DeFi proves charities could do more with their money


Most of the stories that came out of the crypto industry over the past year have revolved around enormous numbers pouring in and out of space. From stablecoins valued at over $ 100 billion, on which Circle raised $ 440 million in private investment in the spring, to decentralized finance (DeFi) projects like Solana, which completed a $ 314 million fundraiser , people like to discuss the huge amounts of money being made with DeFi as a new all sorts of things – time highs break records across the board.

What we don’t see enough are the use cases of how this technological innovation that underlies these new financial instruments can have major causes and effects on organizations outside of the bullish and bearish markets.

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Although blockchain technology has made rapid advances over the past decade, the remaining high barrier to entry into this new financial world is well known, and there is still a long way to go before non-tech organizations can participate and benefit from the industry . While we are seeing a strong positive movement in the crypto industry, with many crypto projects donating their proceeds to charities or claiming they are giving away billions, there are still not many direct pathways between blockchain and charities that could benefit from this technology.

Charities can benefit greatly from understanding the blockchain. In addition to the simplicity, transparency, and speed of transactions, there are many benefits for charities to holding cryptocurrencies in their portfolios and DeFi can unlock a new type of earning potential for charities.

Related: Digitize charity: we can do good better

Charities can benefit greatly from understanding the blockchain

Most charities around the world are largely funded by either government grants or donations, and charities within a given sector vie for the same grant money year after year. This has made fundraising more difficult, and after over a year of lockdowns caused by COVID-19, most organizations lost the opportunity to raise funds through their annual events and initiatives such as personal fundraisers or personal fundraisers.

Donations to charities have been reported to have decreased by 6% in 2020, resulting in a devastating loss of money at a time when additional income was needed. Overall, the global COVID-19 pandemic has reduced the amount donated, but we also saw online fundraising grow by 17.2% compared to the last 12 months ended June 2020.

The integration of blockchain technology into fundraising opens up more opportunities for charities to receive donations while providing transparent tools with embedded trust in both the donor and the recipient.

Related: The future of philanthropy lies in blockchain technology

One of the biggest challenges for charities is that people just don’t trust the money to get there. Early last year, the Red Cross in Australia came under fire for failing to show where the $ 90 million donated money was going and admitted it could take years for all of the proceeds to be distributed. Although funds were properly managed, the organization received additional scrutiny due to the lack of clarity, which damaged the reputation of the impact brand.

It is more expected today that charities can prove where donations are going and get them quickly where they are needed in times of crisis. The use of blockchain for charitable donations embeds trust so that such situations do not arise and there is a transparent path from the donor to the recipient.

There is also a problem with our current donation system as the actual donation process is fraught with hurdles. Most websites require users to fill out a form, prove their identity, and link a payment device before they get to the actual donation page. Most websites have third-party fees that can result in a user donating less or not at all, and these barriers can put off a generous user.

Removing intermediaries ensures that more money gets where it is needed most. All donations, especially one-time donations, should be quick and transparent and allow a user to donate from an already established crypto wallet.

In addition to the simplicity and transparency of blockchain donations, receiving cryptocurrency donations in stablecoins like Tether (USDT) and USD Coin (USDC) can also help charities hedge against volatile currencies. This is especially important for countries with high inflation rates affecting individuals and communities. If a charity elects to convert fiat-accepted assets or accept a variety of assets in cryptocurrency, the financial value of a donation can persist.

Blockchain and its current relationship with charities

There are also ample opportunities to reduce taxable income when using crypto for charity. In the United States, for example, cryptocurrency donations, similar to stock donations, offer a more tax-efficient way to donate, as cryptocurrencies were classified as property back in 2014 by the Internal Revenue Service. For donors, this means no capital gains tax and an appropriate market value deduction. However, only a few hundred charities are set up to accept Bitcoin (BTC) as a donation.

Related: Your crypto taxes can instead be donated to charity

Organizations like UNICEF (United Nations International Children’s Emergency Fund) have embraced the charitable crypto movement. You can have an office in a local area and accept cryptocurrency donations, completely eliminating the need for transfer fees or international transfer fees. You can get the money where it belongs instantly. This is a great example of why more charities should be formed to receive cryptocurrency donations.

Even if a charity does not have a crypto wallet or accepts crypto donations, many still benefit from the money that is made in this area. In this recent non-fungible token (NFT) boom, we’ve seen Coca-Cola publish an NFT and donate the proceeds to charity, and many DeFi NFT projects donate a percentage of their sales to global and national charities.

It’s great to see organizations and great people donating money in cryptocurrencies, but we hope that charities will see more opportunities to actually hold and receive cryptocurrency donations in order to preserve the true value of digital assets while being transparent and fair about the values ​​of the Blockchain.

Related: Philanthropy: A Missing Catalyst for Blockchain Adoption

Direct ways to donate on the blockchain – look at DeFi and charities

Crypto donations and charities have not been commercialized, which means there is a huge gap in the market for players in the blockchain space to take action and run more charity initiatives to benefit from decentralized funding. Right now, there is essentially a level playing field for any blockchain or project that can be incorporated into charitable causes. In addition, charities have the opportunity to receive donations not just in Bitcoin or Ether (ETH), but in stablecoins and other currencies across multiple chains.

In addition to donating the money earned in cryptocurrencies to charities, DeFi applications also build direct avenues for donation. With over $ 150 billion tied to DeFi, more and more projects are finding ways to advance the nonprofit crypto movement.

The Giving Block was a pioneer in enabling charities to receive Bitcoin donations. Back in April, The Giving Block launched the Crypto Giving Pledge, and they are constantly adding new projects so that users can donate to a charity of their choice directly from a DeFi project platform.

In the Solana ecosystem, Step Finance recently launched a charity page that allows any charity with a Solana wallet address to receive donations in USDC. All a charity needs to do is register a Solana wallet and log into the charity page, and then any Solana user can donate USDC directly to that charity. Since its inception in mid-July, the FTX Foundation has received 25,000 donations through the Step Finance Charity Page.

DeFi users, known as degens, are constantly farming and pinning their cryptos to generate huge returns from their portfolios. As a yield farmer, I’ve seen how mechanisms like a charity button can encourage generous users to donate quickly over the blockchain in day-to-day trading.

The charitable crypto movement has made great strides. The one-click ability to donate from your wallet opens the door for charities to benefit directly from DeFi, and the decentralized nature of the blockchain embodies many of the charity sector’s values, including transparency, inclusion, and a global mindset.

Looking Ahead – DeFi’s growing TVL and cross-chain charities

Research shows $ 40 billion was raised online for charities in 2020. That may seem like a large number, but the cryptocurrency market itself holds over $ 2 trillion. We anticipate the Total Value Locked (TVL) in crypto will continue to skyrocket, and we hope to see a surge in charitable crypto donations in parallel.

It can take a few years for charities to grow or use their crypto on their own to earn for themselves, but helping charities with the ability to receive crypto donations is a great first step in giving them access to the lucrative world from DeFi to enable. Receiving crypto donations opens up new earning opportunities and allows charities to focus on their mission instead of spending time writing grants and running fundraisers.

While progress is being made in finding ways to bring charity to the blockchain, there is still a long way to go in sending, receiving, and storing crypto donations as a charity. We need to see more blockchain projects develop actionable tools that allow charities to be easily involved and securely receive instant donations from users of all chains.

As blockchain wallets become more user-friendly and more tools are developed for charity, we expect more global charities to participate in the crypto economy.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.

George Harrap is co-founder of Step Finance, the front page of Solana and head of DeFi at YAP Global. George is a seasoned crypto entrepreneur and former CEO and co-founder of Bitspark. He started out in the crypto world almost a decade ago as an early miner and brings a wealth of experience with building a crypto remittance startup around the world. He built six centralized and decentralized cryptocurrency exchanges and launched 12 stablecoins, raising millions of VC and corporate investors in the process.