Why does any of this matter for a nonprofit when there are already efficient, easy to use donation processing platforms in the market? Here are some of the main benefits that bitcoin can offer to a nonprofit.
Instant Availability of Funds
Bitcoin transfers are nearly instant. Domestic bank transfers take up to 48 hours to process, and international transfers can take as long as a week. Being that most nonprofits work with a tight budget, moving funds quicker can mean saving more lives.
Due to increases in transactions volume, a transaction now can take as long as 10 minutes, whereas they were almost instantaneous even just a year ago. The community is working hard to solve these scaling issues to make BTC’s transactions as quick as a VISA transaction.
Even without a solution to improve BTC’s scalability, a 10 minute confirmation time is still a vast improvement over current banking solutions.
Low processing and transfer fees
Aside from the delay international fund transfers, there are large costs that come with the transfer. International transfer fees (also called remittances) add up to hundreds of billions per year. In the first half of 2017, the global average remittance price was 7.25% with some remittances reaching over 16%. An estimated $40 billion a year is spent on remittances in Africa.
Right now BTC has relatively high transfer costs with an average of $6 per transaction due to the burst in popularity and transfers burdening the network. This weakens the argument that cryptocurrencies can save capital for nonprofits through lower transaction fees.
New projects that work as a secondary layer that interfaces with the such as the Lightning Network bring hope to lower processing fees for anyone sending a transaction in their network. Non profits may be able to send BTC across borders at a very low price within the next year. Until then, it still is a more viable option for saving on remittance fees than traditional bank transfers.
Transparency of Donation Paths
A big concern many people have against donating to nonprofits is that the money does not always go towards helping people but towards for-profit solicitors, corrupt officials, and fund embezzlement.
In the U.S., up to two-thirds of donations go towards donation solicitors. For the worst of those organizations, of the $1.3 billion raised, $1 billion went to solicitors. The story isn’t much different for charities working in Africa, which have been known to embezzle funds and support local tyrants.
The blockchain is a public and transparent ledger of all transactions ever made in its protocol. To see where the BTC sent to an organization goes, just look up the transaction hash given with the donation and the receiving ‘wallet’ and all of its transactions are completely transparent.
While funds are kept in crypto, organizations will be able to prove their honesty easily by simply publicly posting their cryptocurrency wallet’s ID. Conversely, an individual donor can easily track their donations by following their transaction ID.
Bitgive is a nonprofit specifically dedicated to improving the transparency of donation funding. Their new program, Give Track, utilizes the blockchain by publicizing all donations on a public ledger.
Funding the Unbanked
Nonprofits can send money to individuals in remote areas without banks with cryptocurrencies. To send and receive BTC, a mobile phone or access to a computer is all that is needed.
Mobile banking is already a big part of Africa’s ecosystem accounting for over 40% ofZimbabwe’sGDP. Bitcoin and blockchain related technologies are already a part of Africa’s mobile banking revolution with Bitpesa being the most prominent service that allows banking solutions to Africans in rural areas.
Bitpesa is a payment platform primarily functioning in Africa that utilizes the bitcoin blockchain to transfer funds between organizations and individuals. It offers a more economic solution for companies to pay their employees through a quicker, more cost-effective network that uses bitcoin to transfer funds instead of dollars. For individual users, it allows them to save money in their national currency without a bank account and the power to send and receive payments in rural areas where digital payments would not otherwise be possible.
This has become a revolutionary source of change for the individual lives of Africans working as freelancers and for companies seeking to save on international payment processing. Another example of bitcoins impact in impoverished regions is the recent use of Ethereum by the United Nations to refugees from Syria.
On May 31st, the U.N. sent food vouchers on the Ethereum blockchain to over 10,000 Syrian refugees in Jordan. The vouchers could be redeemed at participating locations and could only be used to redeem food items. The project is still finalizing, but the U.N. plans on extending this beyond Jordanian borders in a 2nd round to over 100,000 refugees by late 2018.
These are just a few examples of the many innovations hitting the global market that utilize the power of a decentralized ledger. There are currently thousands of start-ups, nonprofits, and for-profit organizations that aim to change how money works. Jumping on the bandwagon has little to no risk involved and only takes a few simple steps.
- Instant Availability of Funds
- Low processing and transfer fees
- Transparency of Donation Paths
- Funding the Unbanked
- How to Donate Cryptocurrency to a Charity
- Get Started with Crypto Donations
- Is Bitcoin Right for Your Nonprofit?
- Appealing to the Millennial Demographic
- Benefits of Cryptocurrency Donations
How to Donate Cryptocurrency to a Charity
Most charities are not able to accept direct donations of cryptocurrency, due to the complexity of setting up a digital wallet.
If the donor sets up a wallet for the charity and still holds the keys to the wallet, it might not satisfy the requirements to be considered a donation.
Instead, a charity can accept donations of Bitcoin through a third-party processor or through a donor-advised fund.
Third-party processors, such as Crypto for Charity, facilitate donations of cryptocurrency to charities for a small transaction fee, typically 1%. The processor converts the donation to cash on behalf of the charity.
For example, the Center for Excellence in Education (CEE), a 501(c)(3) charitable organization that sponsors science and math programs and competitions for high school students and teachers, recently started accepting donations of Bitcoin and other cryptocurrencies through Crypto for Charity.
A donor-advised fund that accepts donations of Bitcoin, such as the Fidelity Charitable Gift Fund, will convert the Bitcoin to cash and invest it. The donor can claim an immediate charitable tax deduction and later recommend eligible charities to be supported by their gift.
Get Started with Crypto Donations
There are many options today to help nonprofits get started with cryptocurrency, and it doesn’t have to be painful. With crypto booming, it’s a critical time to allow donors the option to support your organization and apply their appreciated coins towards a mission they care about.
Is Bitcoin Right for Your Nonprofit?
Adopting bitcoin can broaden the ways your nonprofit receives donations. As Evan Hochberg, United Way’s executive vice president and chief strategy officer, told CoinDesk, “Our engaging bitcoin was a recognition there’s a fast-growing, innovative, passionate group of people looking to make charitable donations based on the interest in using this currency. We wanted to be at the forefront of that conversation.”
The biggest incentive for most nonprofits to accept bitcoin is that most major payment processors, like Coinbase, don’t charge any processing fees for donations to 501(c)(3) nonprofits and charities. If a donor chooses to donate one bitcoin (equal to $8,981.00 as of this writing), the organization receives the entire donation.
Without processing fees, a greater number of donors can make smaller donations without any additional cost to your organization.
Also, bitcoin’s relatively instant transfers can make an immediate difference in funding the efforts of nonprofits with very time-sensitive missions, such as disaster relief. Converting bitcoins to spendable dollars adds time, though, so you should consider whether the added speed would make a significant difference for you.
Appealing to the Millennial Demographic
Startup charities have it particularly hard trying to catch donors’ attention. They usually don’t have the funds to market themselves and aren’t well known to the public. When most people donate, it’s to the biggest charities and the go-to names they’re used to seeing in the media.
Appealing to millennials should be part of any charity’s priorities. Millennials are more passionate about causes and more altruistic than generations before them (the average millennial donates almost $600 a year to charities). Millennials also happen to be the most active generation using Bitcoin. They’re willing to donate to your cause if you make it as easy for them as possible.
There are several crowdfunding platforms that make it easier for small charities to make themselves known, including bitgive and bithope. Once you get your charity in front of the right audience and make it simple for them to donate by accepting Bitcoin, you widen your appeal.
“Millennials are the demographic most actively using Bitcoin,” says Lamb, “and as charities attempt to recruit younger donors, cryptocurrency is an unprecedented and growing fundraising opportunity area. Also, the ability to accept Bitcoin carries with it a kind of ahead-of-the-times cache, which can capture the attention of the modern and more innovation-oriented donor.”
Benefits of Cryptocurrency Donations
“Cryptocurrency as a donation method has everything a donor looks for when contributing to a nonprofit,” said Pat Duffy, co-founder of The Giving Block. “It’s almost as if it was made in a lab specifically for nonprofits.”
The Giving Block, which brings in over four million dollars in monthly revenue, is a platform that aims to help nonprofits accept payments through cryptocurrencies.
Duffy explained that donating cryptocurrency directly to a nonprofit is tax-deductible. The same can’t be said for donors who transfer the value to another currency. Additional benefits include low friction, a rapidly growing user base, and high tax incentives.
Accepting decentralized donation methods provides users with enhanced speed and security, and opens the door to new potential donor markets.
Demonstrate your organization’s focus on innovation and remain in touch with new technologies by considering this donation option. There aren’t as many nonprofits that currently accept these alternative coins, so it’s an opportunity to stand out.