Cryptocurrency is Transforming Philanthropy
#INTERVIEW | Crypto has taken a backseat of late to AI, but it's worth exploring, especially as companies such as Endaoment are finding a way to use if for good.
Cryptocurrency has, of course, been the subject of hot debate, with some arguing that it represents the future of finance, while others express concern about its volatility and potential use for illicit activities. The currency is also the ongoing subject of regulatory uncertainty as governments wrestle with its growth and ubiquity. It also had quite a crash thanks in part to FTX’s spectacular implosion.
Despite it all, the potential for cryptocurrency to revolutionize philanthropy is a bright side note to the drama of 2023. And last year I reached out to one of the leaders in the space, Endaoment, to better understand cryptocurrency’s more benevolent side. It’s a great read (and still very relevant) so I’m reposting here (and hope you will check them out).
Meet Endaoment: “Philanthropic Institution of the Future”
Without-a-doubt, cryptocurrency philanthropy represents a new frontier in giving. And in a world that's increasingly digital, it could well become the norm rather than the exception. But as we move forward there is a need to educate and contextualize for consumers. So I was excited to connect with Endaoment’s Chief Operating Officer, Zach Bronstein, to better understand the opportunity.
Q: Endaoment manages — and seeks to encourage the growth of — cryptocurrency charitable giving, correct? When was the business started and why?
That’s right! We’re a 501c3 Community Foundation founded on the mission of stewarding and encouraging crypto philanthropy. We started Endaoment because we wanted to make it easy for folks with crypto to donate to charities in tax deductible ways, regardless of the assets they want to give, and easy for nonprofits to accept these donations, but not have to take on the additional overhead of figuring out the blockchain space to do so.
In truth, it all started from an interaction way back in 2018 when our founder tried to make a donation of Ethereum to a local charity. As they looked at him as if he had five heads, an idea started brewing on how we could make this process simpler, and soft-onboard folks into web3 at the same time.
Q: How does it work?
Endaoment.org is built on the Ethereum blockchain and operates via a series of smart contracts and multisig wallets. Every eligible 501c3 is searchable on our platform (about 1.5m), as we pipe in data from GuideStar, who in turn imports data directly from the IRS. Each organization receives its own smart contract (and fully composable Ethereum address) once deployed; an action typically taken by the first donor to that organization.
Once deployed, the organization’s smart contract can receive donations via the app or via direct interaction on-chain. In addition, donors can create their own Donor-Advised Fund on Endaoment’s application — a sort of charitable checking account.
They can then make donations into this fund in the same way they would for other organizations, e.g., get a tax receipt for donating and then grant out funds to chosen charities. This is particularly handy when the timing of tax deductions is important to the donor. You can learn a bit more about how it all works on our site, as well as, in our documentation (docs.endaoment.org)
Q: Who have been your key constituents to date? And of those groups (e.g., donors, charities) what is the typical profile of a client? How do you hope and expect that to change?
Key constituents for us are donors and nonprofit organizations. We split our time to meet everyone wherever they are at, focusing on crypto and web3 for donors while often having very basic conversations about blockchain technology with nonprofit organizations.
To be honest, there is no typical profile of either! We get donors of all ages, from all over the US, and work with organizations of all kinds. From small local single person charities to international organizations.
Our hope is that we continue to see this community grow and become more diverse as more folks take the plunge into web3. In fact, the best outcome in my mind would be that there is no ‘typical profile’ of a donor.
Q: The nonprofit sector isn't one you would conventionally think of as tech-savvy, has that been an obstacle?
In large part, this is why we started Endaoment! We know that nonprofits are regularly strapped for cash, and as such, don’t often make large investments into emerging tech. Our goal was to create a system accessible to everyone regardless of technological know-how.
But to answer your question more directly: both yes and no. Early on, it was a bit of a lift to explain how the system worked and how we were providing this service for free for nonprofits.
More recently, however, as more folks understand the intricacies of the web3 space, this has become easier. Even during the bear market folks have been excited to get set up with us in anticipation of future donations.
Q: Of course, the volatility of the crypto market is chilling even for those cheering it on, how has that affected your business-to-date and what are your thoughts on the future?
Happy to say that this largely has not impacted Endaoment. While donations generally are down from where they were in 2022 (considering both market caps, as well as, current events in either year, such as the war in Ukraine), donations and grant making activity are still lively on the platform as folks still are looking for ways to be charitable with their crypto holdings.
We intentionally built Endaoment to be able to weather the storm of a downturn, and we expect to still be here, moving money to charitable causes, when the market returns to a more positive state.
One of the most encouraging metrics here is that nonprofits — which I think would have been most likely to see bad news in web3 and decide not to engage — have only accelerated the pace in which they are getting set up on Endaoment and preparing for a market resurgence.
Q: How do you think about the regulatory environment and governments here? Also, many crypto holders may be surprised by their tax obligation overall. So, since donated crypto is tax free, is that a message you're also trying to communicate to potential donors?
The tax situation is even better than that actually! While this isn’t tax advice, and everyone’s tax situation is different, all gifts made to Endaoment aren’t just tax free, but are tax deductible to the fullest extent of the law. This is a big part of the selling angle to donors, as they have something directly to gain from making a donation: a deduction. And this is just as they would if donating traditional assets via legacy payment rails.
Making a donation of a long-term appreciated asset can yield a deduction equal to that asset’s current value — obviously a huge win if you’ve held an asset that’s gone up in price significantly. In terms of the regulatory environment, we work closely with the IRS to maintain our 501c3 tax deductible status, and look forward to the wider regulatory space creating concrete rules to help guide management of crypto focused organizations.
If you are interested in learning more about Endaoment, you can reach the team here.