Charity
Lack of transparency, accountability difficulties, and restrictions on how donations can be accepted are common roadblocks for charitable groups. These organizations may benefit from the usage of decentralized and direct transactions provided by crypto-philanthropy (the use of blockchain technology to facilitate charity contributions).
Cryptocurrency Donations
While there is still a long way to go before cryptocurrencies are widely used for charitable purposes, this road is especially long. Some charitable groups have already started accepting cryptocurrencies as a form of donation.
Donors who want to make their contributions in cryptocurrency may have to limit their efforts to the few organizations that support them or donate huge amounts in an effort to persuade their favorite charity to accept crypto payments.
Having a system in place for the effective and transparent management and distribution of cryptocurrency donations is a prerequisite before a charity may begin accepting donations in this form. An efficient implementation strategy requires an understanding of the fundamentals of cryptocurrencies and blockchain technology, as well as how donations can be converted into fiat currency.
Potential Benefits Of Crypto-Philanthropy
Crypto-philanthropy promises some notable advantages for charitable organizations and donors, which include:
Total transparency: each cryptocurrency transaction is unique, which means that it is also easily tracked through the blockchain. The higher level of transparency and public accountability can ease donors' minds and encourage them to give while also reinforcing the charity's reputation for integrity.
Global and decentralized: most blockchain networks present high levels of decentralization, meaning that they do not need to rely on a centralized government or other institutions. Thus, funds can move directly from donors to charities, and the decentralized nature of blockchain makes it uniquely suitable for international transactions.
Digital agreements: blockchain makes it easier to share and store digital data, and may also be used to ensure that important documents or contracts cannot be modified without the approval of all involved members.
Reduced expenses: blockchain technology has the potential to simplify the way charities are managed, automating parts of the process and reducing the overall costs by requiring fewer intermediaries.
Reduced taxes: considering a US-based donor as an example, if a contribution is made with Bitcoin, the charity will get the full donated value (no capital gain taxes). Moreover, the donor would be able to claim a higher tax deduction towards governmental agencies.
Concerns and Limitations
Despite the potential advantages, there are some potential concerns to be considered when adopting crypto-philanthropy:
Security: if the private keys that give access to donated funds are lost, there is no way to recover them. Likewise, if the keys are not managed and secured properly, a malicious entity may end up accessing the wallets and stealing the funds.
Public awareness and understanding: most people find blockchain quite difficult to explain, and many potential donors don’t understand the basics of cryptocurrencies well enough to trust the system or make use of it for charitable donations.
Real-World Cases
Some well-known philanthropic groups have recently embraced the concept of crypto-philanthropy. Fidelity Charitable, a global philanthropic organization, received cryptocurrency donations in the amount of $69 million in 2017. In the same year, an anonymous contributor known only as Pine donated $55 million in Bitcoin to various charities all across the world through the Pineapple Fund.
BCF is another famous example of crypto-philanthropy, as was previously mentioned. The BCF is a not-for-profit organization with the mission of democratizing charitable giving by utilizing a decentralized platform.
Closing Thoughts
Crypto-philanthropy remains a relatively new means of giving, accepting, and distributing donations. But as the blockchain technology grows more widespread and familiar, charities and donors alike may come to embrace it as one more attractive way to help those in need. It seems only sensible to assume that as the public continues to adopt this form of giving, charitable organizations will ramp up their cryptocurrency operations.
Last updated
Was this helpful?