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How Cryptocurrencies and Blockchain are changing philanthropy – Inside philanthropy

Blockchain technology and cryptocurrencies like bitcoins that are based on it are becoming more common in many fields. When you see a technology used in various areas such as regional voting trials, major stores, NASA research projects and refugee identification efforts, it is not surprising that even donors and non-profit organizations are entering the game.

Here, let's look at some of the interesting ways in which blockchains and cryptocurrencies are changing philanthropy, along with some of the challenges and pitfalls.

What are cryptocurrencies and blockchains?

If you already know it, jump! Cryptocurrencies are digital money protected by cryptography that is typically not controlled by central banks. Blockchain technology is different and rapidly evolving, and this is only a general overview. A blockchain is essentially a ledger that contains records (like the details of a digital money transaction) locked in groups called blocks. It is often called a distributed or decentralized system because it keeps copies of these blocks on an extended network of computers, rather than on a centralized server. Each computer on the network has a matching copy of all the blocks and is said to "execute the blockchain". Record blocks are verified, added to the chain, and protected by encrypting or encrypting information. "Crypto-mining" – a complex and complicated IT process that we will not completely cover here – verifies both the encryption of many blockchain and mints new cryptocurrency.

Although not infallible, these systems are considered very difficult to tamper with because, in order to eliminate them, all the computers connected worldwide in the blockchain network should be compromised at the same time. Although blockchains can now be designed for many different purposes and programmed for application in almost all fields, they are often used to provide secure and traceable virtual transaction transactions and rapid peer-to-peer virtual currency transactions.


Many non-profit organizations now accept cryptocurrencies like bitcoins or ethers, including United Way, Red Cross and Save the Children. All three receive digital money via a bitcoin payment processor called BitPay.

Save the Children, along with the Water Project and other groups, has also received donations through the BitGive Foundation, which in 2013 became the first non-profit organization specializing in the use of bitcoins to finance charity work. BitHope is another example of this type of foundation. So far, the BitGive campaigns have collected modest thousands, making their programs similar to medium crowdfunding attempts. It also has a blockchain-based transparency initiative called GiveTrack that seeks to clarify the donation processes for all stakeholders. (We'll look at it in more detail below.) Founder and executive director Connie Gallippi said that some of the benefits of fundraising in bitcoins are:

When you do not have to go through the traditional system of banks and governments, money comes much faster, it's much cheaper, [and] it's also cryptographically secure, so you know it's coming to who it was meant to reach.

On another scale, Fidelity Charitable, which holds the largest national donor fund, received about $ 70 million in cryptocurrency in 2017-10 times more than in the previous year.

"It is one of the fastest growing assets we are seeing wanting to contribute to charity: many people who own bitcoins or other forms of cryptocurrency want to be philanthropic," said vice president Amy Pirozzolo.

In 2014, for tax purposes, IRS classified digital funds not as currencies but as properties, similar to securities or bonds. The donation of such assets prevents the donor from paying taxes on capital gains (taxes on the profit of a sale) and gives them a tax deduction for the donation. So, just as many philanthropists get big tax benefits from the donation of their stocks, they can now do the same with cryptocurrency participations.

In the political field, candidates can accept bitcoins as a "natural" donation, according to the Federal Election Commission (FEC). A handful of politicians are on board, but with some FEC guidelines that create potential gaps (like donations under $ 200 that do not have to be reported), the totals are difficult to track down. The Missouri Republican Austin Petersen is believed to have obtained the largest donation of digital money in the federal election history of 0.284 bitcoins, or $ 4,500 at the time of the donation. He used BitPay to receive the gift. Democratic Brian Forde's congressional campaign in the 45th district of California received more bitcoin donations worth over $ 66,000 in August and September 2017.

"A number of Congressmen have asked for my opinion on how they can accept bitcoins," Forde said.

Large crypto-philanthropists

Several blockchain and crypt organizations and lenders have made large payments to non-profit organizations. The Pineapple Fund, supported by a successful anonymous crypto-investor passing through "Pine", is a well-known, but now exhausted, protagonist in the crypto-philanthropic sphere. The bottom line is, "Because once you have enough money, money does not matter." He committed 5,104 bitcoins and donated $ 55.7 million to 60 different charitable organizations including Water Project, Give Directly, ACLU, Tennessee River Gorge Trust, and women who tech.

In March 2018, San Francisco's global blockchain platform, based in San Francisco, set aside $ 29 million to fund all donation requests on the DonorsChoose.org donors' fundraising site, the largest single donation ever made in cryptocurrency. As we have reported, Ripple has recently committed $ 50 million to expand academic research on blockchain "with the best universities around the world".

Also at the beginning of 2018, the decentralized payment service provider OmiseGO and ethereum blockchain founder Vitalik Buterin collaborated with the nonprofit GiveDirectly to send $ 1 million to refugee families in Uganda. GiveDirectly "allows donors to send money directly to the poor without constraints" and his site shares extensive research that shows the power of direct money donations, which are usually well spent by those in poverty. More than 12,000 families benefited from this crypto donation, which was exchanged with OmiseGO digital tokens in local currency.

The reduction of intermediaries that characterize the GiveDirectly funding structure makes it ideal for the peer-to-peer and decentralized nature of blockchain transactions. In addition, blockchain and cryptofinancial assets, which are often accessible at very low rates through a smartphone app, can empower people who have not established traditional banking systems in their communities. As we have seen, the Gates Foundation has supported innovations using blockchain systems to increase financial inclusion for several years.

In June 2018, Brian Armstrong, CEO of Coinbase, the leading digital currency trading company, launched GiveCrypto.org, "a non-profit organization that distributes cryptocurrency to people living in poverty." Similar to the GiveDirectly model, this organization tries to put funds in the hands of people in troubled economies, where they can convert cryptography into their local currency, execute encrypted transactions or hold them ("hodl" in crypto-slang) for a long time term. Armstrong has already donated $ 1 million to the organization, which has now raised $ 4 million in total. He hopes the fund will reach $ 1 billion within two years.

Armstrong pointed out in a blog post that, like many rapidly rising tech entrepreneurs, the crypto-investors have accumulated large amounts of wealth very quickly. He wrote:

[The] the reputation of the cryptic community has been dominated by the images of "bros in Lambos", whose antics attract a lot of attention. This does not represent the best of our community. Most of the people I respect and know in the crypto-ecosystem believe we have a responsibility to help this technology reach a much wider audience.

Other encryption formats

Charitable coins are cryptocurrencies that are usually created to finance specific causes. For example, the non-profit Charity: Water is raising money through sales and the extraction of its digital currency, the Clean Water Coin. Likewise, RootProject sells Roots tokens and uses them in crowdfunding campaigns to support various "good social" projects and non-profit organizations around the world, including those related to homelessness, education and afforestation. And some charities like UNICEF Australia ask supporters to donate more computer power to help them extract various cryptocurrencies.

Then there is the new GiveTrack system from BitGive. It aims to use a public blockchain (transaction register) to offer maximum transparency, a trait often within the philanthrosphere.

"GiveTrack is a non-profit platform used to collect donations and share with donors exactly how their contributions are used, linking donations directly to a project result," says the site. It is currently in the BETA version and uses an "immutable and transparent" blockchain register to provide information on financial transactions in real time. For example, a non-profit organization would identify the specific costs for a program and once financed in bitcoin, all of its purchases would then be viewable on GiveTrack.

"The project results are linked to GiveTrack through a reporting mechanism that provides notifications on project milestones and updates written by charity representatives in the field," says the site, which allows "donors to see the progress of the project through to completion. . "

While this initiative aims to be the epitome of precise and responsible policy funding, it could leave little scope for nonprofit organizations to be flexible or reactive during a project and is very far from the general operational support that many organizations crave. Nevertheless, the intention to provide transparent registers and linking donors more directly to the progress of a project is certainly interesting, and many types of jobs are now funded on the platform, including wildlife crime training for African rangers, screening of sight for children, and sustainable agricultural initiatives.

Negative aspects of Crypto-Giving

Every transaction on a public blockchain like bitcoin blockchain can be viewed online, but the parties involved can remain largely incognito, carrying on their business with the use of public numeric addresses and private keys (there are also other measures of privacy for some blockchain, but we will not explore them now). The secrecy of blockchain is an interesting feature to consider in the field of philanthropy, potentially adding another layer to give shade to a sphere in which the sources of donation can already remain largely hidden. Within the blockchain interactions, an individual's transactions are sometimes linked to their true identity somewhere in an online account and / or can sometimes be traced to an IP address, so they are not considered 100% anonymous.

Currencies based on blockchain can both mask personal finance and be adopted for criminal purposes such as investment fraud and money laundering. The cryptocurrency regulations are complex and controversial, which vary widely from one country to another. For example, China has banned the exchange of cryptocurrency and the first offers of coins (ICO). South Korea has banned anonymous encryption and Japan has blocked the trade in some "privacy-rich currencies". Meanwhile, Venezuela has launched a state cryptocurrency in October 2018, and central banks in Norway and Sweden are considering taking this step.

In the EU and the United States, regulations are still under development. Separate branches of the US government currently refer to digital currencies differently; like property, securities, raw materials and funds. New York opted to create its own BitLicense system to regulate in-state cryptography.

In addition to unclear and developing regulations, market volatility can be an important deterrent for many who are considering making cryptocurrency transactions. The meteoric rise of Bitcoin in 2017 and the significant collapse of 2018 are a prime example of the intense changes in value that these unregulated money can suffer. A value of cryptovalutation can certainly change after being sent to a non-profit organization. Of course, charities can choose to sell / convert the digital currency immediately into legal currency, or money issued by the government, upon receipt. Since tax-exempt charities do not have to pay capital gains tax, if they sell the crypto, the entire value of the gift persists.

And like all technologies, blockchains and digital currencies are not perfect. For example, blockchains may become congested with traffic and cryptocurrency exchanges and portfolios may be violated.


Despite increasing complications, imperfections and pains, the diversity of applications for blockchains and cryptocurrencies speaks of the usefulness, adaptability and resistance of basic technology. Throughout the world, innovations in this space continue to move forward as regulators play to recover and show no sign of arrest. If used successfully, blockchain systems can move funds in a direct, secure and egalitarian manner, and certainly appear to be a fertile area for philanthropists and non-profit organizations to continue to explore (with caution).

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