Bitcoin basics: what nonprofits need to understand
Searching for “nonprofits that accept Bitcoin”
About 10 years ago, nonprofits started receiving requests to take donations of something they had never seen or heard of before—Bitcoin. Early Bitcoin donors tell stories about how they selected nonprofits to give to by googling “nonprofits that accept Bitcoin” and choosing one from the small handful of organizations that could actually take their donations.
As prices hit an all-time high, Bitcoin is once again in the spotlight. Awareness and adoption of Bitcoin and other cryptocurrencies has grown exponentially, and yet the number of nonprofits accepting cryptocurrency donations has lagged behind. Millions of people worldwide send, spend, and invest with Bitcoin, but when they want to donate, they are presented with relatively few options.
Today, it’s hard to imagine a donor searching online for “nonprofits that accept credit cards” because usage is now so pervasive, but many of the things that are obvious to us today took time to become mainstream. With each new technological advancement, new opportunities for philanthropy emerge. Telethons were made possible through the combination of advances in television broadcasting and the telephone. Donating online was made possible through online credit card processing. And crowdfunding was made possible through social media. The next technological innovation to transform philanthropy is Bitcoin.
Bitcoin: Digital gold
Bitcoin is an incredible new form of money. With today’s financial system, sending money across borders can be difficult and expensive. Traditional services like bank wires or money transmitters are cumbersome and can cost a significant percentage of the funds you’re trying to send. Bitcoin is like digital gold. Like gold, it doesn’t have a central government managing it, and anyone can use it, anywhere in the world. What makes Bitcoin effective is that, unlike gold and traditional currencies, it is easy to send online. Someone can send a transaction of any amount to anyone else in the world in a matter of minutes as a direct person-to-person transaction for a much smaller fee. A cryptocurrency donation is essentially one person sending cryptocurrency to another and in this case, a donor sending it to your organization. What’s truly unique about this transaction is that there is no institution in the middle—it is a direct peer-to-peer transaction.
A community that isn’t being asked to give
The rise of cryptocurrencies has created a new generation of wealthy donors. For some, it began as an exploration of a technological curiosity. For others, it may have been an investment in a high-risk opportunity. However, one thing many early cryptocurrency adopters have in common is that they suddenly found themselves with new wealth.
To understand the opportunity that exists for fundraisers, take a look at the second-largest cryptocurrency platform today, Ethereum. Simply put, someone who invested $215 USD in Ethereum during its launch would have seen their portfolio grow to nearly $1 million USD in just four years.
These portfolio gains happened quietly in the background, with many cryptocurrency holders fiercely protecting their privacy as their numbers grew. In 2020, the University of Cambridge estimated a total of up to 101 million unique users of cryptocurrency. And this is just the beginning. PayPal recently announced that it plans to allow cryptocurrency as a funding source for purchases at 26 million merchants worldwide. As we write this, the total value of all cryptocurrencies is over $500 billion USD and growing.
While fundraisers are generally familiar with the phrase, “You don’t get what you don’t ask for,” you also don’t get what you can’t accept when it comes to cryptocurrency. As cryptocurrency continues to grow, something as simple as providing an option for people to donate it is becoming increasingly relevant and important. However, it’s the organizations that truly get to know the crypto community that will be the ones that see unprecedented major gifts.
It has already been 10 years since the first organization began accepting cryptocurrency donations. In January 2011, the Electronic Frontier Foundation announced that it would accept donations in bitcoin, and from there, the crypto community started to get involved in philanthropy. The Bitcoin100 was one of the first crypto donor initiatives, offering donations of 100 bitcoin to nonprofits that would accept them. During the course of its existence, Bitcoin100 funded over 90 nonprofits.
As the industry and its community started to grow, so did adoption by nonprofits. Pathways to Education Canada became one of the first organizations to issue a receipt for Bitcoin donations in November 2013 and Dignitas International launched a similar program in 2014. An increasing number of organizations—including major players like the American Red Cross, GiveWell, and Wikipedia—have also launched Bitcoin donation programs. And donors are responding. In 2017, an anonymous donor launched the Pineapple Fund, an $86 million USD charitable project that supported over 60 nonprofits worldwide with Bitcoin. The crypto community has also rallied for occasions like Toronto’s Merry Merkle holiday event, which raised over $200 thousand CAD for Covenant House.
In addition to providing a diversified revenue stream, organizations that adopt Bitcoin are also building organizational capacity around innovation and have the opportunity to future-proof themselves for a world that includes digital currency.
As cryptocurrency continues to grow, so does the opportunity for nonprofits. So what’s standing in the way? For some crypto philanthropists, it’s simply that they aren’t being asked to give. “I’m well known in the crypto space,” says a donor who wished to remain anonymous. “It wouldn’t be hard for a nonprofit to predict my ability to give a big gift in crypto. But I never get asked.”
It’s time for the nonprofit sector to see cryptocurrencies as a key part of their fundraising programs.
As with adopting any new element of a fundraising strategy and portfolio (like accepting gifts of securities), there will be a period of transition. Once the details are figured out and these new methods are offered, organizations are afforded new opportunities.
“It took a steep learning curve for the team, our board, and our larger community to understand its potential and how cryptocurrency and crypto donations work,” says fundraiser Henah Parikh. “Within eight weeks of getting set up with cryptocurrency donations, we received more than $42,000 in donations from event sponsorships and COVID relief initiatives for She’s the First.”
Fundraisers looking to add Bitcoin to their fundraising program mix in 2021 can get started with the following steps:
- Educate yourself and your team on cryptocurrencies and how they work
- Secure executive support from organizational leadership
- Decide on the structure and processes of your cryptocurrency program
- Research and understand the unique characteristics of crypto donors
Just as the emergence of the internet allowed nonprofits to capture a new wave of tech-savvy donors and streamline their giving processes, cryptocurrencies will usher in the next wave of growth and transformation. The wealth is there—will your nonprofit be ready to receive it?
Jason Shim and Anne Connelly are the co-authors of Bitcoin and the Future of Fundraising: A Beginner’s Guide to Cryptocurrency Donations.
Bitcoin and the Future of Fundraising was released by Innoraise Imprints in January 2021 and includes detailed information on how to set up a Bitcoin donation program, full-length interviews with cryptocurrency donors and fundraisers, and cryptocurrency donor profiles. To get a free preview and learn more, visit bitcoinfundraising.com