Non-Fungible Tokens (NFTs), Decentralized Autonomous Organizations (DAOs), and Decentralized Finance (DeFi) are redefining the funding models that charities use to raise funds and distribute money to people in situations of social vulnerability.
With ever-evolving cryptocurrency technologies and blockchain networks, crypto-philanthropists tell Cointelegraph that they are witnessing “new wealth distribution mechanisms” that have never been seen before.
“Philanthropy has traditionally been seen as a one-man activity with a high cost of entry, but with Web3, collective decision-making bodies like DAOs can use tools that simplify financial coordination and encourage more community participation,” explained Omar Antilla, Head of Crypto Product. for charity.
He added, “Cryptocurrencies make it possible to implement innovative fundraising strategies, such as charitable campaigns via NFT drops, or allow people to pool their crypto assets on DeFi protocols to earn income on behalf of a particular cause.”
In October 2022, several breast cancer-focused organizations launched campaigns using NFTs to highlight Breast Cancer Awareness Month.
Antilla noted that she has seen many other charitable communities built around NFTs raise money for many other causes such as testicular cancer, human trafficking, and the war in Ukraine.
Last year, UkraineDAO raised $6.1 million through the Ukrainian Flag 1/1 NFT. The proceeds were donated to Ukrainian non-profit organizations to help those affected by the Russian invasion.
Meanwhile, Anne Connelly, co-author of “Bitcoin and the Future of Fundraising,” believes that the philanthropic sector will soon expand beyond Bitcoin (BTC) and Ether (ETH), which will cease to be the main cryptocurrencies for donations:
“However, over time, we will see organizations accept a much larger distribution of tokens — similar to the way they accept gifts of securities. We will also see gifts in the form of NFTs and other tokenized assets such as real estate or collectibles.”
“I think that[…] Once organizations realize the charitable potential of this donor segment, every organization will have a platform to donate via cryptocurrency, just as every organization accepts credit cards.”
The far-reaching nature of cryptocurrencies means that the total addressable market for charities that accept them is huge, Antilla said.
Antilla believes that the “nearly two billion adults without access to the financial institutions that exist in the world today” will soon have the tools “to participate in the global economy, to transact and create wealth without third parties getting in the way or taking the cut.”
This can be particularly beneficial for countries where there is a lack of confidence in the nation’s currency system, and where cryptocurrency adoption rates are also the highest.
Connelly said that adoption rates are higher in underdeveloped countries – most notably Nigeria, Argentina, Vietnam and South Africa – because they simply cannot trust a country’s currency system:
More than half of the world’s population lives under double, triple or quadruple rates of inflation. For most of these people, the government cannot be trusted to manage the monetary system effectively.”
“Having the option to use cryptocurrency is an important choice for citizens, but it also shows governments that if they want people to use their fiat currencies, they need to clean the house,” she added.