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Read this article for the definitive guide on giving and receiving cryptocurrency gifts at your church.
November 20, 2019
While watching baseball on TV recently, a commercial for one of the big computer companies came on between innings. It was one of the worst commercials ever, as if repeating all the buzzwords of the day would convince consumers that they’re smart. But the commercial actually revealed the company didn’t really know what they’re talking about. Among this wall of words without context was talk about AI, Blockchain, Cloud, and app integration.
The whole world is like this right now. If a company just mentions blockchain as part of their quarterly plans on a shareholder call, their stock price jumps. Everyone is talking about Bitcoin and blockchain, but most of us feel completely lost. A lot of people are talking about this stuff. About half know something about it. Very few have a good grasp on the topic.
For those new to the conversation, and looking for a little guidance, we intend to simplify and educate.
To start, let’s talk about the technology behind this entire conversation: Blockchain.
Interested in accepting cryptocurrency donations? Scroll below to learn about our partnership with Engiven.
Blockchain is basically a database. This is the easiest way to think about it.
A database, in the simplest terms, records and stores information. One can also think about a database as a ledger. Like an accounting ledger, blockchain is used to record transactions or changes to the ledger as new entries are made.
The unique thing about the blockchain database is that it is distributed. It doesn’t exist on any one computer, but on many.
When our elementary school class used to visit the library, we learned how to look up books using the library’s database. The central server that housed all the data was called the Master. Various terminals located around the library were Slave computers that could only access the Master.
In very simple terms, the internet works this way. Your personal browser is used to access a server, retrieve files, images, and data from various servers to then display a website. If I want to update my website for the world, I only need to login and update my files hosted on the server.
Blockchain technology is different. Rather than a Master/Slave relationship, the database is Master/ Master, or rather peer-to-peer. Blockchain uses multiple computers connected in a peer-to-peer network with each computer hosting the entire database. This description is overly simplistic, but the main idea is that the blockchain is completely distributed. It does not exist in one place, but many places, and all versions are exactly the same.
How can this be?
How can a distributed database be kept in sync and up to date? We’ll cover that in a bit. First, let’s talk a bit more about the implications of a distributed database.
Because the blockchain doesn’t exist in a central location, authority for the database is decentralized. No central authority or governing body controls the blockchain, and this is something that is fundamental to our understanding of blockchain, cryptocurrencies, smart contracts, and all the other concepts that use the blockchain to exist.
This technology is both distributed (lives on multiple computers) and decentralized (not controlled).
The blockchain represents the most innovative and significant advance in computer science since the invention and proliferation of the internet. Like the internet, it can be used in all sectors of all economy and all industries. Blockchain technology has already been adopted and used by various organizations and companies that want to provide efficient and fast service to their thousands of clients and customers worldwide.
If blockchain is a database that is both decentralized and distributed, then we have something that is very unique. Anyone, anywhere is able to view the database at any time. Anyone is also allowed to add to the database at any time. No permissions are needed.
But, for this kind of freedom of use, some rules must exist. What’s more, they must be followed and enforced.
This is where the blockchain is, in our opinion, amazing.
Following the devastating earthquake of 2010 that caused widespread destruction to an already fragile Haiti, donations for the relief effort began to pour in to organizations helping in the region. An estimated $13 billion was raised to help the people of Haiti in the months that followed the event.
Five years later, compassion gave way to outrage as donors learned that little had changed, and much of the funding had been squandered or lost.
Many of these issues that arose among these nonprofit organizations could have been avoided with the use of blockchain technology and cryptocurrency. The transparency and real-time traceability of blockchain technology promises greater accountability for donors who demand to know how their funds have been used. Imagine tracking the relationship of donations to relief efforts through the supply chain with blockchain-enabled smart contracts. Donors and nonprofit leaders can know where money has been sent, how it has been used, and to whom aid has been distributed. This kind of transparency goes a long way to fight against corruption that is so common during relief work in at-risk countries.
Transfer of funds from a central location to field offices become faster and more reliable with the use of cryptocurrency. Instead of couriers carrying and declaring large amounts of cash across borders, a head office can simply make a transfer into the digital wallet of a field office or on-the-ground workers. The transactions are fast, secure, and able to avoid the security risk of currency exchange and transport.
Organizations often raise funds in one location and rely on contractors to accomplish their mission on the ground in another country. Contracted work and payment tracking is simplified when blockchain transparency is applied.
Tracking supply chain, added transparency, and increased security for field workers are just a few ways that blockchain technology will help advance trust between nonprofits and their donors.
Cryptocurrency is still wildly volatile. But this volatility was also the reason why some early adopters have made millions in the space. As agencies like the SEC and IRS begin to craft regulation and tax laws for cryptocurrency, we believe that opportunities to give cryptocurrency as a tax-deductible contribution will continue to rise. This could be a windfall for nonprofits ready to receive these gifts.
In addition to the obvious benefit of receiving a valuable asset to help advance an organization’s mission, accepting cryptocurrency donations offers some other advantages that may be appealing to donors. If the opportunity to give crypto for good is promoted properly, nonprofits may even attract new donors to their cause— donors they wouldn’t have engaged otherwise.
In 2018, cryptocurrency has a liquidity problem. One can use Bitcoin to purchase some items, but for the most part cryptocurrency holders have trouble exchanging their crypto for goods and services.
When nonprofits begin freely accepting cryptocurrency donations and provide tax-deductible receipts, owners of cryptocurrency have new opportunities for generosity and financial savings. Capital gains taxes apply to cryptocurrency asset growth. Donations to 501(c)3 organizations can offset this tax liability and simultaneously help solve a liquidity problem for cryptocurrency investors.
Nonprofit leaders have long known that some donors prefer to give anonymous gifts to their organizations. Though we think that cryptocurrency donors are more likely to be attracted by the tax benefits, we can’t ignore the fact that anonymous donations through cryptocurrency are very attractive to givers who wish to remain unknown.
Ministries and nonprofits regularly see an increase in giving when they choose to offer multiple giving options. I recently learned that churches launching online giving platforms for their congregations can expect an immediate net increase of 10%–20% in giving. Donors like to have options!
If online giving platforms are any indication, nonprofits can expect to see an increase in giving simply by offering cryptocurrency donations as an option to their donor base. Platforms like Engiven (see below) will make it easy for donors to give and simplify the receiving process for nonprofits.
For these reasons, we’re beginning to see major nonprofit organizations like Red Cross, United Way, and The Water Project open up their doors to cryptocurrency donations. Future advancements in cryptocurrency giving will help other organizations take advantage of this opportunity too.
At Tithe.ly, we’re excited to introduce you to Engiven.
We’ve partnered together to give you an opportunity to benefit from cryptocurrency donations. For a limited time, you can get a one-year membership with Engiven for free.
When you sign up for Engiven, you can …
If you want to offer your congregation an opportunity to receive cryptocurrency donations, then we highly-recommend that you sign up for Engiven.
To see how their platform works in action, check out these two churches:
When it comes to cryptocurrencies and blockchain, we’re just getting started.
We encourage you to take the time to better understand their development, and see how your church can get involved on the forefront of this new medium of exchange.
Editor's note: This is an excerpt from Crypto for Good: Demystifying Cryptocurrencies for Nonprofits by Nils Smith and Nick Runyon.