Crypto philanthropy has exploded over the last two years. Fidelity Charitable received around $330 million in crypto in 2021 up from $28 million in 2020. The Giving Block reported $69 million in total donation volume in 2021, a 1,558% spike from 2020. A relatively new innovative player, Endaoment reported an abrupt increase of total donations from merely 253 thousand USD to a little over 37 million USD, an impressive 14,625%!
Endaoment, launched in October 2020 is the first fully on-chain California Public Benefit Corporation (non-profit) based in San Francisco, federally tax-exempt under Internal Revenue Code section 501(c)(3). It exists to create a faster, more transparent giving experience for donors and mobilize more efficient payments. Endaoment's open-source blockchain structure will allow contributors to see exactly where their money is going, and give them confidence that it will be spent wisely. Endaoment is able to provide grants of greater value than other philanthropic organizations, thanks to its innovative donor-advised fund model and low fee structure. According to Endaoment’s website, their mission is:
“…to manage and encourage the charitable giving of cryptocurrencies.”
How is crypto changing philanthropy?
Cryptocurrencies are easily transferable to any part of the world, allowing charitable organizations to have donors globally. Many international charity organizations, including big ones such as UNICEF, the Red Cross and Greenpeace have all started accepting donations in cryptocurrencies.
Cryptocurrency donations can also help nonprofit organizations that are unable to obtain funding from traditional sources. In 2010, WikiLeaks—an international non-profit organization that publishes news leaks was blacklisted by the U.S. Visa (V), Mastercard (MA) and PayPal (PYPL). Now, WikiLeaks receives millions of dollars in cryptocurrency donations, effectively bypassing any restrictions placed on payment processing companies such as VISA or Paypal. Although the growth of cryptocurrency philanthropy has been unprecedented, it remains a niche form of giving and differs greatly from traditional forms. Most notably cryptocurrency is rejuvenating a sector of philanthropy that has been losing younger people for years.
What Are The Benefits of Cryptocurrency Donations?
Besides the changing donor demographics and funding models, cryptocurrency donations have their own unique benefits.
Cheaper transaction costs
According to the 2020 "Global Trends in Giving Report," 63% of donors worldwide preferred giving with credit or debit cards, but transaction costs for crypto donations are considerably more favorable. According to Charity Navigator, credit card processing fees—which reduce the amount of money a charity receives from every donation it receives—can range from 2.2% to 7.5%.
Although some network fees, such as Ethereum's, may be higher at certain times than others—they are still independent of the amount you're transferring. Moreover, there are other blockchains with fees close to zero. And unlike crypto transactions which take a few seconds or minutes—sometimes even hours in extreme cases—fiat cross-border transfers can take days.
Protecting donors' anonymity
Nonprofits often find it easier to target existing donors than to find new ones, and because of this pressure, many don't like having their name associated with a cause. Similarly, donating a big amount may require the completion of KYC and other personal identification requirements. Donations made in cryptocurrencies can help donors remain anonymous. But as governments increase regulations on crypto, this anonymity may not last long.
Revenue stream diversification
For many nonprofits, even a slight dip in donations can have severe consequences for their ability to continue providing services. In cases like these, having another source of fundraising—like cryptocurrency donations—helps organizations become less reliant on one or two main methods of raising money.
Onboarding younger generations
Many traditional fundraising strategies, such as direct mail and in-person galas, are geared toward Baby Boomer and Silent Generation donors—because the average cash donor is 65 years old. Yet many nonprofits fail to recognize that cryptocurrencies may, in fact, be the next big fundraising frontier. Young, affluent and passionate about the causes they support: crypto donors are typically in their thirties. In addition, according to a report from Fidelity Charitable, crypto donors are also more generous as compared to cash donors. Embracing crypto donations is an easy way to engage with a highly-generous and younger donor base you’re not currently reaching through other fundraising methods.
Attractive tax deductions
Donating cryptocurrencies to non-profit organizations is tax deductible in the U.S., Canada, Australia and New Zealand (among other countries). However, converting crypto into fiat currency can trigger capital gain taxes. Crypto is considered property by the IRS for tax purposes, meaning that crypto donations are treated similarly to stock donations. By donating a long-term appreciated asset directly, an investor is not only exempt from paying capital gains taxes on their assets but can also deduct the fair market value of the crypto at the time of a contribution. For example, If you bought your crypto for $1,000 and it appreciated to $2,000, you can deduct the $2,000 value. Because you will pay taxes on your crypto when you convert it to fiat currency, investors can save at least 20% to 30% by donating cryptocurrency directly instead of cash.
Why Endaoment?
While there are several platforms offering crypto donations, Endaoement stands out with its tax-advantage products with compliance services built atop native crypto rails.
The comparison table below provides additional information on how Endaoment differentiates itself from other platforms.
Values of Endaoment
According to their webpage, their values and vision are centered around the following:
“INCLUSION - We elevate diverse voices. We are most impactful when our organization and our work include people from varied backgrounds, opinions, and perspectives. We are stronger together.
ENGAGEMENT - We create systems that encourage philanthropy as well as heightened involvement between grant recipients and donors. We have the most power when we work closely with one another.
RESPECT - We listen deeply and treat each other with kindness. We ask for and seek to understand the ideas of those both within and outside of our community.
THROUGHPUT - We focus on moving donated dollars from donors to nonprofit organizations with minimal fees and overhead. We aim to align our organizational incentives with those of the DAF holders, allowing us to focus closely on impact.
COLLABORATION - We learn from and with our partners to achieve meaningful impact.
PARTICIPATION - We achieve our strongest impact when we work together to determine best practices surrounding governance and oversight. We are building an organizational model that leverages new ways to collaborate and enhance our collective ability to do good in the world.”
Tokenomics
Roadmap
Core Team Members
Robbie Heeger - Founder and Chief Executive Officer
Upon graduating from university in 2012, Heeger accepted a full-time position with Apple where he first worked as a content publishing quality assurance engineer before becoming a manager of production operations. As his career progressed, his fascination with blockchain technology grew and in 2018, when according to his words he “left Apple with this understanding that crypto was not just something that I could be tangentially interested in anymore — it was consuming.” Despite his experience at a major tech company, he saw himself as technically weak and took boot camp-style classes in solidity coding and blockchain web development. In the meanwhile, he started to brainstorm ways that could take his new skill set and try to build something that would funnel crypto capital into non-profit organizations that otherwise would have very little exposure to crypto. That brainstorming led to the creation of Endaoment.
Zach Bronstein - Chief Operating Officer (.org + tech)
Technical Founder w/ Consumer Application Development Focus Previously: Apple
Ricardo Pedroni - Lead Engineer (.tech)
15 years Web Development Veteran Proficient w/ Scaling & Best Prac's
Previously: Siemens
Alexis Miller - Platform Services (.org)
Community Foundation and Philanthropic Federation Veteran
Previously: Baltimore Community Foundation
Concluding remarks
The rising popularity of crypto philanthropy is inspiring young people to give by enabling direct donations and cause-based impact investing like never before. In turn, the switch from organization-focused to cause-based funding will encourage crypto adoption among small nonprofits. These changes might reshape how we think of nonprofits and cause a shift in traditional giving patterns - with Endaoment as the leading platform.
While currently the most appealing feature of Endaoment is its low fees and tax receipts, in the future it will support complex investment strategies such as those involving crypto-assets like NFTs, vote-locked tokens, and interest-bearing assets. Despite the name, Endaoment is not yet a DAO. The plan is that people who advance the mission of Endowment will be rewarded with tokens—which give them membership and oversight power over their own nonprofit entity. This would make EnDAOment a decentralized autonomous organization, which comes with the Web3 dream of leveraging a community to make happen what no small centralized team could ever do.
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Links
References
https://docs.endaoment.org/organizations/understanding-endaoment
https://www.coindesk.com/layer2/2022/04/05/how-crypto-is-changing-philanthropy/
https://thegivingblock.com/resources/discover-5-key-benefits-of-cryptocurrency-donations-for-nonprofits/
https://docs.endaoment.org/governance/mission-values
https://cointelegraph.com/magazine/2022/02/08/endaoment-charity-hack-fix-your-crypto-cgt-bill