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TL,DR; The Giving Block forecasts $10 billion in crypto donations over the next decade. In this article, we explain when and where crypto donations make the most sense today, and where we expect crypto philanthropy to be most impactful in the future. Today, we think that crypto philanthropy is appealing for folks who already hold a lot of crypto, especially if their holdings have appreciated substantially over time, and for reaching people in places like Ukraine where banking access is unreliable. Looking ahead, we’re excited about more efficient remittances across borders in general, and smart contract innovations that will help solve collective action problems.
What is crypto philanthropy?
Crypto philanthropy is exactly like regular charitable giving, except you donate in cryptocurrency. If you’ve ever given money to a group like Habitat for Humanity, GiveWell, or any group like that, you know how it works—you’d just give Bitcoin (or Ethereum, or USDC, or Glo) instead.
Not everyone is set up to give or receive crypto. But for folks who are, it makes a lot of sense to give the asset you already own, and to give money to people in the way they can make the most use of it.
In 2021, donors gave away $69.9 million in crypto. By contrast, people in the United States donated 484.85 billion in the same year. So crypto has a long way to go to be the dominant medium of charitable giving. But there are a lot of positive signs for the growth of crypto giving.
Who are crypto philanthropists?
A December 2021 report by The Giving Block, an organization that facilitates donating and receiving cryptocurrencies, found that crypto donors tend to be younger, wealthier, and "nearly 100 times" more generous than the typical donor.
A few prominent folks have given substantial amounts of crypto away:
- Vitalik Buterin: After India was hit especially hard by the pandemic, the Ethereum creator donated crypto (Shiba Inu) worth $1.5 billion to help relief organizations provide food, shelter, and medical services to those in need.
- Jack Dorsey: The former CEO of Twitter has donated crypto to pro-social blockchain projects like NOSTR, a protocol for decentralized social networks.
- Cameron and Tyler Winklevoss: The twins, famous for their work on Facebook and Gemini, donated 100 BTC to fund clean water projects.
Additionally, researchers at Fidelity found that 45% of crypto holders donate at least $1,000 to charitable organizations annually, versus 33% for traditional investors.
Best current use cases for crypto giving
If you already have a lot of crypto, giving some away is cost-effective
Even the most diehard crypto skeptics acknowledge that many cryptocurrencies were great investments in the 2010s. The amount of bitcoin it took to purchase two large pizzas in 2010 would, today, be worth about 210 million dollars. (A software developer really did pay 10,000 bitcoin for two large pizzas in 2010.) Even in today’s bear market, Bitcoin has, historically, performed about as well as really successful big tech stocks like Meta. So a lot of people who acquired what seemed like a little bit of crypto ten years ago today find themselves with a large, pretty illiquid asset that they might want to do something with.
For those folks, charitable giving is a great option. As the Giving Block notes, U.S. donors don’t pay capital gains tax on “any property asset” (which includes crypto) when they give it away. This means that dollar for dollar, U.S. donors get their biggest tax rebate when they donate their most appreciated asset, which, for a lot of people, is crypto.
Luckily for them, a lot of great organizations accept crypto natively. GiveDirectly has wallets listed for a wide range of crypto assets, and GiveWell has partnered with Coinbase to accept crypto donations. The Giving Block lists hundreds of organizations they’ve partnered with to facilitate crypto donations, and the Crypto Altruism blog is a great place to stay updated on developments in the field.
Recipients in hard-to-reach places often prefer crypto
Giving cash to someone in person is easy. Getting it to someone far away whom you’ve never met means more steps, which typically means more intermediaries. In some places, those intermediaries work well, and the quickest, most secure way to make a transfer is through a bank. In other places, those intermediaries are, in the words of a 2021 New York Times article about Ukraine, “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork.”
So when war broke out in Ukraine in early 2022, it’s no surprise that cryptocurrency became many people’s preferred way to receive money. Ukraine’s official twitter account posted Bitcoin and Ethereum wallet addresses in February 2022. By March of that year, the Ukrainian government had received over $56 million in crypto donations.
When traditional financial institutions fell short, crypto stepped up.
Not every situation is like this. As Ben Kuhn, CTO of Wave, argues, the hardest part of financial inclusion is providing an “easy way for users to exchange their balance for cash and vice versa,” and in his opinion, crypto makes this harder rather than easier for many people. So whether people have already adopted crypto wallets and infrastructure matters. Still, in situations in which they have, and where banks aren’t trustworthy or present, crypto donations can make a lot of sense.
The future use cases of crypto philanthropy
Cheaper remittances worldwide and smart contract-fueled innovation
We understand if the use cases we mentioned above are a little underwhelming to you. The reality is that blockchain is a really new invention. For anything truly mission-critical – like giving aid to people in extreme poverty – there’s a strong argument for using boring, tested technology. That’s why Glo is donating to GiveDirectly, who then distribute basic income payments in fiat to people in extreme poverty, rather than building payment infrastructure ourselves.
Having said that, the future for crypto philanthropy looks bright. In particular, we’re excited about cutting down transaction fees for international remittances – direct payments from citizens of one country to those of another – and about innovations in the smart contract space for solving collective action problems.
Lower remittance fees
The final mile problem in eradicating extreme poverty—the UN’s #1 Sustainable Development Goal—is that reaching people living on less than $2,15/day is really hard. The world’s poorest often lack official IDs, and live in places where paved roads, phones, and access to mail are rare or nonexistent. GiveDirectly is a charity that distributes basic income payments to people living in extreme poverty, and a large part of their operation is devoted to reaching recipients. Generally, GiveDirectly transfers money to people’s phones, and if people don’t already have phones, GiveDirectly will provide them.
These transfers are typically facilitated by mobile money services like M-PESA, which are designed to work on simple phones and in places with unreliable internet access. According to researchers at Innovations for Poverty Action, over 96% of Kenyan households use M-PESA. However, the service is controversial for charging fees that are high and variable (depending on transaction size and recipient), and fees were suspended by the Central Bank of Kenya during the pandemic.
Another drawback of mobile money services is that they rely on the widespread availability of agents for refilling balances. When that’s not the case, for instance, in places like Niger, they haven’t taken off. Worse yet, in Zimbabwe, mobile money was banned outright in 2019.
In short, mobile money services are far from universally available, and often take a substantial cut. Meanwhile international remittance services often take an even higher cut and are inaccessible to the many people who lack bank accounts.
The crypto philanthropy version of this would combine aspects of international remittance companies and mobile money services into one service. A person would make a tax-deductible crypto donation to an organization like GiveDirectly, who would then give it to someone in need directly as crypto. This would substantially reduce the need for middlemen and the associated fees.
This is definitely speculative: crypto is far from ready to take the place of mobile money on a mass scale. Transaction costs on the most popular blockchains are still high and variable, and the Ethereum network is processing about 30 transactions per second as of this writing, which won’t suffice. But the ecosystem is making a lot of progress on lowering fees, boosting capacity, and building onramps. We’re optimistic about the shape of things to come.
Solving collective action problems with web3
A collective action problem is a situation where everybody would be better off if everyone cooperates on a project, but each person’s individual incentive is to act selfishly and not chip in. A classic example is overfishing. Everybody would be better off if everybody fished in sustainable ways, but at any given moment, an individual can make more money by fishing beyond those limits. Because everyone has that incentive, unless there’s something that compels people to stay within their limits, everybody exceeds the limits, and everyone loses. (Especially the fishes.)
A lot of collective action problems fall in the category of “public goods,” a term from economics. A public good is some publicly available thing that meets two criteria:
- Non-rivalrous (If I consume it, that doesn’t reduce the amount available to you, and vice versa);
- Non-excludable (even people who don’t chip in to purchasing it still have access to it).
Public goods problems are collective action problems because their non-exclusiveness introduces free-riding. Let’s say I want to put on an awesome, Gandalf-esque fireworks show; I can only do it if I collect $100 in advance from 100 people, but everybody will be able to see it regardless of whether they paid. In that scenario, every person’s individual incentive is to not pay me and hope that other people take care of it. Even if it would have been worth it to you to spend $1 to see the fireworks, you’re still better off if you don’t pay and get to see it anyway. So a lot of public goods are underprovided.
Fortunately, a lot of really smart people are thinking hard about how blockchain technology can be put into service providing public goods.
- Supermodular.xyz, works on developing on-chain coordination mechanisms to create public goods;
- Optimism is a layer 2 rollup aiming to promote Retroactive Public Goods Funding;
- The Ethereum Foundation uses “Quadratic Funding” to explore new ways of making sure that projects are funded equitably;
- Folks are working on programming “dominance assurance contracts”—essentially a public goods funding model that guarantees a payout whether or not everyone chips in -–with smart contracts on Ethereum;
- ResearchHub is working on a tokenized reputation system to incentivize credible academic research.
Many of these projects are nascent, and not all are nonprofits. But the philanthropic angle is clear. Philanthropists will soon be able to use blockchain technology to collaborate in totally new ways to make sure that projects that are too large for one person, or one group, to independently execute get done.
It’s hard to predict the exact shape such work will take. But we’re excited about the overall direction and we think the future of crypto philanthropy is bright.