Crypto-based donations are disrupting philanthropy. Donating in cryptocurrencies can make sure that the money reaches the right beneficiaries. And help donors track the end-use of funds. This tracking is possible because donors can follow the passage of funds on the blockchain. Also, since cryptocurrencies are programmable, donors can limit funds for only specific purposes and deny them to others. Crypto-based charity will help many donors hesitant to donate because they are unsure how charities will use their money or end up in the wrong hands.
What is crypto charity?
Crypto-based donations are disrupting philanthropy. If you donate using cryptocurrencies, you can make sure that the money reaches the right people and the causes you want to support. And you can also track where the money is going. Blockchain technology makes this tracking possible. Also, since cryptocurrencies are programmable, you can specify exactly how the charities should use the money.
Crypto-based charity will help many donors hesitate to donate because they are unsure where their money will go. Or if it will end up in the wrong hands.
What are the issues with traditional charity?
- Donors have no visibility over the funds they donate. There is no way of finding out if the money reaches the intended beneficiaries.
- The traditional mechanics of charity funding worked with the help of influential fund-raising intermediaries who sometimes have their own personal and political agendas. And they offer funds, often with strings attached.
- Some charitable organizations misappropriate funds meant for beneficiaries.
- In times of economic downturns, charities and philanthropic organizations face immense financial hardships and even bankruptcies.
How does crypto-based charity work?
Several blockchain-based donation platforms help charities accept funds from donors directly from the websites of the charities. These platforms also allow donors to control the release of funds based on milestones achieved and track if the funds reach the intended beneficiaries.
Some of the renowned blockchain-based donation platforms are as follows:
Humanity Token Project
Humanity Token is an online service for managing donations and ensuring the transparent distribution of donor funds. You can restrict spending funds for certain goods and services like food, shelter, healthcare, and education. The platform uses a proprietary blockchain where you can track donations.
Promise
Promise has an interesting donation management model based on blockchain technology. Like other blockchain-based platforms, you can monitor the end-use of your funds. But it also breaks the project down to milestones. The platform will release the funds only after the confirmation of a measurable event, with some evidence.
The Giving Block
The Giving Block is a blockchain-based platform that brings crypto-donors and charities together. It also helps charities with the technology required to accept cryptocurrencies and helps them convert that to fiat money if needed. It also helps charity organizations get in front of crypto-donors by creating a social presence for charities.
AidChain
AidChain a blockchain-based donation platform, is a poster child for surveillance philanthropy. It helps charity organizations accept cryptocurrency donations. And you can track your contributions on the Ethereum blockchain. Interestingly, it has its own Token, AID, that powers the network.
Aid: Tech
Aid: Tech is a company that helps donors ensure that the money or objects that they gift reach the intended beneficiaries. This technology provides the end-users with a digital identity that allows them to receive money or goods. The beneficiaries can use identity proof to receive the funds or the intended gifts. What this means is that you can send funds or things to anyone in the world without worrying about whether that will reach them or not.
AidCoin
On the AidCoin platform, instead of donating Bitcoin or any other cryptocurrency, donors give funds in AidCoins. AidCoin is an ERC20 token that helps donors track their donations through the Ethereum blockchain. (ERC20 is a standard on the Ethereum blockchain for creating fungible tokens.) Charities can spend these tokens on the AIDChain platform that provides various services for the charity ecosystem. The blockchain has smart contracts that will execute only when the charity meets the prescribed conditions. For example, if a project doesn’t reach its funding goal, the donors will get back the tokens. Also, funds will get released in stages when the project meets certain milestones.
The company also has a payment gateway called AIDPay that helps charities accept donations in multiple currencies and enable crypto to fiat conversions.
What are the advantages of crypto philanthropy?
- The total transparency brought by cryptocurrencies and the ability to track the end-use of funds will ensure that the money reaches the correct beneficiaries.
- Lower transaction costs and speedier transactions will reduce the cost of fund-raising for charities
- International charitable giving is highly suitable for crypto-based donations since there is no hassle of value lost because of currency market fluctuations.
- Increases the donor pool substantially because it removes the charity-hesitancy that people have since they are unsure of how charities will use the money.
- You can support the causes you care about without anyone’s approval or even knowledge.
What are the potential arguments against crypto-based charity?
The following are some of the arguments against using cryptocurrencies for charities.
Lack of understanding of the underlying technologies
Several donors don’t understand the technology behind blockchains and cryptocurrencies well enough to trust and use the method for donations.
High volatility of cryptocurrencies
Most cryptocurrencies are pretty volatile, and hence charities may not get the exact value that the donors initially intended.
Security of private keys
If the charities lose the private keys or do not secure them properly, they may lose the funds irretrievably.
Reduced operational control for charities
Most donors do not understand the nuances of charitable organizations’ problems at the operational levels. And this may limit the operating control for those organizations and affect their flexibility.
Possibility of funding for unauthorized entities
There is a possibility of funding going in the name of charity to specific organizations that governments or regulatory authorities don’t approve of.
Traditional power brokers using crypto instead of fiat currencies
Power brokers now can use cryptocurrencies to control charities and force them to operate in a manner that is detrimental to the independence of charitable organizations.
The future of crypto-based philanthropy
Cryptocurrencies are rapidly becoming mainstream in different parts of the world. Governments are contemplating new regulations, planning their own Central Bank Digital Currencies (CBDCs), and even declaring crypto as legal tender.
Also, the younger millennials and Gen Z citizens are likely to use crypto for charities. In time, corporate giving will also go crypto because they can track the end-use of their funds.
