EA orgs should integrate with The Giving Block for cryptocurrency donations

by Samuel Shadrach9 min read25th Nov 2021No comments

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Update: Apparently The Giving Block charges 5% fees. I still think that swallowing 5% fees is worth it for the features mentioned (weak opinion), cause you can always have both options open (giving block + another channel for crypto payment with lower fees). Another option is developing an in-house solution with all the desired features. I'd be keen to know if there's a third option.


(Credits to Aaron Gertler for feedback)

Epistemic status: I have knowledge regarding technicals of how cryptocurrency works, and how the space operates in practice, having worked in it. I have far less knowledge regarding crypto regulations, or around how charities including EA orgs operate. Hence my claims on latter aren't very sure, feel free to correct me on them. I am also not certain that the Giving Block is the perfect org that satisfies all the functions I am hoping for, this might require a tiny bit more research.

 

Key takeaways

 - Cryptocurrency donors are not your average donor. Strategising around how to get crypto donations is important.

 - Crypto donations must not be restricted in any form if you want more donations. Crypto donations should be accepted if done anonymously or via smart contracts, they should not be restricted by amount donated and they should not require interaction with your website.

 - Crypto also allows for innovation in how donations work.

 - The Giving Block likely satisifies all the functionality desired and EA orgs should consider integrating with them.

 

Why accept crypto donations?

(If you are already convinced that spending time strategising around accepting crypto donations is a worthwhile endeavour, you can skip this section.)

Reason 1: Crypto owners have a lot of money

Some stats (as of writing of this post):

BTC market cap: $1 trillion

ETH market cap: $500 billion

DeFi market cap: $148 billion

This alone commands significant attention. It is difficult for people to even imagine wealth creation at this scale. Focussing on crypto users is likely worth doing no matter what your views on crypto prices or the social benefits of crypto are, since the potential amount of donations generable is so high.

In fact, being bearish on crypto prices can demand more urgency on this work, because you want people to cash out into "real money" now and donate, rather than wait a few more years.

Reason 2: Crypto owners have different psychological makeup

These are broad observations that certainly don't apply to everyone in the space, but do apply to enough people that I think they're worth considering.

  1. Crypto users are more risk-taking and understand heavy-tailed growth. They have basic understanding of investing and money. And are likely more analytical by nature, especially those who are successful. This aligns with the kind of person attracted to EA.
  2. Atleast some of them are optimistic about the future of the world or atleast their ability to meaningfully impact it. Because this is what attracts a lot of users to crypto in the first place. This holds especially true for a lot of developers and builders in the space who have very asymmetric leverage in how to shape its future. This can be seen for instance with MakerDAO founder attempting to route billions towards funding renewable energy. Or self-declared EAs such as Sam Bankman Friedman and Haseeb Qureshi. Developers and builders can soft-nudge their users to donate via the app UI, or themselves allocate tokens to donate, or a number of other schemes discussed below.
  3. Most crypto wealth in existence has been generated in the last 12 months. It is that recent. BTC market cap hit a peak of $300B in 2017 before crashing. It again reached $300B in November 2020, before growing all the way to $1 trillion. This means most people's wealth is still sitting on-chain, and hasn't been cashed out into the real world. It also means many crypto-rich individuals have not yet transitioned or gotten used to extravagant lifestyles, even if they could now afford them.
  4. A non-trivial fraction of crypto investors and traders suffer from addiction and loss of purpose. This point is more anecdotal, but I think it is still worth mentioning. because I have personally noticed it in so many people. Excessive trading and risk-taking promotes addictive behaviours. And making a lot of wealth too fast often causes people to ask hard questions they don't have answers to. EA could provide a source of satisfaction to such people.

Reason 3: Crypto is global and low-effort

For some countries, international transfers are easier if they are done in crypto than they are via wire. Many countries have a weak banking system.

Even for countries that have a strong banking system, there are UX benefits of paying in stablecoins. This point is anecdotal, but a lot of crypto users will attest to this in my opinion. It is why they choose to hold stablecoins not dollars (or their local currencies), even when they don't want exposure to the crypto market.

Lastly, there are some users who are evading tax and local laws by holding crypto. I think accepting anonymous donations from such users is still worth it, because the counterfactual world is not one where they come clean and pay their taxes and then donate - instead it is a world where they don't donate. And accepting anonymous donations likely doesn't increase the number of people evading tax, rather only provides a service for those who are already evading it. (You can also get into debates over which taxes and laws and implementations on ground are "fair" or not, but I'll skip that for now.)

Reason 4: One can experiment around how donation works

This is an open design space but some ideas that come to mind are:

  1. Allow DAOs to pre-commit a certain fraction of their tokens to charitable orgs. The DeFi space contains a lot of very wealthy DAOs providing financial services to crypto users. Most of these are governed by a "governance token" which can have voting rights as well earn revenues. This makes them more like equity, and less like purely memetic assets. Token distributions are usually decided early on in the project by the founding team. Altruistic founding teams may want to pre-commit a fraction of tokens to noble causes. This will attract more users. The DeFi space especially looks down upon founders who keep 100% of tokens to themselves (for ideological reasons), so an alternative reality of founders owning 100% tokens for themselves and donating later on doesn't actually work out.
  2. Crypto and DeFi apps, wallets and interfaces can have UI elements that nudge their users to voluntarily donate. It is quite possible that developers are willing to build such features since they are quite motivated by social good. (Anecdotally I know a few myself.) This is significant given the amount of money that is being moved through these apps and amount of screentime they receive - even a small fraction of it being donated could be a large sum. I can also imagine apps choosing to opt-in users to charity by default for say 1% of their deposit amount.
  3. Implement and experiment with donation matching schemes, using smart contracts. Some EA orgs already run donation matching schemes, but they are enforced purely through the legal route. (Or you might just be trusting the word of the person offering to match your donations) Crypto offers a low-effort to codify these as contract. It also allows you to experiment with new forms of donation matching, allocation and commitment schemes, especially schemes that involve large groups of people. Vitalik Buterin (ethereum cofounder) has post comparing Quadratic funding and Retroactive funding, two interesting ideas on how you could voluntarily coordinate to fund public goods.
  4. Implement complex memetic schemes to get more funds for your cause. For instance, create a meme token but have an increasing supply (in crypto terms, inflationary) that gets donated to your desired cause. An example here would be KlimaDAO, a fork of Olympus that tries to incentivise people to lock carbon credits into their treasury, increasing the price of carbon credits in the reference market. I can imagine people having ethical qualms with this depending on how it is implemented. I would just say that meme tokens and speculation-for-the-sake-of-speculation are pretty much staples of the cryptoeconomy at this point - anything short of very harsh regulation is not going to fundamentally change this, even if you wanted to change it. Given this to be reality it becomes a lot easier to justify creating more meme tokens but diverting some portion of them towards doing good.

What features do we want for crypto donations?

There's a lot of features that are useful to the above goals.

  1. Doesn't require donor to visit your website. Crypto users are used to a quick UX flow where they can move millions of dollars at the click of a button in their mobile wallet. Email forms and sign ups are highly looked down upon. Moreover, DAOs simply cannot collect information regarding all their users, and if DAOs want to integrate donations, they want an easy way to do so that's fully automated and on-chain.
  2. Unrestricted by amount. This adds on to the previous point. DAOs can grow to billions of dollars and they quite literally cannot restrict this. And individuals too prefer fast UX, even when transacting large sums of money. Your crypto deposit address needs to be able to accept and securely store such large sums. (Even if you don't know how to immediately use that much funding - that is a problem to be solved when it arrives.)
  3. Anonymous. Anonymity is highly valued by many crypto users for both ideological and practical reasons. Practical reasons are so that your friends and acquintances cannot track your wealth - since once a transaction is mapped to a real identity, all related addresses and transaction histories can also be trivially mapped. (This makes crypto in some ways less private than bank accounts) Added to this is the fact is that a major fraction of users users self-custody their crypto, which makes them vulnerable to theft via burglary / hostage, which in turns means users wish to transact anonymously. Crypto users are also highly suspicious of any form of data collection, given how often such databases get leaked or misused. This makes minimal data collection and pseudonymity the norm in crypto. Any charity deviating from this is significantly reducing the donations they can get.
  4. Can be done by smart contracts. This is a pre-requisite to DAOs being able to donate, or inventing new donation matching schemes and so on.

The Giving Block

The Giving Block is a non-profit that acts as an intermediary between donors and recepient organisations to make crypto donations easier. This includes safe custody of crypto, liquidating it on market, handling tax and legal burdens, and to some extent community-building. They already work with 1000+ charities.

To the best of my knowledge, The Giving Block satisfies all of the four conditions mentioned in the previous section. I have asked them these questions via their support line and gotten favourable responses. I would highly appreciate if someone with more credentials than me rigorously verified this though.

It is unlikely that your charity or org's custom-rolled solution satisfies these conditons, which is why I'd recommend going through a standardised process such as the Giving Block.

Thoughts?

I'd be keen to receive any form of input on this. I may also be willing to commit my time towards ensuring this happens. Or ensuring it actually gets adopted by existing DeFi DAOs, once the infrastructure to accept such donations is ready.

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