DeFi is changing how the sector works by using onramps, integrations across blockchains to make charitable giving easier.

The story of crypto industry in 2017 has been dominated by the huge amounts of money flowing into and out of it. People love to talk about the enormous amounts of money being made by DeFi projects, such as Solana’s $314 million fundraising.

We don’t see enough examples of how the technological innovation that underpins these financial instruments can be used to benefit important causes or impact organizations other than the bearish and bullish markets.

Although blockchain technology has progressed rapidly over the past decade, the remaining high entry barrier to accessing this new world of finance is widely known, and there is still a long way to go before non-technology-focused organizations can participate and benefit from the industry. While we are seeing a strong positive movement in the crypto industry with many crypto projects donating their earnings to charities or claiming they will give billions away, there are still not many direct paths between blockchain and charities in need to benefit from this technology.

Understanding blockchain can be a huge benefit to charities. DeFi opens up a new way for charities to earn, not only because of the speed, transparency, and ease of transactions but also because of the many other benefits.

Understanding blockchain can be a huge benefit to charities

Many charities are funded primarily by donations or government grants. Even within the same sector, charities are competing for the same grant money every year. This has made fundraising harder. After more than a year of COVID-19-caused lockdowns most charities lost their ability to raise funds through annual events and initiatives such as face-to-face fundraising events or donation drives.

It was reported that charity donations declined by 6% in 2020, experiencing a devastating loss of funds during a time when additional income was needed. Overall, the global COVID-19 pandemic reduced the amount of giving, but we also experienced a 17.2% increase in online fundraising, compared to the previous 12 months ending June 2020.

Blockchain technology can be integrated with fundraising to open up new avenues for charities to raise donations. It also provides transparent tools that embed trust in the recipient and donor.

People don’t trust that money will get there. This is one of the greatest challenges charities face. Earlier last year, the Red Cross in Australia was under fire for not showing where $90 million dollars of the donated money was going, admitting that it may take years for all of the proceeds to be distributed. Although the funds were well managed, the lackluster transparency caused damage to the reputation of the brand.

Today, charities must be able prove where donations have gone and quickly get them to the right place in crisis. Blockchain for charitable donations creates trust and ensures transparency from the donor to the recipient.

Our current donation system is not ideal. The actual process of giving money can be complicated. Before users can access the giving page, most sites require them to complete a form. They also need to prove their identity. Third-party fees are common on sites that may cause users to donate less or none at all. These roadblocks can discourage generous users.

Eliminating intermediaries will ensure that more money reaches the places it is most needed. Donations, particularly one-time, should be fast and transparent. Users can also donate using an existing crypto wallet.

Not only is it easy and transparent to donate cryptocurrency in stablecoins such as USD Coin (USDC), but charities can also receive donations in cryptocoins such Tether (USDT), and USD Coin (USDC). This allows them to hedge against volatile currencies. This is particularly important in countries that have high inflation rates. It can impact individuals and communities. The financial value of a donation may not be lost if a charity converts fiat-accepted assets to cryptocurrency.

Blockchain and its relationship with charities

You can also reduce your taxable income by using cryptocurrency for charity. For example, in the United States, cryptocurrency donations are tax-efficient because they are classified as property by Internal Revenue Service. This means that donors don’t have to pay capital gains tax or deduct fair market value. Yet, only a few hundred charities are set up to accept Bitcoin (BTC) as a donation.

Organizations like UNICEF (United Nations International Children’s Emergency Fund) have embraced the charitable crypto movement. They can have an office in their local area and accept cryptocurrency donations. This eliminates the need to wire money or pay international transfer fees. The money can be transferred immediately. This is an excellent example of why cryptocurrency donations should be accepted by more charities.

Many charities are still benefiting even if they don’t have a cryptocurrency wallet or accept donations in crypto. We saw Coca-Cola issue an NFT and donate proceeds to charity. Many DeFi NFT projects also donate a portion of their sales to national and global charities.

It’s great to see big names and organizations donating in crypto. But we want to see more charities hold and accept cryptocurrency donations so that they can receive the true value and fairness of blockchain assets.

There are direct ways to donate on blockchain — Look at DeFi or charities

The market is still very open for crypto donations and charities, but they have not been commercialized. This means that there is an opportunity for blockchain players to act and create more initiatives to allow charities to profit from decentralized finance. There is currently a level playing field that allows any blockchain project or blockchain to be integrated with charities. Moreover, charities have the ability to receive donations not just in Bitcoin or Ether (ETH), but in stablecoins and other currencies across multiple chains.

DeFi applications are not only allowing you to donate the crypto-currency money to charities but also allowing you to create direct routes to donation. With over $150 billion locked into DeFi, more projects are finding ways to progress the charitable crypto movement.

The Giving Block is a pioneer in allowing charities bitcoin donations. The Giving Block introduced the Crypto Giving Pledge in April. They are continually adding new projects to allow users to donate directly from their DeFi platform to any charity they choose.

Step Finance has recently created a Charity Page in the Solana ecosystem. This allows any charity that has a Solana address to receive USDC donations. To register a Solana account and to sign up for the Charity Page, a charity must first create a Solana wallet. Then any Solana user may donate USDC directly towards that charity. Since its launch in mid-July, the FTX Foundation received 25K donations via Step Finance Charity Page.

DeFi users are known as degens. They farm and stake their crypto to make huge returns on their portfolios. I was a yield farmer and saw firsthand how tools like the charity button can be used to encourage users to make quick donations on the blockchain while they trade.

The charitable crypto movement has made great strides. The ability to make a donation from your wallet in a single click opens the door to charities that can directly benefit from DeFi. Additionally, the decentralized nature of blockchain’s operation embodies many of the values of the charity sector, including transparency, inclusion, and a global outlook.

DeFi’s expanding TVL and cross-chain charity are a sign of things to come

Research shows that in 2020, $40 billion was raised online for charities. That may seem like a large number, but the cryptocurrency market itself holds over $2 trillion. We expect the total value locked in crypto to continue to rise and that charitable donations will increase.

Although it may take a while before charities can start farming or stake their crypto to make a living, helping charities to be able to receive cryptocurrency donations is a great first step in allowing them to enter the lucrative world that DeFi offers. Crypto donations open up new earning opportunities and allow charities to concentrate on their mission instead of spending time hosting fundraisers or writing grants.

Although there are some improvements in the way that charities can be onboarded to the blockchain, there is still much to do in terms of receiving, storing, and sending crypto donations to charity. More blockchain projects need to develop tools that allow charities to easily join and receive donations instantly from all users on all chains.

We expect more international charities to join the crypto economy as blockchain wallets become easier to use and more tools are created to help them.

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