Blockchain giving and surveillance philanthropy: Challenges and opportunities
Blockchain technology is reshaping the way nonprofits conduct business. Blockchain participants represent a new donor pool that could prove attractive as a potential revenue source. According to a Fidelity survey, 45 percent of cryptocurrency investors donated $1,000 or more to charity in 2020—compared to 33 percent of the general investor population.
On the other hand, two of the key aspects of blockchains – transparency and immutability – demand careful thought from charitable organizations. “Blockchain technology encodes surveillance mechanisms into charitable giving”, per Peter Howson of Northumbria University.
Moreover, crypto-giving can pose particular challenges for organizations seeking revenue stability. In other words: managing the inherent volatility of crypto can be a major challenge for nonprofits who lack internal experts on blockchain technology & financial management.
Angel Protocol doesn’t promise to have all the answers to these complicated societal issues. Yet, our experience with impact-driven organizations and blockchains has provided us with valuable perspectives on how “impact orgs” can balance between privacy and transparency.
In particular, we want to highlight two points that help achieve this balance:
The power of endowments to benefit both donors and nonprofits
The role of informed, mature governance
The Role of Endowments in avoiding surveillance philanthropy
The Howson paper succinctly summarizes a number of blockchain’s tradeoffs thus: “Regulators are struggling to keep pace with blockchain innovation, leading to significant risks for charitable organizations, their donors, and beneficiaries (Burcher, 2019).”
Angel Protocol’s Impact Funds offer both a way to establish regulatory compliance and a means for donors to direct funds to specific, transparent causes – all while donor anonymity can be maintained if required. Each Impact Fund can establish specific parameters and strategies that are clearly visible to potential donors. The endowments themselves can be clearly tracked on the blockchain – each disbursement and transfer is easily visible online – which enables donors to ensure that endowments are performing according to the criteria they have established, but without the over-bearing control over funds.
Moreover, these endowments themselves are not limited to traditional centers of power, e.g. the “Global North”, as the Howson article outlines. Each Impact Fund can establish the cultural and local context that is necessary to best serve its intended recipients, and codify these good intentions in smart contracts. Nonprofits and donors who wish to participate in an Impact Fund whose operators and beneficiaries are in historically underserved regions can identify one through the marketplace – or start their own, using the existing tooling such as CASD-SL in Sierra Leone .
The Impact Fund structure also enables programmable parameters that ensure nonprofits’ needs are met. For example: endowments are structured to ensure that the charity controls all the liquid funds; can ask for liquid only donations; and can transfer funds from “locked” to liquid upon request. These parameters empower nonprofits to meet their liquidity needs while also relieving the stress of investing for the future.
Attracting New Donor Communities
For donors, crypto-giving is an opportunity to highlight not only the good that they do, but also their commitment to transparent giving. This is a powerful tool.
Additionally, it unlocks the possibility for radically new forms of giving. Crypto tokens that can be used for voting enable disparate groups to organize and establish voting rules. For example: by holding “charity tokens” in an impact DAO (decentralized, autonomous org), you can help govern that DAO alongside every other donor.
DAO governance can also help nonprofits navigate a tricky balance: delivering projects that meet the needs of beneficiaries while also accommodating donors’ interests (and occasionally, demands). Web3 relies on community voting structures, where multiple stakeholders discuss and debate proposals and then cast their vote. These democratic processes incorporate diverse perspectives and community members’ expertise into voting systems. Nonprofits benefit from this process: using community perspectives to inform and backstop decisions and to convey the reasoning transparently to donors.
The Importance of Education
Any new financial technology requires some degree of user education. Blockchain is no different. Providing tutorials and resources about smart giving and proper security measures is a low-cost approach to empowering charities and donors alike. As well: providing a seamless online giving portal is also a necessity for charities wishing to attract a new class of young, Internet-savvy donors.
Leveraging existing communities and knowledge sources is critical to achieving these goals. Angel Protocol emphasizes close working relationships with charities who sign up to participate in the charity marketplace. Blockchain technology is an amazing opportunity to tap new sources of giving – but both donors and nonprofits require trusted partners to assist them in the process.
Further Exploring the Blockchain
Online giving has changed the way donors and beneficiaries interact – and blockchain will change it further. A plethora of new products is materializing – each of which offers different trade-offs for security, privacy, transparency, and user experience.
Keeping up with different blockchain protocols and their offerings may feel like a daunting task. Yet, staying in touch with the different services available can greatly empower charities to offer better services to donors. Moreover, it helps donors become aware of blockchain-based giving methods that can maximize the impact of their giving.
Angel Protocol exists to maximize the opportunities available to nonprofits. Revenue generation is a major concern for many organizations, particularly smaller ones. Angel’s Charity Marketplace helps new nonprofits onboard and become eligible to receive donations. Nonprofits can subsequently explore a number of options to continue to maximize and level-up their ability to create impact, while doing the due diligence and research necessary to create a high level of confidence and trust with their donors and stakeholders.
The unique nature of blockchain technology enables both anonymity at the individual level and transparency at a high level.For impact organizations that value both donor privacy and public transparency, blockchain tech is an enormously powerful key to publicly share funds without revealing donor identity; easily track the quantity and frequency of donations; and achieve & display transparency in their operations.
Identifying and leveraging trusted partners, while tapping into the customizability of smart contract platforms like the Angel Impact Funds, can help maximize the benefits of crypto-giving while mitigating some of the “surveillance” aspect of blockchain technology.