DeFi proves that charities can do more with their money

Most stories from the crypto industry last year focused on the large numbers of numbers flowing into and out of the space.From Stable coins exceed 100 billion U.S. dollars, And circle Raised $440 million in private investment In the spring, decentralized finance (DeFi) projects such as Solana completed $314 million In fundraising activities, people like to discuss the huge amount of money earned in DeFi, because the new all-time high has completely broken records.

We have not seen enough use cases for how the technological innovations that support these new financial instruments can benefit important causes and affect organizations outside of the bullish and bearish markets.

Although blockchain technology has developed rapidly in the past decade, the high barriers to entry into this new financial world are well known. Non-technical organizations have a long way to go to participate and benefit from the industry. Although we see encryption There has been a strong positive movement in the industry, and many crypto projects donate their income to charities or Claim that they will donate billions of dollars, There are still not many direct paths between blockchain and charities that need to benefit from this technology.

Charities can benefit a lot from understanding blockchain. In addition to the simplicity, transparency and speed of transactions, charities have many benefits to holding cryptocurrencies in their portfolios, and DeFi can open up a new type of profit potential for charities.

Related: Digital philanthropy: we can do better

Charities can benefit a lot from understanding blockchain

Most charities in the world are funded mainly by government grants or donations, and charities in specific industries compete for the same grant year after year. This makes fundraising more challenging. After more than a year of lockdown due to COVID-19, most organizations have lost the ability to raise funds through annual events and programs (such as face-to-face fundraising events or face-to-face donation events).

It is reported that charitable donations Refuse It has increased by 6% in 2020 and has experienced devastating financial losses when additional income is needed.Overall, the global COVID-19 pandemic has reduced donations, but we also Experienced Compared with the first 12 months ending in June 2020, online fundraising increased by 17.2%.

The combination of blockchain technology and fundraising has opened up more ways for charities to accept donations, while providing transparent tools that have built-in trust in both donors and recipients.

Related: The future of philanthropy lies in blockchain technology

One of the biggest challenges facing charities is that people simply don’t believe that money will get there.Earlier last year, the Australian Red Cross came under fire for not being criticized Show Where will the $90 million donation funds be used, and acknowledge that it may take several years to distribute all the proceeds. Although the funds were properly managed, the lack of clarity allowed the organization to receive additional scrutiny, thereby damaging the reputation of the impact-oriented brand.

Nowadays, people expect more that charities should be able to prove the whereabouts of donations and quickly send them to the places where they are needed in times of crisis. The use of blockchain for charitable donations embeds trust so that this does not happen, and there is a transparent path from donor to recipient.

Our current donation system also has problems, and the actual donation process is full of obstacles. Most websites require users to fill out a form, prove their identity, and link the payment device before entering the actual donation page. Most websites have third-party fees, which can cause users to donate less or no donations at all, and these obstacles prevent generous users.

Eliminating middlemen ensures that more funds can reach where they are most needed. All donations, especially one-time donations, should be fast and transparent, and allow users to donate from established encrypted wallets.

In addition to the convenience and transparency of blockchain donations, cryptocurrency donations can also be received through stablecoins such as Tether (USDT) And U.S. dollar coins (USDC) Can also help charities provide hedges against fluctuating currencies. This is especially important in countries where high inflation rates affect individuals and communities. If the charity chooses to convert legal assets or accept various cryptocurrency assets, the financial value of the donation can remain unchanged.

Blockchain and its current relationship with charities

When using cryptocurrency for charity, there are also plenty of opportunities to reduce taxable income. For example, in the United States, cryptocurrency donations are similar to stock donations, Quotation A more tax-efficient way to donate because Cryptocurrency is classified as property Introduced by the Internal Revenue Service in 2014. For donors, this means that there is no need to pay capital gains taxes and fair market value deductions. However, only a few hundred charities accept Bitcoin (Bitcoin) As a donation.

Related: Your crypto tax can be donated to charity

United Nations Children’s Fund (United Nations International Children’s Emergency Fund) and other organizations Has embraced the charity crypto movement. They can set up an office in the local area and accept cryptocurrency donations without wire transfer or international transfer fees. You can immediately transport the money to where you need to go. This is a good example of why more charities should be established to accept cryptocurrency donations.

Even if charities do not have encrypted wallets or accept encrypted donations, many people still benefit from the money made in the field.With this recently Irreplaceable tokens (NFT) boom, we saw Coca-Cola release NFT and Donate proceeds to charity, And many DeFi NFT projects Donate a certain percentage of sales To global and national charities.

It is great to see organizations and big figures in this field donate cryptocurrency, but we hope to see more charities actually hold and accept cryptocurrency donations to obtain the true value of digital assets, while reflecting the value of a transparent and fair blockchain.

Related: Philanthropy: the missing catalyst for blockchain adoption

The direct way to donate on the blockchain-look at DeFi and charities

Cryptocurrency donations and charities have not yet been commercialized, which means that participants in the blockchain field have a huge gap in the market. Actions and more measures need to be taken to allow charities to benefit from decentralized finance. At present, any combination of blockchain or project and charity essentially has a level playing field. In addition, charitable organizations can not only accept donations of Bitcoin or Ether (Ethereum), but in stablecoins and other currencies across multiple chains.

In addition to donating money earned through cryptocurrency to charities, DeFi apps are also establishing direct donation channels.More than 150 billion U.S. dollars Locked Entering DeFi, more and more projects are looking for ways to advance the charity encryption movement.

Giving Block has always been a pioneer in allowing charities to receive Bitcoin donations. As early as April, The Giving Block Initiate a crypto donation pledge, They are Keep adding new projects So that users can donate directly from the DeFi project platform to the charity of their choice.

In the Solana ecosystem, Step Finance recently established a charity page that allows any charity with a Solana wallet address to receive donations in USDC. Charities only need to register a Solana wallet and register to the charity page, and then any Solana user can directly donate USDC to the charity. Since its launch in mid-July, the FTX Foundation has received 25,000 donations through the Step Finance charity page.

DeFi users, known as degens, are constantly farming and collateralizing their cryptocurrencies in order to obtain huge returns from their investment portfolios. As a yield farmer, I have seen how mechanisms like the charity button encourage generous users to donate quickly on the blockchain when conducting daily transactions.

The charity encryption movement has made great progress. Being able to donate with one click from the wallet opens the door for charities to directly benefit from DeFi. The decentralized way of blockchain operation reflects many values ​​of the charity sector, including transparency, inclusiveness, and global thinking.

Looking to the future-DeFi’s growing TVL and cross-chain charities

Research shows that by 2020, 40 billion US dollars will be Put forward Online charity.This seems to be a big number, but the cryptocurrency market itself Hold More than 2 trillion U.S. dollars. We hope to see the total locked-up value (TVL) of cryptocurrencies continue to soar, and we hope to see an increase in charitable cryptocurrency donations.

It may take several years for charities themselves to farm or mortgage their cryptocurrency to make money for themselves, but helping charities to receive cryptocurrency donations is a good start for them to enter the lucrative world of DeFi. Accepting cryptocurrency donations opens up new earning potential and enables charities to focus on their mission instead of spending time writing grants and holding fundraising events.

Although progress is being made in finding ways to incorporate philanthropy into the blockchain, as a charity, there is still a long way to go in sending, receiving, and storing encrypted donations. We need to see more blockchain projects build operational tools, charities can easily join and safely receive instant donations from all chain users.

As blockchain wallets become more user-friendly and more tools are built for charities, we hope to see more global charities participate in the crypto economy.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

George Harapp He is the co-founder of Step Finance, the front page of Solana and the head of DeFi of YAP Global. George is a veteran crypto entrepreneur and the former CEO and co-founder of Bitspark. About ten years ago, he started to enter the cryptocurrency world as an early miner and brought a wealth of experience in establishing cryptocurrency remittance startups in the world. He established six centralized and decentralized cryptocurrency exchanges and launched 12 stablecoins, raising millions of dollars from venture capital and corporate investors all the way.