Many non-profit organizations have yet to pursue crypto philanthropy because cryptocurrency donation is still a relatively new space. As such, there are still many questions left unanswered.
With crypto philanthropy still in its early stages, now may be a good time to get in and offer donors an alternative way to donate to your cause. So, if you’re curious about crypto philanthropy, we’ll explain what it is and how it works.
Cryptocurrency (crypto) is digital money that relies on a computer network (decentralized medium) to uphold and maintain the currency rather than relying on any central authority (like the government).
Unlike fiat money (paper money and coins) you can’t touch or see crypto. Its value comes from perceived value (the crypto community’s belief that a crypto coin can satisfy their expectations of the currency).
Ever since the Pineapple Fund project donated $55 million in Bitcoin to 60 charities in 2017, crypto philanthropy has now become a thing.
While we’re still in the early stages of crypto philanthropy, all signs show it will be a game-changer in the coming years. Below are some of the changes to philanthropy influenced by cryptocurrency.
Did you know the average age of traditional donors in the US is 64 years old? From this, you can guess the majority of your traditional donors lie on the more senior side. You should also know that 38 years is the average age of crypto users.
So, if you’re a non-profit organization (NPO) interested in targeting a new, younger pool of donors, crypto philanthropy may be a good strategy to adopt. You’ll not only access a new generation of donors, but you’ll also diversify your revenue streams.
One of the downsides of traditional philanthropy is it encourages donors to donate to popular non-profit organizations because of their accomplishments and reputations. This trend has led to decreasing support for smaller NPOs performing exceptionally well.
However, crypto philanthropy is evening out the playing field by encouraging cause-based donations. Cause-based donations enable crypto donors to support a particular cause instead of supporting a single NPO. The funds raised during cause-based fundraising are shared equally among all participating non-profit organizations.
Thus, it helps small non-profit organizations receive the support they deserve and donors enjoy a larger pool of charity causes to support.
Non-profit organizations need donor data to perfect their fundraising marketing strategies. At the same time, people are increasingly getting concerned about how much personal information companies collect online.
With so much concern for donor privacy, it makes sense for you and your non-profit organization to give your donors the option to remain anonymous. Cryptocurrencies can guarantee the anonymity of donors as transactions on a blockchain are usually anonymous. As a result, your NPO can guarantee donor privacy by accepting crypto gifts.
Traditional donors donate primarily to popular non-profit organizations because they have proven transparency and accountability records. NPOs have the mandate to provide information on their activities and their finances allowing donors to keep an eye on their activities. Unfortunately, not all NPOs are forthcoming with this information, making it difficult to determine whether they’re operating ethically.
However, when organizations start distributing funding in crypto, it’ll be easier for donors to track where the money is going and how it’ll be spent. A good example of high transparency success due to crypto philanthropy is the UNICEF CryptoFund.
Accessing a new pool of donors and diversifying your revenue sources through crypto donations might sound like an abstract idea. However, companies tapping into the potential of crypto philanthropy are currently enjoying the benefits of their faith in crypto.
According to The Giving Block, a crypto fundraising platform, crypto donations in 2021 rose to $69.6 million from $4.2 million, representing a 1,558% increase. They also reported that the average crypto donation was $10,455.
Only 52% of Americans trust that nonprofits fulfill their pledge to their missions. Now, crypto philanthropy provides nonprofits with a new opportunity to increase their trust among skeptic givers. With increased transparency and accountability, trust in charities increases. In turn, this can lead to an increase in the number of new and regular donors.
Currently, there are four ways to receive a cryptocurrency donation:
Like cryptocurrency, crypto philanthropy comes with its risks.
First, there’s an issue with volatility. Cryptocurrencies are volatile with some wild swings. Today a crypto’s value could skyrocket and tomorrow it could sink and lose millions in value. This makes it difficult for charities to hold on to cryptos like bitcoin and Ethereum hoping their value increases or as a source of income stream.
Secondly, crypto philanthropy isn’t widely known. And with a lot of skepticism around cryptos in general, it’ll take a few years before crypto donations hit a tipping point.
Thirdly, while crypto donation guarantees anonymity, there’s a chance of reputation damage if it’s ever discovered the source of the money is a tainted donor.
The future of crypto philanthropy is promising. This presents your non-profit organization with an opportunity to explore innovative ways to improve donor experiences. Many crypto holders have an interest in social good. And it’s the responsibility of nonprofits to make it easier for them to give.
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