Accepting Cryptocurrency Donations: A Guide to Nonprofit Blockchain

Darcey Jones • Jun 24, 2021

In 1994, Bryant Gumbel, host of NBC’s Today Show, turned to his co-host Katie Couric and asked, “What is Internet, anyway?”

Katie replied, “Internet is ah. . . that massive computer network, the one that is becoming really big now.” 

It turns out Katie couldn’t have been more right: the internet ended up becoming really big!

Despite initial skepticism, the internet became a massively disruptive force and underlined the technological, economic, and sociological advancements of the 21st century. 

Today, the internet shapes the work of nonprofit professionals. Whether it be by storing data on a cloud-based CRM, emailing donors, or moving your services online, nonprofits need the internet to reach their full potential.

We now find ourselves in a familiar situation to the one we experienced in 1994. However, this time it’s with blockchain and cryptocurrencies (cryptos).

Although these concepts remain relatively mysterious to the general public, so was the internet when it first dawned. This tweet sums up the current thought evolution surrounding crypto quite nicely.

Charlie Shrem's tweet about bitcoin

The rise of blockchain and cryptos is undeniable, and it’s time for nonprofits to get on board so they can explore new avenues to pursue their mission and enhance their fundraising.

In this article, I’ll discuss how nonprofit leaders can get ahead of the trend and integrate blockchain and crypto into their organizations. Here’s a full list of topics we’ll be touching on:

First, I’ll go over the basics of blockchain and cryptos. If you’re mostly interested in learning how to accept Bitcoin and other cryptos today, skip to the last few sections of the article to check out our conversation with Anne Connelly.

What is Blockchain Technology?

Simply put, blockchain technology is a type of computer database

Users can store all sorts of data in a blockchain, such as personal identity information, legal documents, and, importantly for fundraisers, financial transactions. 

What makes it so unique is that it stores information in groups or “blocks” that are. . . well. . . chained together. As users enter new data, it fills a new block that, when filled, is attached to the previous block, creating a chronological sequence of information. 

There are countless blockchain applications. But, for this article, I’m going to focus on how blockchain ensures the integrity of cryptos.

Unlock your potential by staying ahead of the curve

Download our 2021 Fundraising Guides for either Canada or the United States and gain access to tips, strategies, and checklists.

What are Cryptocurrencies?

Cryptocurrencies are digital currencies that are secured by cryptography

Many cryptos are based on blockchain, creating a secure ledger of transactions. The main selling point of crypto is that it’s not controlled by any central authority such as a bank, business, or government but by a decentralized network of users. 
Crypto has become increasingly popular and more valuable over the past decade. Even by looking at the increasing value of Bitcoin over the past 5 years, you can get an idea of how popular cryptos are becoming.

On top of its increasing value, there are a variety of proposed benefits associated with crypto.

Security

Crypto secured by blockchain is essentially impossible to counterfeit or double spend. This is because every block in a blockchain sequence is given a unique timestamp when added to the chain that secures it within a sequence. Critically, each block also contains a hash code and the hash of the block before it. 

Hashes are a mathematically determined sequence of numbers and letters that represent the data within a block. If the information within a block changes, then the hash does as well. As each block contains two hashes, its own hash, and the hash of the block before it, the security of one block is ensured by the entire sequence. 

For example, if a hacker wanted to steal or alter any data within a block, it would disrupt the entire sequence. This action would cause everyone else using the blockchain to cross-reference their copies against one another. The other users would quickly identify that the hacker’s alterations are out of line from the sequence, and the alterations would be condemned as illegitimate.  

To successfully hack crypto, a hacker would need to control most of the blocks within a sequence simultaneously. This level of control would require an immense amount of resources. Also, as the sequence grows and becomes more complex, theft would become a more and more impossible feat. 

Decentralization

Crypto can be controlled by a community of individuals rather than a central authority. Through discussing Bitcoin, the most popular crypto, the benefits of decentralization are demonstrated clearly. Unlike traditional online databases, Bitcoin uses a community of computers to store its blockchain. 

Within this system, users don’t have to trust an entity like a bank to regulate their assets. This means that transactions can happen anytime, quickly, internationally, anonymously, and without the approval of a central authority. 

Additionally, Bitcoin can be as private as a given user wants it to be. All Bitcoin is traceable, but it is impossible to establish who has ownership of a Bitcoin if purchased anonymously.

While this level of anonymity creates an opportunity for illegal activity to be financed, it also provides the freedom to buy, sell, and trade resources without being restrained by a third party.

Transparency

Every Bitcoin transaction can be transparently viewed by Bitcoin users or by visiting blockchain explorers. However, as previously mentioned, users can remain anonymous, which does create transparency concerns. Most important for nonprofit professionals, blockchain technology provides an excellent platform for those who want to demonstrate the highest level of transparency.

The Benefits of Cryptocurrency for Nonprofits 

1. Capital Gains Tax Incentives for Donors

The Giving Block estimates that there is about $300,000,000 donated in the form of crypto each year. 

The rising popularity of crypto giving is likely due to the tax incentive linked to donating appreciated assets directly, opposed to cashing out an investment and donating the proceeds. Usually, people in the US investing in crypto would be taxed on a portion of their capital gains, up to %20, when cashing out their investments. 

However, when crypto is donated directly to a charity, the tax is avoided. Donors can even take an income tax deduction for their contribution’s total fair market value of up to 30 percent of their adjusted gross income.

Canadian fundraisers should be especially bullish on accepting crypto donations as 50% of the value of any capital gains in Canada is taxable. So for donors, crypto donations are a savvy way to create social impact while benefiting their bottom line.

2. Attract Millennial Donors

Philanthropy has evolved rapidly throughout the 21st century. 

Forms of giving like snail mail campaigns have become less popular, while e-giving has increased. Now, young donors are giving in innovative ways that avoid the traditional philanthropic avenues. 

Instead of donating to nonprofits, young people can give directly to those in need through platforms like GoFundMe, cutting out the middle man. As we’ll explore in the next section, crypto is especially suited for giving directly to those in need. Nonprofits need to adapt to modern giving trends and offer philanthropy that’s attractive to the next generation of major donors

What’s more, an eToro survey revealed that 43% of Millennial online traders have less faith in the stock market than in cryptos. Also, 71% would invest in cryptos if traditional financial institutions offer it. So, for a generation looking to make a social impact and drive innovation, crypto donations are an ideal solution. 

Engage More Millennial Donors with the Perfect Donation Page

Every detail matters. Use this FREE 17-point checklist to create an engaging and high converting donation page. 

3. Give Directly to Those in Need

Working with marginalized communities can often require cash to trade hands multiple times before getting to the desired beneficiaries. 

Let’s say a donor made a $100,000 donation to support a school program in rural Uganda. That money would have to be transferred to Uganda, converted into Ugandan Shillings, withdrawn from a bank, and transported to the rural area. 

All of the fees associated with this long process would diminish the value of the original contribution and take money out of the school program. However, with cryptocurrency, this process can be avoided.

Anne Connelly, an advocate for the social potential of blockchain, contends that crypto, like Bitcoin, can overcome the inefficiencies of humanitarian work. More, Anne argued that Bitcoin could be a valuable currency for those living in the global south that have seen their currencies inflate to the point where they are no longer functional. 

Bitcoin can overcome governmental mismanagement of currency and provide those in marginalized communities worldwide with economic power. 

For donors, giving Bitcoin also allows them to see exactly how their money is spent, as every transaction is public and protected by blockchain technology. 

Getting Started with Crypto: A Conversation with Anne Connelly 

Anne was gracious enough to talk to Keela about how blockchain and crypto can be used within nonprofits and how nonprofit professionals can get started. The questions and answers below are based on a conversation with Anne Connelly and supported with other tips and resources.

Where can I learn more about Crypto?

Anne told us that the best place to learn more about blockchain and crypto is the same place we go to watch silly cat videos, look up recipes, and buy last-minute birthday presents: the internet! 

Based on this advice, I have compiled some excellent internet resources to answer nonprofit professionals’ questions. 

How Can I Accept Cryptocurrency Donations?

Broadly, there are three ways for a nonprofit to accept crypto payments:

  1. Use a cryptoprocessor: The most simplistic option for most nonprofit professionals is to find a platform that will help them immediately convert crypto to their local currency. Two popular platforms for currency processing are BitPay and Coinbase. These platforms function internationally and support cryptocurrencies like Bitcoin, Bitcoin Cash, and Ethereum. 

Be aware that these platforms are centralized entities that charge transaction fees, reducing the value of any donation. Also, if you fully cash in a crypto donation, you’ll be unable to pass it along to your beneficiaries, limiting the usefulness of the donation.

  1. Open a personal wallet: The more efficient yet daunting way to accept a crypto donation is to open a personal wallet. Having a wallet allows you to manage your donations directly and buy and sell with ease. 

This method will limit transaction and conversion fees while giving you more control over your crypto finances. To learn more, check out Anne Connely’s article on how to buy Bitcoin. 

  1. Use a donation platform: The final way to accept crypto donations is to use a crypto donation platform. GiveTrack, Binance Charity, and The Giving Block are nonprofits dedicated to providing other nonprofits with a safe and secure crypto donation mechanism. 

These organizations will help you drive crypto donations worldwide while minimizing transaction costs and maximizing transparency. 

How Can I Spend Cryptocurrency?

For those interested in selling and trading crypto like Bitcoin, it’s a very similar process to buying. For those who choose to use centralized crypto processors, like those mentioned above, you can sell your assets by paying a service fee. Similarly, you can sell bitcoin from a personal wallet.

What are the Crypto Solutions Available for Nonprofits? 

There are several excellent sources where nonprofit professionals can find more information on how to manage cryptos. The Giving Block provides various crypto solutions for nonprofits and donors, including resources on donating, fundraising, and managing cryptos. 

For any Canadian nonprofits, Crypto Giving outlines a list of charities that accept cryptos, info for charities considering accepting cryptos, and other valuable resources.

Moving on from how to accept and spend crypto, the next question we asked Anne was. . . .

Bitcoin and the future of fundraising

Learn How Cryptocurrency Can Impact the Future of Fundraising

Written by Anne Connelly, with a foreward by Beth Kanter, this book explores how bitcoin is transforming the way fundraisers raise money.

How Can Nonprofit Leaders Get Stakeholders Onboard with Cryptocurrency? 

According to Anne, education is key. Nonprofit leaders and fundraisers must educate themselves on the ins and outs of cryptos to dispel myths and help people understand its benefits. 

Anne also told us a simple but compelling way to get stakeholders on board. Send them some crypto! 

Even if it’s a dollar’s worth, getting the people around you invested is an easy way to get their attention and prompt them to do some research of their own. 

Your board and directors may be skeptical about blockchain and cryptos. But, if you show them how it can economically empower your organization and its beneficiaries, they will be more likely to warm to the idea. 

I get it. . . blockchain and cryptocurrency seem like futuristic concepts that make you uneasy about investing or even researching. But, similarly to how the internet developed, the popularity of cryptocurrencies is growing. The least you can do is to learn as much as you can about these topics so you can make informed decisions.

The information provided in this article does not constitute investment advice, financial advice, trading advice, or advice of any sort; you should not treat any of Keela’s content as such. Keela does not recommend the buying, selling, trading, or holding of cryptocurrency by you. Perform reasonable due diligence and consult a financial advisor before making any financial decisions.