and nonprofit sectors. A series of short videos put out by the Charities Aid Foundation envisions what this future may look like. On the blockchain, all financial transactions are visible to everybody, which furthers the possibility of creating “radical transparency” in terms of donations, thereby increasing levels of trust.
The GiveTrack platform, currently in its BETA phase, is one initiative that is exploring the use of blockchain technology to increase transparency between donors and nonprofit organizations. This is a platform that “nonprofits use for taking donations and sharing with donors exactly how their contributions are used while tying donations directly to a project result.” While in the BETA phase, GiveTrack is only working with pre-established partners. However, interested organizations can click on “Start a Project” on the upper right hand side of the webpage to be notified when the platform is open to new project campaigns.
Examples of similar initiatives include Giveth and Alice. Currently in development, Giveth is creating a donation application using Ethereum smart contract technology. The “system cuts out bureaucracy and enables nonprofits to create a high level of transparency and accountability towards Givers. At any point until the moment funds are locked, a Giver can decide to withdraw them.” Alice is another platform that aims to bring transparency to the funding of social organizations, including charities, non-governmental organizations, and social enterprises.
Blockchain technology may also revolutionize our traditional notions of the way foundations operate. The article “Crypto-philanthropy: How Bitcoin and Blockchain Are Disrupting the World of Giving” predicts that in the future, blockchain technology may lead to the emergence of a new type of “Distributed Autonomous Foundation.” The idea behind this type of foundation is that funding decisions would not be made by a program officer or other foundation staff but would instead be made through a voting process involving crypto token holders.
While many of these blockchain-related technologies and platforms are still in their early stages, nonprofits wishing to stay on the forefront of new philanthropic developments may consider taking part in whatever way they can. Whether accepting cryptocurrency donations or participating in the BETA phase of a newly evolving project, early blockchain adopters may find that they have a competitive fundraising advantage.
- Click on the links above to learn more about philanthropy and blockchain technology.
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