Here are seven questions you may have that should answer everything you need to know about the connection between blockchain technology and charities.
1. Is It Already Possible To Donate Crypto To Charitable Causes?
Yes, non-profit organizations are always looking for new ways to attract people to their cause. Crypto offers one possible avenue. Crypto investors may use their cryptocurrency assets to support causes. In fact, crypto donations can be a good way to avoid capital gains taxes if a crypto asset increases in value.
Fidelity Charitable reported a record-high of $69 million in cryptocurrency donations, 10 times higher than the previous year. The organization connects that increase in donations with the increase in Bitcoin’s value. Fidelity also says cryptocurrencies has allowed new donors to contribute who have not done so in the past.
2. Can Cryptocurrencies Be Mined For Charitable Reasons?
Some charities have explored this idea with some level of success. For instance, UNICEF launched an initiative in 2018 called Game Chaingers that encouraged those with graphics cards on their PCs to mine Ethereum. Roughly 12,000 computers were involved (mostly gamers), totaling 85 ETH, equivalent to about $35,000, that was sent to children affected by the civil war in Syria.
This has become one way that charities get people involved who have not made financial contributions in the past. However, given how mining can be harmful to the environment because of the energy involved, charities have to be careful about these endeavors having a negative impact on the world.
3. How Do You Know Crypto Donations Are Properly Used?
Blockchain technology has the ability to improve transparency and accountability with charitable organizations. Smart contracts help to ensure funds are only released to an organization after they prove that their work is making a positive impact. If they don’t meet certain targets, donations can be taken back.
4. Why Is It That Some People Don’t Trust Charities
Sadly, there have been some noteworthy stories about charities misusing funds. There is also some distrust because of how fervent some organizations are about asking people for donations. In the past, some organizations have lacked transparency with regard to how their funds are allocated. With charitable organizations, people want their donations going to the cause and not high-ranking executives, who sometimes take a large cut.
Blockchain, however, can be part of the solution. The technology allows the finances of a charity to be publicly audited. This not only forces accountability, but it can also remove the middleman (i.e. banks) and allows funds to go directly to those in need. However, many charities are already genuine and transparent. They also do a great job of drawing attention to worthy causes, and so they will not be replaced entirely by blockchain technology.
5. Will Blockchain Help Charities Cut Administration Costs?
As many people already know, administration costs and the act of fundraising are two huge costs for charities. Blockchain has the ability to cut down on transaction fees that are associated with donors transferring funds to charitable organizations. This is particularly true with international organizations that operate across borders. In that sense, blockchain can help maximize the amount of money that goes to the cause.
Blockchain organizations are also working to develop APIs in lieu of creating their own platforms. This can be particularly useful for smaller non-profit groups, as they don’t have to spend as much money on developing infrastructure while also reaching more potential donors.
6. Who Benefits From More Transparency With Charities?
More transparency usually brings more peace of mind to donors. After all, they often donate to causes they are passionate about, and so they want most of their money being put to good use. However, transparency can also prevent charities from being cut off from funding for no reason.
For charities that send money to countries where terrorism is prevalent, it’s possible to have their bank accounts closed because the banks don’t want to be accused of failing to stop the financing of terrorism. However, blockchain can help create a better record of money coming in and out of an organization. This creates more transparency and certainty that well-meaning organizations are not financing terrorism or other illegitimate causes.
7. How Do For-Profit Blockchain Platforms Being Charitable?
Many organizations that use blockchain technology have also opened foundations that work to give back. Coins.ph, for example, makes an effort to give those in developing countries access to bank accounts via blockchain. The hope behind this endeavor and others is for well-known figures in the crypto community to implore their followers to support worthy causes that utilize blockchain technology.