Dreams thrive, even in crisis

As the dawn breaks on a world rife with turmoil, one can’t help but be struck by the poignant postcard penned by 11-year-old Zawad, a child caught in the maelstrom of a Bangladeshi refugee camp who dreams of being an English teacher.

Below postcard, drawn by Zawad, is a testament to the resilience and hope of the human spirit. The United Nations global education fund’s initiative to collect postcards from over 60 children like Zawad serves as a clarion call to the world at large that we must do more to help young dreamers realize their aspirations.

But in a world where conflict and instability are curtailing the hopes of 222 million young dreamers facing the horrors of war, disaster, and displacement, traditional philanthropy often falls short. The bureaucratic red tape and lack of agility in traditional philanthropy hinders its ability to respond quickly to urgent needs. Moreover, the centralized nature of traditional philanthropy creates a power dynamic that leaves those in need feeling helpless and disempowered.

Fortunately, there is hope.

Throughout history, philanthropic innovations have been ignited by “new sources of wealth,” such as the establishment of America’s first foundation by John D. Rockefeller, or the Gates’ remarkable translation of their tech-fuelled prosperity into global philanthropic prowess, benefiting the destitute, the sick and the marginalized.

In like manner, the emergence of a new cohort of “crypto-elite” is disrupting conventional philanthropic methods, creating novel opportunities for nonprofits to leverage blockchain technology and cryptocurrencies, like Bitcoin and Ethereum, in their fundraising strategies.

With the ability to operate on a decentralized blockchain, crypto philanthropy offers the transparency that traditional philanthropy often lacks. It empowers donors and recipients alike, enabling them to connect directly without the need for intermediaries.

Traditional Philanthropy’s Dirty Secrets

Traditional Philanthropy has been plagued with issues such as lost funds, delays, and fraudulent activities. For example, Simon Price pilfered almost $1 million from a charity he managed. Moreover, there are instances where funds fail to reach their intended recipients in a timely manner, such as the Twin Parks fire incident, where a meager $1.65 million was distributed out of the $4.58 million intended for the victims.

On the other hand, Web3 technology has emerged as a game-changer. One of its most commendable feats is its ability to prevent fraud and donation slippages. With every transaction being securely recorded on the blockchain, the risk of tampering and malfeasance is significantly reduced. This not only guarantees the safe transfer of funds to the intended recipient but also bolsters trust in the system.

Recent Trends

Recent trends in the realm of philanthropy indicate that millennials are increasingly drawn towards crypto philanthropy, which was hitherto considered a challenging demographic to reach for charitable giving. According to recent studies, an impressive 90% of Millennials recognize the importance of charitable giving, with a staggering 75% identifying themselves as philanthropists.

Talking about institutions, Fidelity Charitable received an astonishing $330 million in cryptocurrency donations in 2021, up from a mere $28 million the year before, a staggering eleven-fold increase! Similarly, The Giving Block, a cryptocurrency donation platform, reported a 1,558% increase in total donation volume, with $69 million being donated in 2021 alone.

One of the most fascinating aspects of crypto-based philanthropy is the demographic it caters to. The average income of a crypto user, specifically blockchain developer, is approximately $110,000 per year, which is significantly higher than the national average. This translates to a higher propensity to donate, resulting in larger donations compared to the average person. In fact, the average crypto donation is a jaw-dropping $10,000, which is over 100 times larger than the average online donation made using a credit or debit card !!

As the world moves towards greater digitization, it is heartening to witness organizations leveraging technology to further their altruistic goals. The Giving Block has been at the forefront of this movement. And, amongst their numerous success stories, Orangutan Outreach stands tall as a testament to the power of embracing novel ways of giving. With a steadfast mission to care for displaced orangutans, Orangutan Outreach witnessed a staggering surge in their revenue in their very first year of accepting crypto and NFT-related donations, raising a whopping one million dollars.

Another project known as the Pineapple Fund is a stellar example of crypto-philanthropy which is spearheaded by an anonymous crypto-whale, known as “Pine,” whose immense holdings enabled the donation of over $55 million worth of Bitcoin to 60 U.S.-based charitable organizations.

Moreover, the COVID-19 pandemic has acted as a catalyst for transformative change, where organizations have had to re-examine their fundraising strategies. Traditional in-person events, once a mainstay of charitable giving, have become a rarity. In their place, digital giving has emerged as the new norm.

NFTs and Crypto Philanthropy

Over the past year, there has been an explosion in NFT-related donations, ranging from 20% to 30% of all donations. NFTs enable a unique mode of giving, allowing donors to earmark a percentage of the initial sale price to be automatically directed towards a charity. Additionally, future royalties can be programmed into the NFT, providing a sustainable stream of recurring donations.

One key advantage of NFT-based crypto philanthropy is that donors can enjoy tax benefits. The IRS defines cryptocurrency as a form of “property,” which exempts donors from paying capital gains taxes on any appreciation of their crypto assets. This translates into higher tax deductions for the donor, and correspondingly, more funds for the nonprofit organizations.

The potential of NFTs for charitable giving is already being demonstrated in real-world scenarios. A non profit Ukraine TrustChain was able to secure funds during a funding crisis. When the organization was running low on funds, they turned to bitcoin and NFTs, which enabled them to raise the necessary funds quickly. This demonstrates the power of NFTs as a tool for social impact, enabling organizations to tap into new sources of funding and drive sustainable change.

Pitfalls

Despite the exciting prospects, the growth of crypto-philanthropy is not without its challenges.

One major hurdle is the relative “newness” of digital currency donations and blockchain-based philanthropy systems, which can be difficult for users to navigate. Moreover, there is still limited awareness and interest in crypto-philanthropy among individual givers, charities, and foundations.

While Ukraine TrustChain has seen success with Bitcoin donations, other charities have not been as lucky. Critics point out that the technology behind crypto can be rather slow, with a low throughput rate compared to traditional financial networks like Visa or Mastercard.

Furthermore, the risks of volatility associated with the crypto currencies cannot be ignored. Several organizations proceed with caution, preferring to quickly convert their digital holdings back to traditional fiat currencies.

The irreversibility of crypto transactions can also be a concern for charities. Unlike traditional financial networks, where steps can be taken to have cash returned in case of a fraudulent transfer, this isn’t the case with crypto.

Moreover, Crypto mining emits a massive amount of carbon, making it a bad choice for charities with environmental interests. 0.5% of the world’s electricity is consumed by crypto mining for a system that can process only a few transactions per second. Therefore, being public about crypto philanthropy runs a real risk of backlash because it is not only a financial cancer, but it also cooks the Earth.

Lastly, What if the non-profit sector embraced the potential of DAOs and restructured itself around token voting structure? The implications of this shift would be momentous, transforming everything from fundraising to grant distribution and nonprofit management into a transparent process. However, there lies a challenge in the transition to nonprofit DAOs, particularly in the United States, where maintaining charitable status while adopting a DAO governance structure is a conundrum.

Way Forward

Blockchain philanthropy has attracted a diverse range of organizations committed to furthering justice, equity, and inclusion. UNICEF, for example, is exploring blockchain to improve access to financial services, while the Human Rights Foundation is promoting Bitcoin as a tool for human rights and free societies. OutRight Action International is employing NFT artists to support LGBTIQ rights globally, and several other initiatives are underway to utilize blockchain to combat climate change and promote sustainable agriculture.

However, Crypto-philanthropy, as a verdant oasis of charitable giving, has yet to be fully explored by many institutions. While some organizations, such as the Great Lakes Science Center and the Institute of Contemporary Art, San Diego, are taking tentative steps into the Web3 space, many cryptocurrency investors remain unaware that they can donate their investments to charity.

Furthermore, we must be careful not to replicate the shortcomings of traditional philanthropy. There is still a lot of uncertainty about crypto’s future, especially in philanthropy. We need to avoid creating crypto-giving incentives that burden the already busy and resource-limited people to solve a problem they didn’t create, force fundraisers to spend disproportionate amounts of time and money, raise insufficient amounts to tackle large-scale problems, or condition donors to expect sweeteners in return.

The advent of a charity token exchange, dedicated to facilitating the buying and selling of charity tokens, could potentially catalyze a market-based approach to philanthropy that benefits both philanthropists and charitable organizations.

Moreover, many of those who wish to pursue donations report difficulties in finding charities that will accept them. Thus, it is imperative that non-profit organizations develop a deeper understanding of how to engage with crypto-philanthropists, and create internal policies that govern crypto philanthropy.

Final thoughts

The rise of Web 3 has brought about one of the biggest wealth creation events in human history, and as we look towards the future, it’s important to consider how this will impact society and philanthropy at large. From crypto fundraising to crypto charities and accepting crypto donations, the possibilities for using crypto for good are virtually limitless.

While it’s impossible to predict with certainty what the crypto philanthropic landscape will look like in 2040, one thing is clear: the crypto rebels have won. After all, lasting societal improvements can only be achieved when we intervene our efforts through the transparent fabrics of Web 3.0.

This article was written by Raviyank Patel on behalf of COMB Finanical