In the past few years, a number of startups have tried to attach themselves onto a good social angle. Uber for instance, has created a community impact initiative, while insurance startup Lemonade donates money not paid out in claims to charity. And just recently, Cryptokitties are now being auctioned off for charity.
The Cryptokitties game is currently holing a charity auction for a digital cat. The game gained popularity in 2017 at the height of interest in cryptocurrencies and crypto assets. The team behind these digital kittens was able to raise money from investors like Andreessen Horowitz and Union Square Ventures after users went on a mad rush to collect these “collectible cats”.
Cryptokitties uses Ethereum blockchain technology to create these digital cats. Users buy these cats, collect them and breed them with other cats, which will create even more cats. These digital cats can sometimes go for over $100,000. The new cryptokitty being auctioned is named Honu and will be used to help raise funds for ocean and wildlife charities.
“I am excited by the potential of cryptocurrencies and cryptogoods to change, and hopefully improve, the way we raise funds for charity,” Union Square Ventures partner Fred Wilson wrote in a blog post.
Honu is not the first blockchain-based charitable venture. Late last month, Brian Armstrong of Coinbase Inc., launched GiveCrypto.org, a fundraising platform using cryptocurrency. The funds raised would be then distributed to people in need all over the world. So far, consumers have been willing to donate via crypto assets. The fact that majority of cryptocurrencies’ value rose dramatically towards the end of 2017 also helped, since they could use the donations as a tax deduction. A good example of this would be the charitable giving department of Fidelity, which has been accepting bitcoin on its platform since 2015. Just last year, the company received $69 million in cryptocurrency donations.
Besides simple charitable donations, several companies are also pushing towards increasing charity accountability using blockchain technology. UNICEF Australia, for example, lets you donate part of your computing power to its Australian branch to enable it to mine cryptocurrency.
The Future of Charitable Giving?
The idea of using blockchain in charitable giving is being taken seriously, and according to Larry Liebman, chief operating officer of Charity Navigator, “Blockchain will be one of the most important revolutions of international relief efforts, without any question.” The head of the independent charity watchdog added, “The efforts will be completely updated because of the blockchain technology.”
But, although a digital ledger might make sense for certain non-profit orgs, there are still certain kinks the industry has to work out—especially involving giving a largely speculative asset to organizations assigned to provide relief for the poor. Even if most charities cash out the coins to fund their programs, the market volatility would be a problem. For example, someone gets a valuable Cryptokitty at an auction, but the dollar value of Ethereum falls by 20% by the time the auction closes…what happens then?
“The biggest head scratcher is that organizations may not know what to do with it,” Lieberman said. “Right now they are handling it in the same way they handle stock donations, selling them just like they sell stocks through a third party.”