More than a decade has passed since the release of the Bitcoin white paper. During this time, the cryptocurrency industry was born. Hundreds of new blockchains have been released, with total valuations in the trillions. Millions of preachers and skeptics were mobilized. Yet there is still no clear consensus when it comes to the most basic questions surrounding it all.So is cryptocurrencies a good thing?
At the time of this writing, the question is particularly acute — at a time of a sharp macroeconomic downturn that, for some, raises the question of whether cryptocurrencies will still be around a year from now, let alone their impact on society. influence. I think and hope that many false representations of cryptocurrencies will disappear in the near future.But it is clear that the collective themes that make up what we call cryptocurrencies are not going to change. The network is still largely centralized. A third party is still required to transfer money online. Ownership of digital items remains ambiguous. Problems like this will continue to be solved, and those who build solutions will continue to see the economic benefits. This is more important than any blockchain. Just as cryptocurrencies are giving birth to a new category of technology, it is also giving birth to a new category of technologists. These people’s desire to change the world, and to get funding from their world-changing ideas, is only going to get stronger.
Let’s get into the public good of cryptocurrencies. Crypto public good is not just another vertical in an imaginative industry, it can already be touched and felt in ways that the Metaverse cannot. Rough estimates put annual giving under its banner from hundreds of thousands of dollars in 2017 to billions in 2022. This puts crypto public causes on par with some of the largest foundations in the world. It’s now a central issue in podcasts, conferences, and many organizations.And that’s not even mentioning its repercussions in the private sphere, which is often where pro bono discourse is most popular.
This report begins by taking readers through the brief history of crypto public good. How did cryptocurrencies bring so much wealth? Who is a cryptocurrency publicist? What tools, infrastructure and mechanisms do cryptocurrencies bring to the redistribution of wealth? After establishing this baseline, this article discusses emerging behaviors on top of it. What types of things are crypto philanthropists funding, and how? Finally, we will consider the implications of this new public good paradigm.
While philanthropy has a similar reputation to Davos, it is more than just a philanthropic event and a virtue signal.Regardless of the current macroeconomic fate of cryptocurrencies, this is an inevitable and understudied attempt at progress. In its cryptocurrency sub-variety, it is already expected to impact the livelihoods of millions of people.On the one hand, this post is for those viewing this strange new world from the outside, curious about crypto public good and its complex impact on the world.
Importantly, this report is also for crypto workers and aspiring philanthropists. While it has strayed from its earlier frenzy, the cryptocurrency industry still finds itself in a period of hope and romanticism. While crypto believers are drawn to making money, many work in crypto because of its world-changing potential. However, the past few years have shown that the achievements of cryptocurrencies are limited if their impact is assessed solely on the basis of their technical merits.By understanding cryptocurrency public good, we can draw a broader view of cryptocurrency’s impact on the world, and in the process form a more immediate answer to how it might improve human well-being. We may never be able to answer the question “Are cryptocurrencies a good thing?”, but through crypto public good we can at least look at the closest thing to that question.
What is a crypto public good?
Crypto public good is partly concerned with using unrestricted capital to improve society, life, the real world, and everything in between. This is an intentional open-ended and self-defining behavior. Although there is a reasonable overlap between the two, public good can be associated with actively funding social progress, but not philanthropy, which can provide passive assistance to those in dire need. All good deeds are good deeds, but not all good deeds are public good.
As Nadia Asparouhova puts it: “If venture capital is venture capital for private goods, public good is venture capital for public goods.” In an industry like cryptocurrencies, where public goods are produced by for-profit entities, true public goods are Products are inevitably deprived of priority. Philanthropy is a way to refocus on the things most deserving of funding.
Logically, crypto in crypto public good refers to the use of blockchain and similar technologies themselves as tools to achieve impactful outcomes. An oft-cited example is peer-to-peer financial transactions, which help individuals avoid predatory middlemen. Another example could be the potential role of cryptocurrencies in advancing cryptography, and thus digital privacy. Finally, cryptocurrencies in their broadest definitions of “on-chain code” and “off-chain community” bring new ways of pooling and distributing public interest funds. We can call all of this “first-level” crypto public goods.
Less obviously, cryptocurrencies also refer to harnessing the ability of technology to create wealth, which is then organized and redistributed to initiatives that are not necessarily cryptocurrency-related. Consider an early Z-cash investor who used a portion of his wealth to build a school for orphans in Nigeria, in addition to longevity research funded by Vitalik Buterin.We could call these things “second-level” crypto public goods.
Piecing these definitions together, we can begin to understand why crypto public good is more than a combination of two buzzwords. The pursuit of positive impact is fundamental to the past development and current appeal of cryptocurrencies, although this aspect is obscured along with more nefarious use cases. However, even if cryptocurrency is not linked to first-level impact, it still has a high potential for public good. We can attribute this to the vast amount of new wealth generated by cryptocurrencies and the inevitable flow of this wealth to good causes downstream and off-chain.
Therefore, crypto public welfare should be seen as a new public welfare paradigm, similar to the previous upheaval brought about by the technology-driven wealth boom. Just as the industrialists and technological innovators of the Gilded Age of the 21st century solidified their own philanthropy mechanisms and styles, so will the winners of the cryptocurrency boom we are currently in.
We know this because it has already happened. In the individualistic world of philanthropy, it only takes one particularly selfless person to create massive philanthropic outcomes that can substantially change the world and set an example for others. Consider the enigmatic Sam Bankman-Fried, the CEO and founder of FTX and the youngest billionaire in the world.Bankman-Fried has publicly declared that the ultimate goal of his cryptocurrency endeavors is “earn-give,” a style of public good combined with an effective altruism movement. He has a net worth in the tens of billions of dollars and is somewhat recession-proof. It’s hard to overstate how powerful SBF’s beliefs can be, and he’s just one of dozens of people in crypto with this level of influence.
Not every act of pro bono looks like the effective altruism of the SBF, though. Just as traditional public good can be an empty signal, so too can crypto public good. In fact, as we’ll see later in this article, a lot of what we might call crypto public good falls short of the high standards set by Bankman-Fried.
We study and analyze public good because it is a discipline that often eludes the public eye, despite its fundamental concern with the public welfare. Because public good happens after a person becomes rich, it is often seen as a dessert rather than a main course. But to the individuals affected by it, such framing is irrelevant. Good causes can have equally uplifting and terrifying results. However, because it’s often illegible, it’s hard to tell if it’s for the right reason, or if it’s having an impact. In an industry like cryptocurrencies that places a lot of emphasis on the fundamental potential of the technology itself, shifting the definition of impact toward a philanthropic focus provides a more holistic view of how cryptocurrencies can benefit society.
Cryptocurrency generates wealth, wealth generates public welfare
The first thing to notice about cryptocurrency is how rich it has made some people in a relatively short period of time. The rapid accumulation of wealth is the inevitable result of speculative bubbles. But is cryptocurrency a bubble? If so, it doesn’t quite fit historical precedent.
The tulip or railroad mania has only seen one notable speculative boom and a multi-year bust, whereas cryptocurrency speculation has been going on for over a decade. There was the Bitcoin bubble, but there was also the ApeCoin bubble, and they were both related but completely different.
The point here is that whether you call it a bubble, a frenzy, or a Cambrian explosion, cryptocurrencies have found a way to create over $1 trillion in value during their recent peak and during the current downturn There are still at least hundreds of billions of dollars worth. It aggregates these values into individuals who are willing to take significant risks. The typical image of a philanthropist is that of a middle-aged industrialist whose stable management has given them the expertise and capital to start their own foundations during their careers. What would happen if the image was a 20-something kid who made a few good bets and got out of poverty in just a few years?
At the lower end of the cryptocurrency wealth graph are individuals whose primary forms of interaction with cryptocurrencies are retail investment, day trading, and various liquidity supply positions. The wealth created by cryptocurrencies is in the hundreds of thousands to millions – a very large wealth relative to the average citizen, but not an unimaginably huge amount in the context of public welfare Donations – We see very few people willing to give away this wealth. This is due to the intuitive pattern of spending wealth on personal matters before considering intentional giving. It is worth mentioning that the meme of buying steaks, yachts and Lamborghinis with Bitcoin is a sincere motivator for many in the crypto space. Plus, there are less-than-hedonistic anecdotes about paying off student loans or buying a house for mom. When altruism occurs, it often precedes public welfare in the form of charity.
Despite the short-term volatility in the market, many individuals have emerged in the cryptocurrency space who are winning the game. For this group, their wealth comes not from retail investing, but from actively contributing to companies and infrastructure in and around the cryptocurrency space. People like Brian Armstrong, Changpeng Zhao, or the aforementioned Sam Bankman Freed have made amazing fortunes by creating cryptocurrency exchanges. Another common way to make money is through protocol creation and/or management for wealth appreciation. Hayden Adams, creator of Uniswap, and Vitalik Buterin, creator of Ethereum, own hundreds of millions of dollars in tokens for their projects. All of these individuals began to engage in pro bono activities to varying degrees, the nature of which will be discussed below.
Historically, only such billionaires have pursued genuine public good. But cryptocurrencies appear poised to change that, making it easier for those in lower wealth brackets to coordinate the pooling and distribution of money. Will this make the financial threshold for capital philanthropy lower than ever before?
Cryptocurrencies Generate New Wealth Distribution Mechanisms
In the context of cryptocurrencies, where wealth is already being generated “on-chain” (mostly in the form of cryptoassets), we need to understand how this wealth is ultimately transferred to organizations and individuals who can make a difference. Cryptocurrencies have developed new capital placement and aggregation mechanisms, as well as usage patterns and interfaces that sit on top of this process.
DAOs and other collective decision-making bodies have the potential to take public good practice beyond its reputation as a closed-door, individualistic discipline. Whether they realize it or not, many DAOs are already engaging in pro bono practice.
On the other hand, there are still plenty of individual donors. Sometimes they are even anonymous. They are also influenced by the new ways in which public interest capital flows in cryptocurrencies.
It is critical to have a clear interpretation of all these reference points as new phenomena with practical implications for social progress, even if they currently seem like the passion projects of cryptocurrency insiders.
Crowdfunding, DAOs, and Accidental Public Goods
Crowdfunding is the core transaction primitive of cryptocurrencies. Crowdfunding is by no means a new concept, especially in the context of altruism. But cryptocurrencies take this primitive and embody it in its ideology and technology.The sentiment seems to be “together we can buy anything, have anything, and therefore do anything”. This trend is further fueled by other tools that simplify financial coordination, such as multi-signature wallets and group bidding platforms. All these tools distill a sense of economic coherence among cryptocurrency users, regardless of the level of trust, permission or financial contribution. Merely having a common interest is reason enough to cooperate.
The concept of a DAO has become an umbrella term for any type of coordination group in the context of cryptocurrencies. This is partly due to its flexibility. The DAO is more than just a shared wallet. They can form many different schemes from social clubs, trade groups, to individual companies. As long as there are common interests, it is enough to form a DAO. One form of composition that a DAO can take is a crowdfunding DAO. In this form, participants coordinate crowd-raising for collective purchasing power.
A well-known example of this type of DAO is the Constitution DAO, which uses a tool called Juicebox to pool funds in an attempt to buy a copy of the U.S. Constitution. Likewise, SpiceDAO raised funds for the purchase of Alejandro Jodorowsky’s Dune. Even though only SpiceDAO has successfully bought its target, the learnings from both organizations are the same. Since U.S. securities laws prohibit the sale of commercial assets to unaccredited investors, participating in these types of crowdfunding DAOs does not grant partial ownership to legal entities that own capital such as rare books or documents. Instead, participants are granted governance tokens that simply represent control over the strategic decisions that guide the management of their own assets. As such, these organizations can actually be viewed as a form of public good based on pooling funds purely for the purpose of managing or advancing ideology. With crowdfunding DAOs, a serendipitous public good replaces the promise of financial rewards.
Of course, the public good principles behind SpiceDAO and ConstitutionDAO can also be applied to more purposeful use cases. There are signs that DAOs are emerging to fund careers such as scientific research. While the actual utility of DAOs is largely unproven, by introducing mechanisms for group coordination and pooling of funds, DAOs serve as an interesting foil to traditional individualistic public welfare practices. DAOs are notable not only because they lower the cost of entry for the public good, but also because they experiment with group decision-making. Many people can have more nuanced conversations at the negotiating table than making decisions based on personal preferences.
By pooling and distributing the funds of individuals under the banner of a common purpose, DAOs have the potential to engage in causes larger than the sum of their parts.
Therefore, we are also seeing the first signs of a DAO that is not collectively raising funds, but collectively distributing funds. Nonprofits like Big Green are leveraging the governance features of DAOs to facilitate public benefit funding. It is uncertain how this model, once implemented, will improve upon the standard non-encrypted structures administered by nonprofits. For Big Green, the desire is for the DAO to act as a balancing mechanism that upends the relationship between funders and grantees by providing voting power to practitioners who would otherwise be at the end of strategic considerations. DAOs have the potential to ameliorate these problems that have long plagued funding agencies. It’s also possible that “impact DAO” is just an example of everything looking like a nail when you’re holding a hammer. Only through a tight feedback loop between a busy public good and its real-world impact on beneficiaries can impact DAO avoid this fate.
NFTs: Symbols of Altruism
For a brief period in the mid-2000s in America, everyone seemed to be wearing a yellow rubber bracelet with the words “LIVESTRONG” engraved on it. In support of the cancer research work of Lance Armstrong’s Livestrong Foundation, the bracelets produced and sold by Nike are both a fashion item and a symbol of altruism. The marketing strategy, which raised more than $100 million in total, demonstrates that when positive moral reinforcement meets social signaling pressure, it can lead to a significant altruistic outcome.
With the rise of NFTs, we see some lessons learned from the era of public welfare bracelets. Just as NFTs can function as personal artwork, they can also function as participation badges and signals within groups. POAP (Proof of Attendance Protocol) NFTs have become a popular way to signal to others that you have attended events and conferences (often cryptocurrency-like). Displaying a “PFP” (profile photo) NFT as a twitter avatar is another example of NFTs exploiting powerful signaling effects. Likewise, it’s not hard to imagine NFTs that can signal virtue or altruism. As it turns out, there are many such tokens, and they are actually one of the most expensive tokens NFTs have ever had.
DeFi’s aesthetics flow to donation platforms
Cryptocurrencies embrace on-chain and off-chain composability. On-chain primitives such as DAOs and NFTs accompany off-chain habits, behaviors, and aesthetics. Among the off-chain habits of the cryptocurrency world, the DeFi platform’s refined interface and wallet-centric user experience are paramount. The ubiquity of web3’s aesthetics means it’s starting to move towards cryptocurrency-related products, such as donation platforms that don’t have much to do with DeFi.
On Endaoment, one of the more well-known cryptocurrency donation platforms, we saw the web3 aesthetic on full display. Another popular giving platform, Giving Block, doesn’t have the same level of interface optimization as Endaoment, but it retains the web3 UX principles of simplifying transaction triggering and generally calls for a more financial style of giving (for example, Giving Blocks offers an “impact index fund”). “).
The assumption behind crypto-native donation platforms is that they drive donations by creating symmetry with the DeFi platforms they emulate. Liquidity mining has nothing to do with choosing and donating to charity. However, if these two types of transactions are only mirror images on an aesthetic level, it can make users from DeFi backgrounds feel like they are doing liquidity mining when they are actually donating to charity.
In the cryptocurrency field, there are donation platforms similar to DeFi products, as well as DeFi products with the characteristics of donation platforms. At the simplest level, this manifests as a flow adjacent to a transaction layer that allows users to make small donations, similar to a coin jar in a grocery store checkout aisle. A well-known example is the donation “swap” feature released by Uniswap in support of the war in Ukraine. The principles behind this donation mechanism are simple. Get as close as you can to the flow of money and let some of it go to good causes. The reason this strategy works is also its downside. Sometimes passive philanthropy is appropriate, but sometimes philanthropy requires deeper consideration and more purposeful financial contributions than a lean piggy bank can provide. Maybe wartime aid wasn’t the best option? Or even if it is, maybe it deserves more than leftovers?
Programmatic Giving and Protocol Fiscal Decentralization
FTX, Sandclock, Pupper, and Bail Bloc have all (in varying degrees of seriousness) taken this transaction layer concept a step further, hardcoding charitable donations into the underlying logic of their use cases. For Sandclock, that means programmatically converting proceeds into tax-deductible donations to pre-determined charities. In the case of Bail Bloc, users can use the idle computing power of their PCs to mine Monero, which is then automatically donated to nonprofits to raise community bail funds. For FTX, this simply means taking a 1% fee on all transactions and donating it to a valid portfolio of nonprofits. In terms of the size of FTX’s operations, this approach has generated over $20 million in donations.
In the context of DeFi, the protocol and its treasury are often governed by a community of governance token holders, and one hypothetical decision this voting body can make is to allocate a portion of these funds to good causes or public goods. We might call this behavior one of many acts of “headless corporate social responsibility.” It’s interesting to imagine a hypothetical scenario where a governance body votes to implement some functionality, such as FTX charging a 1% fee to nonprofits at the protocol level. More than a one-time public benefit donation, this deliberations are starting to look like creating a bespoke tax system — a compelling way to evolve protocol governance beyond the current state of minimalism.
Secondary Voting and Retroactive Public Goods Funding
Quadratic voting and retroactive public goods funding are unique but have implications for the process of public benefit funding. Both use incentive design as a means to push more people to participate in public goods funding, but they do not contribute much in terms of better public goods selection.
Secondary funding is a system whereby funding contributors to a set of projects receive matching funding based on the number of contributors to each project. The idea is that more people contributing smaller amounts to a project is preferable to fewer people contributing larger amounts to a project. This helps incentivize project diversity and “push power to the edge, away from whales and other central power brokers.” Secondary funding has become a core mechanism for Gitcoin’s empowerment project, which seeks to improve on the traditional $1-vote matching The risk of nepotism in the pattern.
Unlike funding at the start of a project, retroactive public goods funding is funding a project after it has existed for a period of time based on evidence of its impact. The amount and direction of funding is predicted based on outcomes, which is currently a fancy way of saying a voting committee with expertise in a subject area. This mechanism is significantly developed and used in the Optimism Ethererum scaling ecosystem.
While useful in the narrow context of funding Ethereum public goods, quadratic voting and retrospective public goods funding should not be mistaken for solutions to finding capital or prioritizing which types of problems are worth funding in the first place. If Gitcoin and Optimism want to be considered suitable public interest vehicles (rather than just open source sponsored new systems), they can expand their definition of influence. So far, their plans have been software-centric.
Combining legitimacy and anonymity
Crypto public interest presents us with an unusual dynamic of anonymity. In the traditional public welfare context, we are used to knowing who the funders are. This is partly for self-awareness reasons, such as the fact that a family’s name is inscribed on the art museum’s flank. This is also for legal reasons. Registered nonprofits are subject to KYC regulations for liability and tax reasons, even if they do not publicly disclose who their donors are.
The decentralized nature of cryptocurrencies allows the idea of true anonymity to be accepted, even if the donation transaction itself is public and visible to the world. A nonprofit that opens a wallet and publicly lists a donation address is essentially creating a one-way channel through which any individual can make a donation. The most historic example of this is the $55 million Pineapple Fund, which issued large $5 million grants to 60 different charities vetted by anonymous donors.
The Pineapple Fund’s reputation as a shining example of influential philanthropy is presumably determined by an anonymous choice. But could anonymity make things worse? Recently, a crypto hacker used Beanstalk to steal $181 million, but after that, he donated $250,000 to the war in Ukraine. If the funds were donated, we would know their malicious source, but what if hackers successfully laundered the money and then donated the funds in a newfound anonymity? What if the donation was not for the morally acceptable war in Ukraine, but for the war in Russia? Then we can see how anonymity will start to backfire. While I personally don’t think the potential negative effects of anonymity outweigh the positive ones, it’s important to understand the unintended consequences of this mechanism.
Philanthropy in the field of cryptocurrency
So far, we’ve seen how cryptocurrencies have spawned a wealth of newfound wealth and a corresponding class of public good. We also saw how cryptocurrencies have brought new ways of pooling and donating funds. We’ve discussed the “how” of crypto public good, but we haven’t really discussed the “what.” “What do crypto philanthropists actually fund?” In what ways are crypto philanthropists trying to change the world?
In the not-too-distant past, you can count all the examples of giving through cryptocurrency proceeds in history. Now, this giving niche has become so diverse and large that it is not easy to capture how it works with a single linear description. So I’m going to try to document a non-exhaustive list of what I think are the most compelling stories that have emerged in the crypto nonprofit world.
First, I will discuss interventions that can be considered Tier 1 crypto public goods, as they are marked in the introduction.These programs revolve around public-benefit funding for projects whose primary function is to use cryptocurrencies.
From here, I will expand the scope to the second level of crypto public good – projects that are stimulated by the wealth brought about by cryptocurrencies, but not necessarily involving the use of cryptocurrencies.
Level 1 Encrypted Public Welfare
Consider first the original slogan of cryptocurrencies: permissionless financial instruments and means, including secure stores of value, cheaper and more accessible loans, stablecoins, and more. While most of the current “DeFi” use cases focus on self-trading and high levels of financialization, it’s not hard to imagine a future DeFi serving those effectively disenfranchised by the traditional financial sector. For example, the role that digital currencies, and stablecoins in particular, play in war-torn regions like Afghanistan, where financial service providers are fleeing for fear of fraud and money laundering.
Another way to define the fair utility of cryptocurrencies is as a public good. In fact, this view has taken hold among proponents of cryptocurrencies. But, as Hart, Lottie, and Shoring point out, framing cryptocurrencies as a public good is vulnerable to short-sighted definitions. What one calls a public good may actually be just an open source software framework, which in practice only benefits a small group of people. In order for something to be a truly public good, its benefits must be freely available to everyone in the public, not just hypothetically.
After weighing the pros and cons, we can see the controversy between the impact of cryptocurrencies and the implicit promise of financial returns, not to mention the various serious negative externalities surrounding cryptocurrencies such as their carbon emissions or the harmful giants they incubate. swindle), most use cases are not considered valuable public welfare actions. Even in the case of ReFi, where there is solid evidence of its impact, its heavily speculative revenue model means that ReFi institutions are often well funded without public capital injections. Imagine donating to Tesla.
If there is anything to be said for the first-level impact of cryptocurrency, it is that its potential is enormous, but it will continue to be hampered by an inability to focus on how to benefit those who need it most. In order to unwind its misguided process and avoid price volatility surrounding a technology that has unrealized ultimate value to users, cryptocurrencies need a clearer purpose-driven profit that is unaffected by the interests of whale users. It will also benefit from more nonprofit research organizations centered on human utility. Tier 1 crypto public good has the opportunity to fund and create more of these entities.
Level 2 Encrypted Public Welfare
While cryptocurrencies have potential merit, they are not a panacea for serious development challenges such as providing clean water and sanitation. Rather than a solution, it’s just a starting point. Just like the Rockefeller Foundation has nothing to do with propaganda about oil, the second-level crypto public interest only uses cryptocurrency as a means of wealth creation and public welfare currency, not necessarily the content focus of public welfare itself.
Organizing for Philanthropy and Philanthropy Capitalism—Taking Malta’s Binance Philanthropy as an Example
We can start by isolating “public benefit capitalism”, which some people use to refer to charitable acts aimed at explicit self-interest. An example of this is where companies conduct green CSR efforts aimed at enhancing public opinion. Think of the Shell Foundation’s international development initiatives, or Mr. Beast’s content-driven public good.
The cryptocurrency space has no shortage of charitable activities that look like philanthropic capitalism. Mostly, it happens through transactions of companies and projects. Organizational good causes in the cryptocurrency space share the same premise as individual good causes—someone creates and controls a slew of tokens that have experienced historic price increases. Just like project founders, cryptocurrency organizations usually hold a large number of their own tokens through foundations with funding capabilities. A notable example of this behavior is the exchange company Binance and its native Binance Coin. When it first launched four years ago, the price of a single Binance Coin was $4, and now, even with the market slumping sharply, it is priced at $280. This massive speculative upside advantage provides companies like Binance with essentially free ammunition to advance their causes, as long as those causes accept cryptocurrency donations.
Over the past few years, we have seen Binance use this strategy very frequently when dealing with Malta. Amid global regulatory uncertainty in 2018, Malta tacitly offered Binance a safe haven to establish its headquarters and base of operations for its EU activities. Immediately afterwards, Binance donated $200,000 (at the time) worth of Binance Coins to the Malta Community Chest Foundation through Binance Charity. Two years later, the Malta Financial Services Authority began changing its stance on opening, partly due to concerns that Binance was being used for money laundering. It was also around this time that Binance withdrew its local donations that were used to fund the treatment and support of terminally ill patients. Binance was sued by the Maltese nonprofit in 2021 for failing to transfer donations that had already accrued to $8 million. Binance claims that they withdrew the donation because the original donation terms were not fulfilled. The donation is conditional on being able to directly transfer Binance Coin to the beneficiary of the nonprofit, the statement said. While this may seem like an acceptable principle, it would be impractical to have 15,000 terminally ill cancer patients each have a crypto wallet backed by Binance Coin to receive an $8 million donation.
This confusing story is not brought up to teach Binance’s role in this situation, but to clarify its public good motives. We can’t say that Binance’s donation of the money was purely “bad,” especially given that the company appears to have real incentives (threat of lawsuits or otherwise) to live up to its terms. Just because a public good is done for public relations does not automatically render its influence useless. Other projects under the Binance Charity platform seem to be really influential. But they do not rule out different possibilities for downstream beneficiaries. Therefore, regulators need to investigate the main motives (overt or not) of public interest capitalists to reduce the likelihood that their initiatives will backfire.
Currency volatility and legal risk – how donating (and receiving) cryptocurrencies complicates good causes
Another interesting story is that Binance’s donation to a small charity saw a dramatic appreciation. The charity’s Binance token surged from $200,000 in 2018 to nearly $10 million in 2021 after failing to send it and thus cashing in. Currently it is less than half that number. It could easily be up or down by a few million from now on. While this is an exception, it’s an interesting case study for organizations embracing crypto for nonprofits.
The vast majority of crypto charity donations are transferred in cryptocurrencies rather than U.S. dollars. This is partly related to the crypto wealth generated by owning a large number of tokens that have seen a significant increase in price for a particular project. It is also related to the tax advantage of donating assets directly rather than cashing out first, which triggers a capital gain event for holders.
By accepting donations in cryptocurrencies, nonprofits can exchange those funds for fiat currency. The process is not easy, nor is it cheap. Its difficulties have spawned a small industry of intermediaries that can transact quickly and for a small fee.These fees are often bearable compared to the net benefit of being able to receive donations from a rapidly growing donor base. But for nonprofits already struggling with technical debt, the technical barriers to establishing such intermediary relationships are often too high. Even if a transaction is in place, what happens if it’s not instant, when the nonprofit has to deal with a precipitous drop in price and the transaction is deadlocked? It will be important to pay close attention to the inequalities between nonprofits that can get past these barriers and those that cannot.
The volatility of cryptocurrency donations makes reporting very difficult. Nonprofits must meet high standards for transparency and reporting. In many jurisdictions, they are required to file annual reports with the public and tax authorities documenting their financial position. Volatility in cryptocurrency prices makes this point-in-time, pdf-centric reporting practice a difficult problem for nonprofit managers. Likewise, changes in the value of donations make it very difficult to analyze good causes.
There is also the case of economic stimulus groups whose operations are based on the distribution and exchange of volatile cryptocurrencies. As an ideal vehicle for economic growth, GiveCrypto, various crypto city projects, and most notably the country of El Salvador are all crypto-centric examples. From the perspective of donors, the use of Bitcoin as a public good currency may be an innovative strategy to pass on the benefits to beneficiaries. But token prices don’t always go up, and price slumps can spell disaster for people already facing financial vulnerabilities.
Finally, funding charities with cryptocurrency means that charitable activities can face legal challenges. Cryptocurrencies exist in a regulatory gray area. In jurisdictions like the U.S., that could just mean tax uncertainty until the SEC gives clearer guidance on which cryptocurrencies are actually currencies and which are securities. Trading cryptocurrencies is illegal in places like India and China. Of course there are ways to circumvent this problem, but in practice it means prudent nonprofits avoid operating in politically sensitive areas. This is a significant hurdle considering that it is these regions where permissionless currencies tend to have the greatest potential impact. Given these challenges, and the general stigma that cryptocurrencies have for some, some nonprofits have refused to accept cryptocurrency donations altogether.
Aping into public welfare, FOMO process – the psychology of cryptocurrency investment
A sign of the crypto zeitgeist is to mobilize quickly as soon as you see an opportunity for speculation. When anything can be tokenized and permissionless traded, anything can be turned into an investment that provides a first-mover advantage.It’s not just an investment strategy, it fosters a new habit of thinking that can be applied to a variety of non-investment behaviors. You can ape into NFT projects posted by your friends on Twitter, but you can also ape job opportunities, ape nightly programs. When this mindset is combined with “FOMO,” it becomes even more irresistible. What you get is not only an individualistic motivation to ape something, but also the additional peer pressure of other people doing the same.This psychological cocktail creates the conditions for rapid group mobilization. In cryptocurrency, all it takes is a viral tweet, an ETH address, and a few hours to get hundreds of millions of dollars flowing into an entirely new asset or instrument.
This attitude applies to investing assets as well as giving. While it can increase engagement, is it the best mindset to pursue a good cause? Or is it more suitable for situations in which aid is allocated?
A somewhat cynical reading is that devoting yourself to a good cause looks like any other self-interested act of cryptocurrency. It is a transaction in which economic gain is the primary motive and loose good deeds are the secondary motive. Examples here include the aforementioned charity tokens or NFTs that donate transaction fees to charity. A more explicit example would be someone donating ETH to a war effort in Ukraine in hopes of being whitelisted for a rumored token airdrop. If you move fast enough, not only can you have the cake, you can also eat it.
But there are also plenty of examples of charitable acts from the cryptocurrency community without quid pro quo. During the outbreak of the delta virus variant in India in the spring of 2021, we saw the crypto community mobilize very quickly and impressively around the distribution of aid. CryptoRelief appeared to be set up overnight, with Vitalik Buterin passing on the $1 billion worth of SHIB airdropped to him. While the group initially had some difficulty converting cryptocurrency donations, they were eventually able to distribute over $55 million in grants.
The stopgap for CryptoRelief to set up and absorb capital is partly related to the urgency of the crisis in India. Even if it feels like a distant memory now, in the spring of 2021, the pandemic disaster in India was a source of immense sympathy around the world. While this empathy is universal, cryptocurrencies may indeed differentiate themselves from other groups in their ability to quickly coordinate, pool money and distribute it to those who need it. From this perspective, you can think of the entire crypto twitter as an overloaded GoFundMe page, where removal of intermediaries combined with an ape/FOMO mindset facilitates a flywheel of charitable behavior.
While it is remarkable that the crypto community can raise funds so much and quickly for causes such as pandemic relief or the war in Ukraine, it is important to realize that these times of rapid mobilization can also have negative consequences.While sending ETH does not require an intermediary, it is fundamentally required to create positive charitable outcomes.Crypto donations need to be converted into local fiat currency and, most importantly, someone who can competently assess the best place to send that money. The danger of over-lubricating the public welfare process is that the importance of fundraising strategies can be overlooked. Philanthropy may be as easy as hacking a website and a wallet, but doing it well is a cost-benefit process, and even experts can get it wrong.
This view suggests that the need for crypto-native philanthropic middlemen is increasing. These actors are able to straddle both worlds equally and reliably steer well-intentioned donors to the most impactful outcomes.
It’s finally worth considering how the cryptocurrency mentality applies not only to humanitarian aid, but also to good causes that don’t have pre-determined funding channels and that reveal the donor’s personal ambitions. It has been pointed out elsewhere in this article that it is difficult to describe non-anecdotal trends in philanthropy. Nonprofits operate in a diverse environment, and their financial independence means that everything is fair. Cultural consistency among crypto entrepreneurs means they take the same approach to problem solving, even if they focus on different reasons. In this sense, we can argue that crypto workers loosely inherit the rationalist lineage of tech workers, but add a sense of nihilism and weirdness.
Many of the hallmarks of the tech zeitgeist of the 2010s have found their way into tech-based foundations like Open Philanthropy and the Chan Zuckerberg Initiative. These organizations appeal to evidence, metrics, rationalism, and lofty ambitions. What would the philanthropic values reflected in these industries look like in a cryptocurrency version? We might expect some lingering rationalism to come into the picture, but the crypto industry is most notable for its irrationality.
Cypherpunks’ visions, scientific progress, and longevity research
More specific than “lulz”, so far, crypto public goods can be grouped into a few masters. These niches show us that world-changing money has gone to certain types of good causes.
A group loosely revolves around the spread of cypherpunk ideology. In 2011, when bitcoin was the only cryptocurrency that mattered, donors gave a total of 3,505 bitcoins to the Electronic Frontier Foundation. Nearly a decade later, the highest price for an NFT was Edward Snowden’s Stay Free, which sold for $5.4 million. A year later, the FreeRoss DAO organization broke records again, spending $6.2 million to acquire NFTs to support Silk Road founder Ross Ulbricht.Despite these high-profile donations, it’s hard to determine how much crypto-philanthropists are drawn to cypherpunk values. There is no crypto-native EFF, or even a nonprofit that teaches information security best practices. Perhaps this is a product of the value drift that cryptocurrencies have experienced over the past decade. Perhaps the pro-privacy movement will take on new meaning due to future changes in the geopolitical landscape.
But there is a very clear modern line that goes back to the cypherpunk origins of cryptocurrencies. That’s the science of slowing (or even reversing) aging in the form of scientific progress. Former Bitcoin cryptocurrency enthusiasts like Hal Finney showed interest in the space, and the connection never really went away. If Vitalik Buterin is in some way a philanthropic leader in cryptocurrencies, longevity is one of his priorities, for which he has funded hundreds of millions of dollars.
Not only did we see Vitalik’s generous support of longevity research. VitaDAO and NewLimit have shown interest mainly from a profit perspective, but maintain public welfare operations through scholarships. Impetus Grants have invested tens of millions of dollars in longevity research, with the bulk of the funding coming from donations from crypto wealth such as the Astera Instistute.
Perhaps in addition to its cypherpunk feel, longevity research is attractive to donors because it fits well with the contemporary movement around accelerating the pace of scientific research. Whether it’s a “Fast Grant”-style grant, or the crypto-native “DeSci” (decentralized science) movement, both approaches support grant programs that won’t be prioritized for NSF grants. Given its novelty, potential advantages, quirkiness, and niche status, it makes sense that longevity research would become a favorite target for crypto nonprofits.
Effective altruism and the SBF effect
In addition to longevity research, another clear focus for crypto public good is effective altruism (EA). Effective altruism is a public welfare discipline concerned with using your time and money to do as much good as possible. It selects career fields based on evidence and reasons for impact. Often, EAs end up focusing on reducing existing risks, or intervening in neglected areas of global health. While EA has grown in popularity in the tech world in recent years, the connection between cryptocurrencies and EA is mostly a story of specific individuals and small samples. Again, Vitalik is worth mentioning, who donated $54 million to GiveWell. The same goes for Ben Delo, founder of the BitMEX exchange and signatory to the “Giving What You Can” pledge. But whenever EA and crypto public good are discussed, the most important name is undoubtedly Sam Bankman Fried.
SBF is an outlier in the cryptocurrency space. Long before he started working on his own trading platform FTX, SBF worked on the principles of EA, specifically a career path called “earning-to-give”, where an individual works to earn as much money as possible, And donate it to a valid nonprofit. After setting this goal for his career, many factors conspired to put SBF on the path to becoming the richest person in the world under 30. In the process, SBF has amassed tens of billions of dollars, while maintaining a clear goal of giving it all away.
While the SBF has made and will continue to make substantial political donations, he recently revealed his first major vehicle for supporting EA’s values. In early 2022, the FTX Foundation launched the Future Fund, a $100 million-a-year grant to address a range of career areas that are involved in EA on the one hand, and research on the other hand.Although the recipients of funding have just been announced, it is already clear that the Future Fund has a soft spot for funding unconventional projects that are equally influential, which is often a balance of philanthropy at its best. “Space governance” is an example of a new area of business that the Future Fund seeks to support.
SBF is unique with the scale of his wealth and high investment in public welfare. Although SBF is a household name, he has not clearly inspired the rest of the crypto industry to follow in his footsteps at EA, or even imitate his earning-to-give style in any other nonprofit sector. Some may find the SBF cargo shorts lifestyle endearing, but that doesn’t mean they’ll adopt his utilitarian values. Perhaps this is because his rise was so short-lived that it will take more time for him to have an impact on the public interest ambitions of his crypto peers. Or, there is an unbridgeable gulf between the lofty ideals of the SBF and the material motives of the common crypto brethren. There are also many who are uninterested in effective altruism and see the SBF’s earning-to-give approach as just another chapter in the long history of public good. This camp questioned whether “doing good” could justify aggressive profit-seeking.
For the self-proclaimed degen cryptocurrency retail class, the SBF’s effective altruism is seen as a cover for extractive business tactics, such as deliberately causing market downturns to liquidate margin trades and acquire distressed business assets.
The future legacy of crypto public good
Philanthropy has often come under fire for its inherent hypocrisy. If upstream sources of funding are harmful to society, what are the benefits of downstream public welfare? Such a difficult comparison makes it difficult to generalize the results of many public welfare projects, and can only say “it’s complicated”. For SBF, FTX’s reputation as a Ponzi-like digital asset casino complicates the moral standing of his public good. In the eyes of a certain class of anti-establishment value investors, SBF’s business practices are as unethical as those of the bankers who sparked the 2008 financial crisis. At the same time, there may never have been a single person committed to a large-scale, impactful cause like SBF.
Facing the contradictions of public welfare is a healthy reflection of society on how to solve its ugly problems. The most serious of these is wealth inequality and the corresponding elite control over institutions. But the question “Is billionaires bad?” or “Is cryptocurrency bad?” is distinct from “Is public good?” and those concerned with progress need to be able to distinguish between the two categories. Measuring SBF’s so-called negative business externalities against the positive externalities of his public good is a daunting task. In the U.S. (and the Bahamas), the current approach to taxation and securities regulation makes FTX fully legal. According to the Fundamental Law, the FTX Foundation can freely dispose of the funds. Until these laws are changed, or until the SBF is found to be violating these laws, we should see the public good as a by-product that emerges from the system and as an independent act that should be judged on its own merits.
While there are some examples of philanthropy (especially corporate philanthropy) purely to enhance the negative reputation of a business, most philanthropy is done with good intentions. The same goes for crypto public good. But good intentions stop there. It is up to the public, in collaboration with the quaternary industry, to assess the difference between the good intentions and positive impact of any particular public benefit project. In the context of legislation like the United States, public welfare is an inevitable by-product of wealth creation, and we have built a society where wealth creation is the main driving force. We need to see philanthropy as a core driver of collective progress, not a pet program for the rich.
The downside of crypto public good
In the case of crypto-philanthropy, even with outliers, mere good intentions will, on average, produce a style of non-profit that actually converges on philanthropy. In this post, I have already mentioned the difference between philanthropy and public welfare, but for the sake of summarization and clarity, here are the main areas where the ambitions of crypto public welfare fall short.
- For interventions such as wartime aid or outbreak relief, sensationalism, in-group imitation, and emotional empathy drive engagement more than any positive progressive vision. These drivers are fine, but they make the impact less important.
- Likewise, when crypto projects and companies facilitate good causes themselves, inappropriate incentives for positive PR outcomes may have less impact.
- An overreliance on projects that require the use of cryptocurrencies as a means of influence by crypto philanthropists will ultimately lead to poor outcomes. While cryptocurrency unlocks novel and compelling mechanisms for public good and removes financial barriers, not all interventions require its use. Where cryptocurrencies do have first-level impact, that impact is often thwarted by highly speculative underlying tokens that create destabilizing risks for nonprofits without the technical capabilities or financial health to mitigate risk .
- Cryptocurrencies claim to be highly supportive of public goods, but said public goods are not very public and do not always serve a clear interest. In reality, crypto public goods often mean open source software libraries that, while neutral in themselves, are used in practice to extend DeFi-related applications with indirect human utility. Not to mention the fact that the non-exclusivity of cryptographic public goods often depends on being part of the very few members of the public who understand smart contract engineering.
What makes crypto public good
Not everything about crypto public good is lackluster. First, the value exchange and group coordination mechanisms that form the basis of cryptocurrencies have a clear role in improving some of the long-standing inefficiencies and inequities in public welfare. When it comes to planning, ambition can be found in a handful of prominent donors. Not only are these people ambitious, they are also pulling the entire nonprofit industry in more interesting directions than other crypto philanthropists.
In conclusion, here are the main aspects of the crypto public good that stand out.
- In a world revolving around the falling costs of building payment channels and transacting with cryptocurrencies, nonprofits will benefit from more flexible ways to accept funds and transfer them to the ultimate recipient.
- For a handful of the biggest winners in the cryptocurrency craze, entrepreneurial vision and philanthropic vision are linked. For Sam Bankman-Fried, the idea was taken to the point that his entire reason for working in cryptocurrency was to create wealth for good causes. For less extreme cases, such as the longevity study funded by Vitalik Buterin, there is clearly an incentive to use the wealth earned to create beneficial outcomes for society. While many in this cohort have yet to manifest their full charitable ambitions, we can expect to see more in the medium term as the crypto industry reaches its peak of adoption and founders start looking at new ventures charitable activities.
- Beneath the greedy surface of cryptocurrency, its advocates have a sincere desire to change the world. Expectations of financial returns alone rarely spark a frenzy, but the seduction song of money and progress is something else. The cryptocurrency’s direct revolt against the apparent breaches of the web2 platform that came before it still lingers.However, web3’s poor amelioration of web2’s problems has caused some cryptocurrencies to feel far removed from the ideology they originally flourished. If the progress of cryptocurrency as a first-tier solution continues to stall, second-tier crypto-philanthropy will grow in popularity as it provides a clearer answer to the kind of good that crypto-philanthropists can achieve.
New Content and Uncertainty in Crypto Public Goods
We ended up talking about a few aspects of crypto public good that are not necessarily good or bad, just different.Regardless of the outcome, they are changing the way public welfare is practiced.
- While charities that trade in volatile currencies can create instability in the valuation of donations, there are many examples in the short history of crypto philanthropy where these donations have resulted in very large financial benefits to nonprofits. From a cost-benefit perspective, it may be beneficial for nonprofits to deliberately not cash out certain cryptocurrency donation types immediately, where there is potential upside.
- Charity DAOs are an interesting way to experiment with grant deliberation (at least) and the concept of public good as an individualistic practice (at most). Will a more participatory public benefit distribution process get bogged down in the friction of decentralized governance like DeFi protocols? Or will horizontal public interest structures create more equitable and democratic funding outcomes?
- Protocol public good may be considered a subset of “headless corporate social responsibility,” which involves the voting public maintaining control over assets held in a decentralized protocol treasury. This is technically similar to a public interest DAO, but has a different route or scope in practice. While the main responsibility of a public benefit DAO is to distribute public benefit funds, this work may be a much lower priority for the protocol treasury. It is in this positive reflection that “this is our money, we can spend it how we want”, a seemingly inconsistent DeFi protocol like Uniswap can choose to pursue the results of public welfare. The potential is there, but for a voting public concerned about fiscal conservatism, it’s by no means a promise.
- The extremely rapid collective mobilization exhibited by the crypto community is roughly captured by the psychology of “aping” decisions. Just as this sentiment can be used to sell tokens, it can also be used to solicit more donations and public interest participation. But just because it’s easy to hit “send,” doesn’t mean you’re sending something that’s been properly vetted. In general, the types of activities that are more susceptible to FOMO logic are those that are hyped, which also tend to lead to poor public good behavior.
What is the future legacy of crypto public good? Philanthropy is a discipline with scattered aspirations. It’s hard to talk about the combined goodness of the entire philanthropic sector. But if you have to draw a regression line between its data points, crypto public good can be largely understood as a rising, nascent, and sometimes misdirected niche.
This is just the current interpretation. In the future, crypto public welfare is likely to develop into a greater cause. The capital is there, even if the ambition is still brewing. If this shift happens, it’s because crypto-philanthropists have decided to de-emphasize cryptocurrency as a means and an end, but only as a means. Ultimately, the biggest impact will come from seeing cryptocurrencies as one of many tools that can be used to create progress.
Going beyond the first level of crypto public interest is not just a matter of the appropriate tools, it also requires nonprofits to actively envision what kind of world they want to live in and what kind of problems they want to solve. Perhaps the vision is a world where financial barriers are lowered and poverty is radically reduced. Maybe it’s a world where age-related diseases don’t exist. Regardless, well-meaning crypto publicists should pursue their careers in a way that is a serious attempt to make progress. Public relations boosts, virtue signaling, and tokenization games are all viable as long as they don’t come at the expense of influence. However, this rarely happens.
When philanthropy does well, it has a way to replace the baggage that surrounds the idea of billionaires building the world in their vision. Once something goes wrong, the narrative of elite takeover crystallizes. Take MacKenzie Scott, whose recent large donation overnight set a new benchmark for the potential of decent good causes. We may never be able to assert that cryptocurrencies are good, but we can at least work for good crypto public good.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/crypto-commonwealth-report-can-cryptocurrency-directly-improve-social-problems/
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