Nonprofits, breathe during the Bitcoin boom
These days, my news feed on LinkedIn is dominated by updates about blockchain technology and Bitcoin. Previously, I would blindly engage with these posts to appear knowledgeable. Occasionally, I would see posts advocating for nonprofits to jump in before it was “too late.” However, with the recent news of the anonymous Bitcoin Pineapple Fund, the nonprofit world is abuzz with opportunities for cryptocurrency donations.
I had to take a few days to really learn about this. One documentary and a few deep dives later, I feel like we are advising nonprofits to adopt this technology without understanding their overarching needs, pain points, or their potential audiences.
After working exclusively with nonprofits for over two years, I have observed the respective learning curve with digital innovation. Processes and operations often take time as nonprofits are balancing increasing needs with limited staff and tight budgets.
When a nonprofit adopts digital channels to reach audiences, it is often with the intention of building a community to eventually support ongoing development efforts. Technical efforts that impact the infrastructure of a non-profit (e.g., a responsive site, online donation systems, and reporting structures) often demand additional attention that requires significant amount of time and resources. These investments are timely and exhaustive in part because there is always something else.
Aside from the impact work to which each nonprofit dedicates its mission, these nonprofits exist and thrive in part because of their successful engagement of donors. When I see these updates about Bitcoin, the argument plateaus for nonprofits: “Cryptocurrency is a new way to get your dollars. You might as well be the first to pioneer it!”
Well, let’s wait. Take a step back for a second.
Before the boom
If you’re reading this, you probably know what Bitcoin is; however, for those (like me!) who are newly acquainted, Bitcoin is a cryptocurrency, meaning it is a digital currency that can be exchanged securely without the need of a third party (e.g., a bank). Bitcoin’s main feature, its lack of regulation, is possible via a decentralized system separate from current financial systems. Its value is retained by a finite number of coins available in the world (21 million Bitcoins total); and the ledger that chronicles the exchanges of Bitcoins and the technology that empowers the exchange of Bitcoins is the blockchain. For more of the basics, you can find a thorough breakdown from the MIT Technology Review online.
To understand the purpose of Bitcoin, it helps to understand its origins: Bitcoin was founded following the financial crisis of 2008. Its founder(s)¹ had lost trust in the American banking system and to address the lingering uncertainty, proposed this solution to protect consumer privacy and financial security independent of an incredibly powerful economic body.
Here we are…
Since 2009, Bitcoin’s value has fluctuated and plateaued. As of today (December 19, 2017), one Bitcoin is the equivalent of $17,286.40. It is currently pricing at three times its original value; meanwhile, the number of users globally adopting Bitcoin is between 2 and 6 million. Bitcoin may be more than a buzzword today in the marketplace and is offering cryptocurrency cousins such as Monero and IOTA to shine.
Earlier, I mentioned the surprise announcement of the Pineapple Fund. The article by Inverse actually summarized the opportunity for nonprofits and foundations with access to Bitcoin through the Pineapple Fund: organizations can now access a large amount of money without tapping into the exhaustive, elongated grant application process. Money comes sooner, and faster, thanks to this technology.
Even before the Pineapple Fund, a number of organizations were found to have been utilizing cryptocurrency to their benefit. The Red Cross has been accepting Bitcoin donations during disaster relief for years now. United Way currently accepts Bitcoin donations to support their innovation fund, while The New Inquiry founded Bail Bloc to better support the Bronx Freedom Fund.
Some of the perks for nonprofits remain with donations through Bitcoin. Donations using cryptocurrency can still qualify for tax-deductions; there are no processing fees for Bitcoin; and the set-up is fairly pain-free. Organizations will only need a separate electronic wallet or bank account to collect these donations.
There is a wealth of opportunity to adopt cryptocurrency for good, and we are now seeing diverse users simultaneously engage with this innovation and inspire social change through its change. It’s full of promise.
Your nonprofit, cryptocurrency, and fundraising
Again, I want to acknowledge that this is all very interesting, but I want to go back to your nonprofit or organization. Specifically, your development department.
Whether you raise money through digital channels or direct mail (ideally both!), your organization is able to engage with donors and identify prospective donors in part because you know your audience. Beyond the fact that you and your audiences share similar value systems and support the same causes, you know their names. If you are active on social media, there is a chance your community regularly engages with you.
That doesn’t happen with cryptocurrency. While it is simple to launch Bitcoin donations, exchanges made using cryptocurrency are anonymous. The donations are tax-anonymous, but you may not be able to maintain the donor-relationship as actively as you would with your current setup.
Imagine trying to send a thank you letter, or appeal, to a cryptocurrency donor. The reality? You can’t. That privacy is valued and secured through this relationship, but after the investment, what is the guarantee that you would have a repeat donor through cryptocurrency?
Before you consider the investment or jump at the opportunity to accept Bitcoins immediately, reconsider the question.
It’s not, “Does my nonprofit need Bitcoin?”
It should be this: “Do my donors want to support my organization with their Bitcoins?”
And for some, “Do my donors even have Bitcoins?”
Having this conversation with development or donor relations ahead of time can at least help staff and donors keep an eye out for this opportunity over the next few years. Beyond the buzz and year-end rush, though, I would recommend you take a breath. Reframe the question, and continue to learn more about the technology before you dive right in.
What do you think? Do you see your nonprofit leaning on cryptocurrencies within the next decade? I’d love your insights.
- The founder of Bitcoin is marked as founded by an unknown party named “Satoshi Nakamoto.” Watching the documentary Banking on Bitcoin leads one to believe it could be an alias for a group of programmers from the cypherpunk movement. The identity of “Nakamoto” has yet to be unveiled..