WTF is blockchain? Why should I care about crypto donations as a nonprofit?
Real quick: think of that movie you've seen a couple dozen times (everyone has one). Every time you see it, you notice something new. Maybe it's a little thing, but you always get one more puzzle piece to bring the story to more brilliant life, to more completely round out the characters, to drive home the movie's message.
Hearing Anne Connelly speak on blockchain and Bitcoin and the potential of cryptocurrency within the nonprofit world is like that. The first explanation leads to a second listen and then a third Aha! moment. Try it.
Then come back and read this (streamlined-for-easy-reading) breakdown of the conversation between Anne Connelly, TED speaker and Blockchain Faculty at Singularity University, and Justin Wheeler, Funraise CEO and Co-founder.
Here’s a summary of our interview with Anne, in her words:
The cryptocurrency learning curve
In the early days of crypto, education was really by tech people for tech people. How do you share a global mindset of what communities could look like with blockchain applications implemented in real-world ways? How do you get people to believe in the potential of this technology so that they can start to learn more about the practicalities of making that happen?
The world's innovators—people with really expansive, adaptive minds—want to learn about all the latest technology and apply it to whatever they're doing. And to promote inclusion in education, I'm co-writing a graphic novel about blockchain with an artist out of Kenya, Chief Nyamweya. Trust will be a very exciting, interesting, and free way for youth to learn about this complex technology.
Exponential technologies can solve problems that impact over a billion people
When you look at many nonprofits today, they're tackling a problem out there in the world and every year they make it 10% better: a great but very marginal increase on improving that problem.
But the problems that we're dealing with today, when you look at COVID, when you look at climate change, these problems are enormous and 10% improvement is just not good enough to actually solve the problem. So getting people to think more in terms of a 10X solution instead of 10% requires a different type of thinking.
Here's an example: How would you make the room you're sitting in better? Most people might ask for a more comfortable chair or for more light. But figuring out how to make the room 10X better requires a totally different problem-solving mindset: a hologram of your friend who can't be here today, or putting the room inside a helicopter so it could fly anywhere in the world.
The exponential potential that blockchain technology has is all about taking that mindset to scale the applications that you're working on. So, for example, if you're building an application to solve a problem using today's technology, you know you'll get the 10% improvement you're looking for.
But if you build an application today that draws on technology you know you'll have in five years, once you access that five-years-from-now technology, your scale and your impact will rise exponentially.
Investing in Impact Scaling
The exponential potential mindset also flips the overhead conversation on its head; if you're talking about scaling impact five years from now, it's imperative to acknowledge that growth requires investment and is not usually realized in the first year of work you put in. What that looks like is a really expensive first year when compared to actual, long-term outcomes.
If you were looking at a highly successful startup, you wouldn't expect to see profits at all for the first 5-10 years. You would see the startup investing in the infrastructure needed to scale exponentially and create infinite levels of disruption and change. That's a bit of a mindset that's uncommon in the nonprofit space; although so many organizations have really amazing concepts, if they put 100% of their funding into establishing and building their solution for the first couple of years, they would see their overhead ratio go to 1% spending on administration because of the way they set their structure up for scaling.
Solving nonprofit problems with blockchain
It's crucial to look at crypto donations as a starting point. The reality is this is a whole new asset class. Think about the way nonprofits responded to stock donations back when charities weren't accepting those—that's where we're at with crypto.
But what's neat about crypto is it brings in this whole new set of donors that you've never had before. This is not your traditional major donor; it's a whole new set of donors, which is unprecedented in the nonprofit sector.
The donation element of crypto is really just the very, very beginning, because blockchain technology offers much more: impact tracking, supply chain improvements, new governance models. The most exciting thing about this technology is not so much that it's going to help nonprofits be better at what they're doing, but it allows our society to redesign the underlying systems causing the problems that nonprofits are treating the symptoms of.
To repeat and clarify: Blockchain is changing the underlying issues as opposed to treating the symptoms, allowing nonprofits to make fundamental change instead of righting wrongs.
Here are some examples of the ways that blockchain technology can fundamentally build better systems:
In 2010, the North Korean government did a currency reevaluation in an attempt to reassert state control over the economy; meaning, they closed the market and banned foreign currency. North Koreans who had saved money through trading were targeted as the North Korean government saw them pushing back against the government.
North Korea redenominated their currency, the won, effectively eliminating people's wealth overnight; it was one of the first times in North Korea where there were public protests. The North Korean government ended up scapegoating and then executing their Minister of Finance.
Blockchain would be particularly interesting in a situation like that, right? If everyone were using a different currency—bitcoin instead of the local North Korean won, for example—this could have had a very different outcome.
We've seen a similar thing in Venezuela. What started fundamentally as a financial crisis, a mismanagement of the national financial system, turned into a humanitarian emergency. People were starving because they couldn't afford food and their life savings went up in smoke.
In oppressive regimes like Bahrain, Pakistan, and India, the government will turn off the Internet so that protesters can't complain about government or can't organize. For these communities, blockchain can enable them to have secret messaging systems or well-encrypted blockchain-based mesh networks. So if the Internet gets shut off in a country where you're protesting, but you need to get information out about human rights abuses, you can send messages to and through the cell phones of all the people around you until it reaches the phone of someone who has a connection.
Blockchain technology is essentially enabling people to have the freedom of speech and the freedom of assembly that they are entitled to in a way that's never been possible before, which is incredible.
Ok, but back to crypto as a donation method!
We're starting to see more nonprofits offer crypto as a way to donate. Funraise is a technology platform that's helping power online fundraising and donor management, and we've always made crypto a part of our payment flow. Why are so few nonprofits still adopting this and using it? What is preventing organizations from using crypto today?
The biggest barriers are just knowledge and information. Most cryptocurrency programs that have been implemented were done so because someone on staff had a special knowledge and made it happen.
To get people over that barrier, we need more education within the nonprofit sector to explain what it is and how it works and to make people comfortable with the technology. There's a number of organizations out there that are already tapping into this new, huge pot of donors: Red Cross, Save the Children, Wikipedia, United Way.
This group of cryptodonors is totally different from your traditional major donor. In the early days, a lot of really young, not rich, but very savvy individuals got into crypto and have now made millions of dollars. So they don't fit the typical 60-year-old female retiree profile; they're not at a gala fundraiser. They're dynamic, they're active—they want to build things that are changing the world, but they want to do it differently.
So it's really about rethinking your strategy for how and where you go after them and then what you do once you open the broader conversation around how your organization treats donor data. Look for these donors at meetups and conferences online, in forums, making sure that they know that you're there—they're looking for organizations that believe in the vision that they believe in.
What should nonprofits do when they get a cryptodonation?
Most nonprofits are taking the hypersafe route and doing an instant conversion, but there's massive potential for organizations to preprogram smart contracts to hold onto crypto that's been donated and sell once it goes up 20%. Or if it goes down 50%, sell it, because that's the range they're willing to work within. Crypto endowment funds have the potential to make money in a different way, turning them into 10X and getting much more out of each donation.
The relationship between blockchain and freedom
When you think about our society today, almost everything we do, every transaction we make, every interaction we have is using some sort of centralized third party to make that happen. So if I want to send money overseas, there's a couple of banks in between. There's a government. But that extends far beyond money. And so when you look at something like identity—I think I own my identity, but I really don't. Our identity is given to us by whatever government we're are part of.
For people who are a part of stable governments, that works pretty well. But oppressive governments will either remove your identity or not grant you one in the first place, inhibiting your ability to flee.
Example #1: the Chinese government has removed identities from weaker Muslims because they don't want them to be able to flee.
Example #2: refugees. Even if refugees were able to get an identity from their government, they can't because they've fled from their war-torn town, which has been bombed out. They can't go back and get identification documentation, which really restricts their freedom: freedom of movement, freedom of access to health care or social services.
Blockchain enables individuals to be self-sovereign or to own their own identity, freeing them to build an identity over time. The same thing applies to data. Facebook is taking all our data. They're making money off of it. With blockchain, I own that data, and I have the right to sell it, rent it, trade it.
A good example of where this might really matter is when you look at genetics. If you've done your 23andMe, you've now handed over your genetic information to that company. They own it. They can sell it. They can do what they want. Which is scary if they start working with law enforcement in negative ways, or if you've got a government that's trying to track anyone who has a particular type of heritage—23andMe can make a list and do things with your genetic information.
But if you had your genetic data on a blockchain, you would be able to open up snippets of that to a researcher who wanted to do research around cancer or Alzheimer's. Most importantly, you could revoke access to your genetic information.
Blockchain shifts the power from centralized parties like governments and corporations by having data decentralized back to the individuals that should own it, ensuring that people's freedom and assets are owned and managed by those people.
Company-based crypto: Good or bad?
It depends on the company. We've seen Jack Dorsey from Twitter all over Bitcoin. He's looking at Bitcoin applications within his companies.
Facebook is taking the opposite approach, recently launching a "cryptocurrency", Libra, that only operates within its walled garden of Facebook and Instagram and Messenger and WhatsApp.
Saying, "Hey, you can only use this within our products and then we're going to take all the data associated with your transactions and sell it or hand it over to oppressive governments," is not the ethos of cryptocurrency.
This means that we need to be vigilant as cryptocurrencies gain traction, looking at whether a government's or corporation's cryptocurrency is really free, decentralized cryptocurrency like bitcoin. In most cases, it's definitely not, and the consequences of that can be very serious. Imagine a woman in Saudi Arabia making a donation to a women's rights organization through Facebook's cryptocurrency, then the government subpoenaing Facebook for the information. That woman could be jailed or killed for trying to support women's rights. That's a real danger of these types of crypto versus bitcoin which allows her to make that donation without having anyone track it back to her.
The future of blockchain technology for nonprofits
In a generation, blockchain will be a foundational element of our society. Looking at it from the nonprofit perspective, start with crypto donations, but also look down the road at implementing blockchain now around supply chains or money movement or impact tracking. Then take it 10X further to imagine how blockchain will impact not just your nonprofit, but the entire industry.
Are you as a nonprofit, a centralized intermediary preventing donors from giving money directly to the individual who needs it overseas? What value-add do you provide to ensure you won't be disintermediated by blockchain itself? Thinking about the bigger picture—what does the world look like in 20, 30 years as we embrace blockchain-based infrastructure? Will the problems you're trying to solve be solved by blockchain technology? Let's hope so, but what does that mean for your organization?
Where should nonprofits get started if they want to become more involved with blockchain and crypto?
My number one piece of advice for any nonprofit employee is to go out and buy a dollar's worth of bitcoin. Take an evening, go learn how to do it. There's lots of instructions online. I've got a blog all about it.
Then you can watch your dollar go up and down, see the volatility and just become a part of this community. From there, you can move onwards to looking at the rest of the applications and how they might apply to you. Really, it's about just taking that first step. Put your toe in the water and go out and get a little bit of bitcoin.
Let's tie up this interview.
This conversation makes it clear that blockchain is a precise and delicately complex subject matter that can be complicated, but Anne also demonstrates that it can be interesting and straightforward and—ultimately—attainable.
Branigan, Tania. “North Korean Finance Chief Executed for Botched Currency Reform.” The Guardian, Guardian News and Media, 18 Mar. 2010.
Noland, Marcus. “North Korea's Failed Currency Reform.” PIIE, BBC Online, 31 Aug. 2018.
“North Korean Won.” Wikipedia, Wikimedia Foundation, 8 June 2020.