Anne Frank once said “Nobody has ever become poor by giving” and it remains true to this day. When we give, the world gives back. This same statement can be made about cryptocurrency, for when Satoshi developed this revolutionary technology and gave it to the world, a chain of effects began that would benefit millions of people.
Allow us to explore the topic of crypto-charity, providing insight into the cross-section where philanthropy and the blockchain come together.
Why do charities win in the crypto-age?
Crypto is something we can’t see, smell, or touch, and yet it exists, and with its existence comes disruption, not least for the charity sector. A large percentage of philanthropy is done with desired anonymity, as donors want to support causes they believe in by giving what they can, without looking for any publicity or personal gain. With cash or typical financial donations, it’s hard for anonymity to be maintained, and that’s the first reason of many why some wealthy philanthropists look towards cryptocurrency as a solution to this problem.
Charities simply need to open a crypto wallet and share their address to their followers in order to start receiving crypto-donations, better yet, in most countries, these donations are tax-free. There are further benefits than being just tax-free, in fact, non-profits often receive additional perks when using major crypto-websites, like Coinbase, for example, who waived their fees in order to support charities, or like Ethereum, whose smart contracts have been designed to be seamlessly used in the third sector.
One of the biggest victories for charities and their diversion into cryptocurrency is the fact that it costs nothing to send crypto from wallet-to-wallet, solving one of the biggest pain points that international aid has faced over the last few decades. With millions of workers heading overseas to support their families in any way they can, a huge amount of money gets lost when sending back remittances, as much as 10% for those in developing or rural areas. Each year an estimated $30bn is lost on transaction fees from money sent from migrant workers back to their families. With crypto, more of those hard earnings are kept.
Why should charities embrace crypto NOW?
Here are five key reasons that charities shouldn’t delay in getting started on their crypto journeys.
- Access to a new donor demographic of people who own cryptocurrency and want to do something positive with it.
- It’s a new payment method that costs nothing to process and can take payments from anywhere in the world.
- Positions charities as innovators that are keen to modernise
- Catches the attention of crypto-donors who might otherwise have not noticed the charity
- Helps philanthropists who want to find an ethical solution for their tax dilemmas
Are there any charity-specific cryptocurrency projects worth knowing about?
Sure there are! There are so many that we just picked out a few interesting ones to highlight:
- AidCoin – A simple widget for charities to put on their website in order to receive payments in 23 different cryptocurrencies
- Giftcoin / Promise Giving – Giftcoin is a crowdfunding crypto-platform for charities where funds are released when key milestones are met, or redistributed when they are not.
- GiveCrypto – Brian Armstrong’s crypto-philanthropy project is working to end poverty in all forms
- WFP Building Blocks – The UN and World Food Programme are working together to deliver food vouchers, testing the strength of the blockchain as a support mechanism
- Giveth – Donors gain insight and control over who gets access to their crypto-contributions, and the whole thing is based on Ethereum and smart contracts to provide extra security
- Alice – Described as ‘the future of impact finance’, Ethereum-based Alice improves transparency and connects donations to project outcomes
- BitGive Foundation – Similarly to Alice, transparency and milestones are the key features to improve the relationship with donors
- Disberse – This disruptive organisation is trying to address the issue that the global financial system isn’t quick enough to handle the rapid needs of aid work. They are adapting to emerging tech and blockchain to track funds moving from donors through organisations.
One… billion… dollars!
Coinbase CEO Brian Armstrong is thinking bigger, which is consistent with the nature of the man who helped Coinbase to become the dominant crypto exchange in the western trading world. He’s putting his own money into a fund called givecrypto.org, with which he aims to raise one billion dollars for charitable causes from those who he can convince to join him as backers. Inspired by a combination of the Gates Foundation, the Pineapple Fund and Ripple (which we will cover in the next section), Armstrong wanted to prove that cryptocurrencies could be used as a powerful force for good.
Check out this fantastic quote from Brian Armstrong below:
“People who invested early in crypto have amassed an enormous amount of wealth in a relatively short amount of time. Yet the reputation of the crypto community has been dominated by images of ‘bros in Lambos,’ whose antics get a lot of attention. This doesn’t represent the best of our community. Most people I respect and know in the crypto ecosystem believe we have a responsibility to help this technology reach a much wider audience”
The best anecdotes from crypto-philanthropy
Fidelity Charitable, the philanthropic wing of Fidelity, the world’s sixth-largest private wealth management firm, announced that it has been receiving over $30m a year in crypto donations over the last four years. With more than 127,000 connected non-profits, they spend a lot of time at their research centre, Fidelity Labs, assessing where is best to spread these donations in order to get the maximum charitable effect.
Whilst huge wealth management firms seem like the natural place to look, we’d be better off looking at ‘Pine’ or the ‘Pineapple Fund’ if we want to see one person doing something absolutely extraordinary. In December 2017, during the Bitcoin bull run, an anonymous crypto trader called Pine started a fund to give away 5,057 Bitcoins to charity. At the time, this was worth around $86m, and Pine gave it all away by starting a website and allowing applications from charities.
A name you will probably recognise is Vitalik Buterin, the young founder of Ethereum. He’s also involved in the philanthropic side of cryptocurrency, and there are plenty of stories about his giving. He donated around $1m to African charity ‘GiveDirectly’, another $2.4m to the SENS research foundation, $300k to crypto startups, and $760k to the Machine Intelligence Research Institute. Buterin could easily be a billionaire by now if he hadn’t of turned his idealistic attention to global empowerment and sustainable altruism, rather than indulging in crypto-tech like many of his counterparts.
Here’s a story that warms the cockles. DonorsChoose.org, a crowdfunding platform for educational projects and classrooms that were struggling for funding, was given a whopping $29m in one go, fully funding all 35,000 outstanding campaigns. The donor was Ripple, who made the gift after receiving a very powerful letter about the DonorsChoose.org mission. This isn’t Ripple’s first case of generosity, they also donated $25m to San Francisco State University in 2019. On top of these two massive donations, they also gave $50m spread across 17 universities to support their University Blockchain Research Initiative.
TV and movie star Ashton Kutcher also caught the news a few years back for dipping into his own crypto reserves to donate $4m worth of Ripple to Ellen Degeneres’ Wildlife Fund.
Will cryptocurrency change the face of charity forever?
Truly, it’s hard to see how it can fail. If we can conceive charity as a funnel of funds coming in, and then aid and support as the funnel going out, then by revolutionising half of the system, cryptocurrency could certainly change the face of charity forever. Issues remain for charities, such as whether they should ‘hodl’ or sell donated cryptos, or whether they should partner immediately with a crypto-to-fiat service to turn all donations straight into cash.
Despite some of the risks, cryptocurrencies offer the perfect set of circumstances to both charities and to donors. For the charities, they get transparency, immutability, and traceability, whereas donors get anonymity and tax incentives. Year on year, crypto donations increase, especially as more currencies enter the market and more traders see the wonderful social potential of decentralised money. In fact, 2020 saw the percentage of charities accepting cryptocurrencies double too, which is fantastic news, even if that is just from 1% to 2% (as is estimated by The Giving Block).
Perhaps the biggest issue for the charity sector in working with cryptocurrencies is that there is a direct impact between the performance of the crypto markets and how much crypto is being donated, not just in terms of the number of tokens, but their lessened value in a downturn. When the crypto markets are booming, the charity sector is a huge winner, with more donations and higher values of tokens, but since the big rush of 2017, that sort of boom hasn’t repeated. We will have to wait and see what the future holds on this topic…