— by James Hornitzky, Digital Director of Marlin Communications.
Cryptocurrency has been one of the biggest digital trends of 2020 and 2021. Based on blockchain technology, they allow people to trade currency and assets (both digital and physical) online and are interesting alternatives to traditional money.
As an NFP fundraiser, you should be watching this space (and maybe even joining in) as cryptocurrencies are creating wealth at staggering rates – imagine what you could do with a low-cost, low maintenance funding stream that increases post donation ~500% in one year? And potentially gives you access to a younger demographic, more receptive to digital interaction? Wouldn’t that be cool?
Cryptocurrency could be that for your organisation.
How does it work?
Let’s go back a couple of steps and look at the fundamentals first.
Cryptocurrencies are all built on blockchain technology.
Wikipedia defines blockchain as:
‘A blockchain is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). By design, a blockchain is resistant to modification of its data. This is because once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks.’
Whilst that’s a very good technical explanation, it’s a little dense and hard to understand.
A metaphor for blockchain I like to think of is the never-ending chain of sweaters that my son’s grand-aunty gives him every Christmas. Every thread in that sweater is weaved into the next thread, until eventually you have a whole sweater. You can’t have a sweater without the threads, and if you remove some you destroy the integrity of the sweater – each thread you sewed leads to the next one. It’s the same as blockchain – each block leads to the next block, and therefore you can’t go back and change something without invalidating the whole blockchain.
Cryptocurrency is an application of that fundamental blockchain technology. You can make blockchains for all kinds of things – even internet cats – but cryptocurrency is the specific use of blockchain to represent money.
Of course, there are many types of cryptocurrencies out there, but the one you may have heard of most is bitcoin, which is credited as the first cryptocurrency invented.
How can I accept cryptocurrency donations?
Firstly, you need to have a place to store your cryptocurrency. The general term for this is a wallet (surprise!), although you can think of it like a bank account (except it’s not linked to a bank).
There’s quite a lot of options for where and how your wallet is managed but generally the simplest option is to go with a cryptocurrency gateway who will manage that for you.
That brings us to the cryptocurrency gateway or platform – this is the platform/connector that will handle the payment for you. There are again a few options, but two prominent ones are Coinbase Commerce and The Giving Block.
Coinbase Commerce is more similar to a traditional payment gateway like Stripe or eWay, except it receives payments in cryptocurrency rather than fiat currencies. It’s a well supported platform and even has some great features for getting started like payment buttons and hosted payment pages, similar to Paypal and Stripe. Coinbase Commerce is also integrated with Shopify, so if you already have an eCommerce store for your NFP, here’s something
The Giving Block is more of an all in one platform, in that it offers the gateway similar to Coinbase, but also more functionality in terms of receiving, donor management, and some publication on their marketplace. They also automatically convert currency received at time of payment to cash, so you won’t have the volatility concerns of holding cryptocurrency.
How do I market to donors?
Of course once you can accept cryptocurrency, you need to tell your supporters that you can.
There isn’t really a gold standard for this yet as it’s so new, so the suggestions we have are:
- You can look to update your donation page or appeal pages, with text on the page outlining you can accept cryptocurrency.
- You could even choose to add the option directly into your payment forms.
- Alternatively, you could also look to place an additional page on your site stating that you accept payments and providing the payment widgets or links there.
In terms of how much can you make, there is not a lot to go on. The Giving Block claims on their services page that the average for organisations on their platform is $30,000 USD, but that is likely spread unevenly between the organisations and is very dependent on specific charities, their size and supporter mix.
Isn’t it a bit risky?
In short, yes it is, but there are ways to manage the risk.
Cryptocurrency itself still remains highly volatile – the price relative to AUD or USD changes drastically on a regular basis. The easiest way around this similar to what The Giving Block does is liquidation of cryptocurrency to cash at time of donation, although of course by doing this, you are missing the potential upside of the market as well.
Another issue are the tax implications for both the organisation and the donor. Unfortunately, this is such a new technology and use case the guidelines in Australia may not be 100% clear, and I’m not a lawyer or accountant either, so this is something you should definitely ask internally of your finance and/or legal team before setting up. Don’t expect this to be easy, but over the long term the rewards may outweigh the risks.
There is also the high energy consumption of the networks and the environmental impact. This is both a risk to the underlying value of the technology, as well as a CSR concern. I think this is a fence sitting issue – on the one hand, there is a negative impact on the environment today, but at the same time there are a lot of positives in cryptocurrency, and there is a lot of potential growth. I would also expect that the network will become more efficient and/or switch to renewable sources, particularly as mining and running costs become higher over time.
The final issue, and potentially the most important, is will people actually use it? This is truly new technology and user behaviour, and aside from the initial claims from The Giving Block, there is not any significant research we are aware of to suggest either way. The total market capitalization of all cryptocurrencies globally though (at the time of writing) is $1.65T though, so ask yourself is it worth spending a little time to see if you can get a tiny slice of that?
Should I do it now?
This is the big question your CEO or board will be asking. Difficult to say, as there are some significant unknowns and risks still in the market and the technology.
My initial suggestions are that you should be focusing on your other basics first, like optimised donation forms, good reporting, agility in your platform and security. They will deliver value for you now and in the long run, and are a more certain bet.
If you have those in a good state already, and you have some capacity within your fundraising or digital team, then I’d say it’s at least worth some serious consideration. 2021 could be another big year for cryptocurrency (and blockchain in general), and it’s worth being in at the ground floor if it is.
If you’d like some help moving into cryptocurrency fundraising in 2021, our team would be happy to help put you on the right path. Please get in touch.
P.S. Marlin offers its own Web Platform that clients such as Plan International Australia and RSPCA NSW use to ensure their websites are stable, tested and well supported. Our platform solution offers best practice UX and out of the box page templates, donation forms and lead capture forms. You can also look to extend key features. Chat to the team to find out more.