Cryptocurrency Donations: What Your Nonprofit Needs to Know

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By Robert Carnes
cryptocurrency coins
Published September 16, 2021
Reading Time: 5 minutes

Cryptocurrency donations continue to gain traction. We’re here to help your nonprofit understand their impact on your fundraising diversification strategy.

The crypto marketplace is worth over $1 trillion and boasts more than 100 million users across the globe. Bitcoin alone was valued at about $653 million as of March 2021.

It’s challenging for nonprofit leaders to navigate the rise of this exploding technology with increasingly more digital currencies.

Cryptocurrency is a complex topic to tackle. Here’s what you’ll take from this break down:

  • Simplified research
  • Benefits of cryptocurrency donations
  • Insights to take full advantage of this new revenue stream

Cryptocurrency Basics for Nonprofits

Before we dive into the benefits and practical steps for nonprofit organizations using cryptocurrency, let’s start with the basics. Cryptocurrency is a highly-discussed trend, but the technical details of this alternative asset class can be hard to fully understand.

Cryptocurrency is just like any other legal tender that can be traded for goods and services. The biggest difference is that these tokens are completely digital and logged in a blockchain. A blockchain is a technology that decentralizes data by spreading all of the information in a database across multiple internet-connected devices.

Its decentralized nature is one of the things that makes cryptocurrencies more attractive to tech-savvy users because it increases the flexibility and security of the asset. With a digital currency, people are no longer reliant on a financial institution, like a bank, to hold their money.

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.

“[Cryptocurrency has] all of the things you’d imagine a donor wanting to see out of an asset they’re contributing to a nonprofit,” said Duffy, who spoke at Classy’s 2021 Collaborative on nonprofit innovations.

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.

How to Donate Cryptocurrency to Charity

At the 2021 Collaborative, Edwin Goutier, The United Way’s Vice President of Innovation, explained why his organization was one of the first nonprofits to begin pursuing cryptocurrency donations.

[Cryptocurrency] is completely aligned with our mission. We saw the growth of that market and the potential for our community to have their wealth do something positive. It’s been a wild ride.

The United Way

More and more donation platforms are allowing nonprofit organizations to accept cryptocurrency, which is good news for individual donors looking to give back. The Giving Block is just one of the most prominent examples. Even some larger financial institutions, like Fidelity Bank, are getting on board.

To ensure that your donation is being used effectively, take advantage of transparency resources like GiveWell or Charity Navigator. Strong stewardship is important regardless of how you donate your assets to nonprofits.

3 Ways to Accept Cryptocurrency Donations

1. Bitcoin Donation Buttons

The first step is to make sure your donation platform accepts cryptocurrency, especially Bitcoin. Use specific donation buttons on your website to make this donation method more visible. There are a number of Bitcoin buttons that can be added, including plugins on WordPress websites.

2. Informative Landing Pages

To get the word out, post on your website explaining why and how your organization is accepting cryptocurrency donations. Here’s a good example from Save The Children, which has been accepting Bitcoin since 2013. The Water Project has a similar informative landing page on their website with specific donation details and a list of which coins they accept.

3. Pursue Cryptocurrency Grants

In the future, certain foundations may begin designating grant money via digital currencies. In 2017, The Pineapple Fund anonymously donated $55 million in Bitcoin to over 60 different charities. These grants will likely work about the same as traditional grants, but create more diversified access to new grant opportunities.

Stay Informed: An Overview of Cryptocurrencies

Because of the fluidity of the digital financial marketplace, there are countless different cryptocurrencies. New coins are being created or deleted almost daily, and their value is in constant flux.

There’s no way to keep up with all of them, but here is a list of a few of the most popular cryptocurrencies currently on the market to catch you up to speed.

Cryptocurrency Through Bitcoin

By far the most popular cryptocurrency, with 68% of the crypto market, is Bitcoin. Bitcoin was introduced to the public in 2009 by an anonymous individual or group. The currency touts itself as a “new kind of money,” which is recorded in a distributed public ledger called blockchain.

Cryptocurrency Through Ethereum

Ethereum is the second largest crypto currency, which was initially released back in 2015. Ethereum is slightly different from Bitcoin in that it’s both a digital currency and an open-sourced network that allows other applications to function on a decentralized blockchain.

Cryptocurrency Through Dogecoin

Dogecoin, which got its name from this 2013 meme, has been referred to as the “fun and friendly internet currency” by its founders. The coin has primarily found its popularity because of frequent mentions by Elon Musk.

Cryptocurrency Through Litecoin

Released in 2011, Litecoin, often referred to as an altcoin, is a peer-to-peer cryptocurrency that was one of the earliest spin-offs of Bitcoin. Technically, Litecoin is very similar to Bitcoin, but the biggest difference is that the network processes blocks more frequently than Bitcoin, making it easier to process transactions more quickly.

Cryptocurrency Through Tether

Tether is an altcoin controlled by Bitfinex, a Hong Kong-based financial exchange. The currency is referred to as a stable coin because it was created to be valued at $1 and retains the equivalent amount of cash in reserves—thus your digital tokens are tethered to more traditional currency.

However, there has been some controversy as to whether or not owners of Tether tokens could actually cash out their tokens for physical dollars.

Cryptocurrency Through Polkadot

Polkadot was introduced in 2017 by a co-founder of Ethereum. More than just a currency, Polkadot is a multi-chain network of blockchains. In simple terms, this means that other currencies can be built on top of its architecture.

The Impact of Cryptocurrency Donations on the Future of Nonprofit Giving

Cryptocurrency remains one of the biggest opportunities for growth to both for-profit and nonprofit organizations alike.

“You can choose not to invest in the future and stay in your lane. You can be afraid of spending money on things that help you innovate, [but] if you aren’t investing in the best appreciating assets, you’re negatively impacting your mission,” said Duffy.

It takes time and resources to better understand cryptocurrency, but learning how your nonprofit can get involved is worth the investment.

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