2024 became the biggest year for crypto philanthropy, with cryptocurrency donations crossing the $2 billion mark in the past five years. In 2024 alone, $1 billion in cryptocurrency was donated to charitable causes, while the US elections alone received $190 million worth of cryptocurrency donations.
Source: X
Call it the regulatory progress or nonprofits’ openness to digital payments, cryptocurrency donations have seen explosive growth in the past few years.
Decentralised Autonomous Organisations (DAOs) are increasingly being discussed in nonprofit and crypto philanthropy circles as a viable model for pooling resources and collectively deciding where to donate funds in a democratic manner.
DAOs function as decentralised, on-chain collaborative platforms, similar to how a giving circle operates offline. DAOs are collectively giving a new trust model based on transparency, collaboration, and democratic governance.
Let’s dig into how crypto is changing philanthropy, the role of DAOs in charity, and the trends around DAO-led philanthropy initiatives.
What is Crypto Philanthropy? And why now?
Philanthropy, or the act of giving (charity), fueled by cryptocurrencies, is simply called crypto philanthropy. More than 75% of Forbes’ Top 100 Charities said yes to cryptocurrency donations in 2024.
Source: The Giving Block
Kimbal Musk, brother of Elon Musk (Founder of Tesla and SpaceX), started the first giving DAO, Big Green DAO, on November 20, 2021. It was the first experiment in decentralised philanthropy.
But that’s not how crypto philanthropy took shape.
A decade ago, in 2011, WikiLeaks started accepting Bitcoin as a donation when regular processors blocked all donations directed towards it. Bitcoin was censorship-resistant, the perfect tool for fundraising for causes.
Traditional giving practices, on the other hand, were opaque, biased, and involved hierarchical structures, which delayed donations, encouraged corruption, and were often subject to censorship from governments.
Ethereum’s smart contracts gave birth to DAOs, and suddenly, the entire donation program could be pre-programmed, its milestones set, and payments triggered as soon as the milestones were completed.
DAOs further ensured charity payments went to legitimate parties, with zero middleman, in a peer-to-peer fashion, after the contributing parties gave their consensus.
Blockchain charity is borderless, instantaneous, and autonomous. However, Bitcoin and other crypto donations are subject to volatility. This issue is being solved by stablecoins, which are pegged in a 1:1 ratio to fiat. Stablecoins have become the most donated cryptocurrencies in recent times.
COVID-19 and the subsequent Russia-Ukraine war saw increasing instances of crypto philanthropy, given its borderless and censorship-resistant nature. The peer-to-peer transactions helped divert funds to the needy without any delay or red tapism, at barely any cost. A similar donation via the traditional route could have taken months to get approved, sent, and finally reach the true recipient.
In 2021, Vitalik donated $1 billion worth of SHIB to India to help combat the pandemic. In 2022, Ukraine DAO 2.0 helped Ukraine raise millions of dollars to support its military efforts in the war against Russia. So far, $2 billion in crypto donations have been made by these Impact DAOs to institutions and individuals.
DAO-Driven Charity Models: UkraineDAO 2.0 and Others
Let’s study a few case studies on how DAOs impact crypto giving and philanthropy in general.
Case Study 1: UkraineDAO 2.0
Source: blogs.infoblox.com
UkraineDAO 2.0 was born in response to the Russia-Ukraine war as the world’s first wartime DAO. The sole objective of the DAO was to raise and distribute cryptocurrency funds to the war-affected Ukrainians. The DAO had members–both institutions and organisations– from all over the world.
The DAO also sold NFTs of the Ukrainian national flag to raise funds, which went to humanitarian causes. It also issued a LOVE token, which was sent to those who donated as a reminder of the cause.
UkraineDAO has become an empirical case study for studying the role of DAOs as self-organised responses to crises and as an alternative fundraising mechanism. The DAO raised $10.40 million in web3 endowments as of 2022.
The most valuable thing, to me, about this DAO, is that I was able to connect with other people who were on the ground, or that could provide some help.
Giving Block has been actively working to help nonprofits raise funds and, reciprocally, help crypto investors donate to institutions, charities, political groups, and religious/faith organisations.
The Giving Block Disaster Relief Fund brings together medical services and humanitarian aid and helps those affected by war in Ukraine. The DAO works with local bodies to identify the needs of the people and areas that fall under the radar, and facilitates crypto aid distribution in these areas.
It also connects medical professionals, volunteers, and communities and makes efforts to distribute donated supplies to Ukrainian people.
Source: gdrt.org
Besides Giving Block and UkraineDAO, some popular digital giving DAOs include Giveth DAO, Big Green DAO, and ImpactMarket.
Giveth DAO focuses on public goods and is built on the Ethereum blockchain as an open-source platform. Its GIV token fuels community governance and zero-fee, smart contract-led donation.
Big Green DAO engages in crypto fundraising for food and gardening organisations in the US. The DAO empowers member organisations to determine how and where DeFi charity funds are allocated. The DAO was set up by Kimbal Musk. The DAO built ‘Learning Garden’ classrooms in 650 schools.
I believe that growing food changes lives. It improves your nutrition security. It improves your mental health. It gets you out into nature. It opens your eyes to the weather volatility created by climate change.
ImpactMarket DAO targets vulnerable communities and helps establish poverty alleviation mechanisms, such as an unconditional basic income, to support them.
Also read this Medium article on Philanthropy DAOs by Yonca Braeckman for a list of DAOs making the most social impact.
In a DAO, control lies in the hands of all stakeholders, rather than a single entity. The stakeholders own a part of the DAO, and are eligible to vote on its matters. This DAO governance via smart contracts and crypto transparency allows fair allocation of resources.
DAOs can be purpose-built to serve specific charity causes. For instance, Green DAO only targets nonprofits.
[The Big Green DAO is] an experiment in democratising and decentralising our grantmaking…to radically reconceive and restructure grant-making, disrupting embedded power structures by putting nonprofits in th.e driver’s seat
Those participating in community discussions and voting are incentivised via tokenised rewards or tokens. All funds from various resources are pooled together, and the funds raised are used to support on-chain philanthropy initiatives. Discussions in DAOs happen via Discord groups, community voting, and governance tokens. Since everything happens on a public forum and payments get transacted via a public blockchain, transparency and accountability are ensured.
If you donate cryptocurrency directly to a 501 (c) (3) nonprofit organisation, you can save more on taxes, and your hard-earned money in the US. The IRS treats cryptocurrency as property.
Some countries promote tax incentives for crypto donations. For instance, in Switzerland, crypto endowments made directly to qualified Swiss charities are tax-deductible. The donor can deduct the fair market value of the cryptocurrency at the time of donation.
Australia and Canada give tax deductions on crypto donations to registered charities.
Obstacles
Just like cryptocurrencies, crypto donations also need to face complex regulatory challenges, often when cross-border transactions are involved. KYC and AML laws apply to all kinds of crypto transactions, but different jurisdictions have different rules, which makes navigating regulations difficult.
Only a handful of countries recognise DAOs as a legal entity. DAOs and crypto platforms still need to improve their user experience. A large section of the world's population is still unfamiliar with the concepts of wallets and decentralised governance. The friction remains because of smart contract vulnerability and increased instances of cyberattacks.
Add to that volatility in cryptocurrency prices and changes in overall market sentiment, which impact project timelines and fundraising from investors.
Read how different jurisdictions treat DAOs in terms of legality in this article by MIDAO.
What Comes Next: Is The Future of Philanthropy Decentralised
Cryptocurrency donations are no longer a luxury or a niche event. Billions of dollars in donations being moved on-chain today are making a big difference. Philanthropy is getting a crypto makeover in several countries, but the US nonprofits remain the frontrunners.
A new breed of DAOs is emerging and driving philanthropic and social causes, like food security, poverty alleviation, education, disaster rehabilitation, etc. Stablecoins offer the most stable and straightforward route to send donations across borders.
However, stablecoins like the Glo Dollar are built to serve and empower charity DAOs. It is a fiat-backed, dollar-pegged stablecoin that allows DAOs to spend money on social causes without spending money from their treasuries.
Charity was never a singular event, but a collective effort for the collective. DAOs are just providing a platform for formalising and managing these efforts.
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