what charities need to know about fundraising from the NFT community

Crypto and NFT users are one of the fastest-growing donor demographics in the world. A new report outlines what charities need to know.

First created in 2014, non-fungible tokens, better known as NFTs, have gained mainstream interest from a wide audience that includes crypto investors, sports fans, art collectors and… fundraisers.

Today’s vision for NFT fundraising as a subset of Crypto Philanthropy was born in 2021. Seeking a way to give back, a handful of the NFT community began to make a social impact through acts of charitable giving.

Luckily, the generosity trend caught on. To date, millions of dollars have been donated to charities by the NFT community. Crypto donation solution, The Giving Block, alone processed more than US$12.3 million in crypto donations from NFTs in 2021.

So how do NFTs work, how can you incorporate them into your fundraising strategy, and which donors will they connect you to? We explore The Giving Block’s ‘The Rise of NFT Fundraising’ report to find out.

What NFTs are (and what they are not)

In the most basic sense, a NFT is a way to store data on a blockchain such as Ethereum. Unlike a fungible asset, such as the Australian dollar, one NFT cannot be swapped interchangeably for another NFT. That’s because each token functions as a way to validate unique ownership of something, such as a single work of digital art.

In the case of digital art, NFTs are often misunderstood to be the work of art itself, but that is not the case. Instead, the NFT is the underlying technology that has enabled digital artists to mint and sell uniquely verifiable works of art (think of it as a deed to a house, not the house itself).

Why NFTs matter to NFPs

In recent years, nonprofits have adjusted their donor strategies in response to a spate of major global disruptions. Many have also identified the need to embrace new technologies to connect with younger supporters. These two considerations have helped fuel the trend of nonprofits embracing NFTs as a fundraising tool.

As NFTs have caught the attention of mainstream culture, the market for them has grown exponentially. In 2021 it grew by more than 22,000% versus the previous year, and sales topped US$17.6 billion. As a result, creators and collectors have seen a rise in profit margins from the sale of NFTs and this has empowered them to use their affluence to make a positive social impact, often in the form of charitable donations to nonprofit organisations.

The global crypto user base increased by 178% in 2021, rising from 106 million in January to 295 million in December.

For a variety of reasons, crypto and NFT donors are generally considered to be uniquely generous compared to their cash-giving peers. A hot NFT market can create massive wealth for many and crypto investors are a charitably inclined cohort. About 45% of crypto investors donated at least US$1,000 to charity in 2020, compared to only 33% of the general population.

Crypto and NFT users are one of the fastest-growing donor demographics in the world. According to a study by Crypto.com, the global crypto user base increased by 178% in 2021, rising from 106 million in January to 295 million in December. Based on their giving habits, they are showing signs of becoming one of the greatest forces for social impact in recent years.

What motivates these motivated givers?

The report attributes NFT giving motivation to four main factors:

  1. Doing good is a top priority The majority of crypto users, including members of the NFT community, are Millennials (26 to 42 year olds) and Gen Z (10 to 25 year olds). Many in these cohorts see social impact as a part of their personal responsibility, and the choices they make, from the brands they buy to their career paths, reflect these views.
  2. Creating unique value for their audience Creators that introduce a charitable component into their NFT collections are taking steps to be altruistic. But they may also be making strategic moves to differentiate their work as a more unique commodity for potential buyers.
  3.  Empowering their supporters In some cases, NFT projects will hold a vote among their fans and supporters to choose which nonprofit(s) to support. In NFT marketplaces (such as OpenSea), offering users the opportunity to make crypto donations is an easy, yet effective way to show corporate values.
  4. Bringing NFTs and crypto mainstream Put simply, charitable cryptocurrency donations are one of the most effective ways the crypto community can demonstrate their positive impact on the world.
  5. Maximising crypto tax incentives This is specifically related to the US, but valuable to all in highlighting the importance of seeking information about relevant tax benefits and implications before embarking on crypto fundraising. In the US, the Internal Revenue Service (IRS) treats digital currencies as property for tax purposes, which means that crypto donations are subject to different rules than cash donations. As a result, crypto donors may be able to offset some of their capital gains taxes by donating a portion of their cryptocurrency holdings to charity, rather than selling for cash first. These tax incentives are a major reason why cryptocurrency investors often donate to charitable organisations with crypto assets instead of cash. The bottom line is that many donors can donate more in crypto than cash.

Who’s involved

Like any other fundraising activity, there are a raft of stakeholders involved in making NFT fundraising successful. The main players are:

  • Nonprofits equipped to accept and encourage crypto donations.
  • NFT artists and creative studios 
  • Platforms and marketplaces which exist as vehicles for NFTs to be minted, bought, sold, and exchanged. Marketplaces also offer additional ways for users to support charities, such as API integrations with charities’ crypto donation widgets.
  • Collectors and investors – some NFT holders view their purchases as investments that will appreciate in value over time, much like fine art collections. Other collectors want to buy NFTs that will look great as their Twitter avatars. As NFT projects have become more philanthropic, collectors have also made their purchasing decisions based on their personal or political values.
  • Companies and corporations – as activities such as NFT charity auctions become a more established way to inspire and incentivise people to support charitable causes, more brands and companies are experimenting with NFT-related corporate social responsibility (CSR) initiatives.
  • Donation processing companies – nonprofits that fundraise with NFTs or receive donations from the NFT community rely on cryptocurrency donation processing companies, such as The Giving Block, to facilitate secure, regulatory-compliant transactions. Without these companies, donors would be stuck converting their crypto to cash.

Types of NFT philanthropy

Here are five of the most common ways that nonprofits receive NFT donations:

  1. Direct donations – any member of the NFT community can make a charitable gift to a nonprofit organisation that accepts cryptocurrency.
  2.  Donating NFTs – nonprofits that receive NFTs as donations have a choice between selling the NFT for its market value or holding it as an investment.
  3.  NFT charity auctions – once a nonprofit has found NFT artists willing to auction their work and donate 100% or a percentage of proceeds, they need a marketplace or platform to host the auction. Artist Jack Butcher helped CARE USA raise US$200,000 for Afghanistan humanitarian relief via an NFT auction.
  4. Perpetual giving via smart contracts – this method of giving is similar to a regular gift. Many NFT projects set up their ongoing giving so that each time one of their works is sold (or resold), a percentage of the proceeds is donated to a charity.
  5. In-platform donation methods – several crypto and NFT companies have created easy pathways for their users to donate to charities. By placing “Donate Crypto” buttons in prominent locations on their websites, or embedding a donation widget for a nonprofit they support, these companies demonstrate their corporate values and offer a unique experience to their users.

How impactful is NFT philanthropy?

NFTs donations often deliver enormous clout, with some nonprofits receiving transformative donations worth hundreds of thousands or millions of dollars.

One example is Trees for the Future, an environmentally-focused US-based nonprofit, which has received hundreds of thousands of dollars through donations and collaborative fundraising efforts with NFT projects such as Woodies.

Over on Australian shores, MSF Australia received the world’s largest crypto donation from an NFT project in 2021 – a gift to the tune of US$3.5 million (AU$5.1 million). Whilst the donor remains anonymous, the gift was facilitated through the GenerativeNFTs and Art Blocks platforms.

How nonprofits process donations from the NFT community

For nonprofit organisations to receive a direct form of charitable giving from the NFT community, accepting cryptocurrency donations is a must. That’s because NFTs are listed, bought and sold on marketplaces that handle cryptocurrency transactions.

When an NFT is sold, the creator receives a royalty in the form of a cryptocurrency such as Ethereum or Solana. For them to donate a portion (or all) of the proceeds to a nonprofit in cash, they must exchange the cryptocurrency. In the US, this is likely considered a taxable event by the IRS, and the creator would end up with less to donate (to find out more about tax implications of crypto donations in Australia, click here and here).

Solution providers such as The Giving Block make it possible for nonprofits to fundraise from multiple crypto assets, generate tax receipts for donors, and embed a crypto donation widget on their website.

How to launch a successful NFT fundraiser

Full details for the following steps can be found in the report:

Step one: Getting ready
  1. Prepare to accept cryptocurrency donations
  2. Find the right cryptocurrency donation solution provider
  3. Set up your social media presence
Step two: Active engagement 
  1. Connect with the NFT Community
  2. Identify NFT partners
  3. Pick your target audience

Step three: Launch your fundraiser 
  1. Establish a fundraising roadmap
  2. Choose a platform or marketplace
  3. Prepare your communications
  4. Engage and stay connected

What’s next for NFT fundraising and philanthropy

Exponential Growth in NFT Donations

More money invested in the NFT economy means greater opportunities for social impact through charitable donations. The global NFT community’s charitable giving could rise to over US$100 million in crypto donations by the year 2025.

More innovative collaborations

Nonprofits and NFT creators are already fundraising together in exciting ways, from developing art collaboratively to hosting educational webinars and Twitter Spaces. These early collaborations will inspire future partnerships to reach new creative heights, make use of new blockchains and crypto tokens, and take bold new approaches to donor engagement.

An influx of major brands

As NFTs claim more of the cultural spotlight, we will see more CSR efforts with a NFT component. There will be an increase in corporate-sponsored NFT charity auctions, such as the one coordinated by VaynerNFT for Stella Artois and its charity partner Water.org.

Greater community building

As NFT projects grow, they often nurture their fan bases through direct engagement on platforms such as Discord and Twitter. Increasingly, these projects ask their supporters for input on ideas for future projects and charitable giving decisions. Nonprofits active in the NFT space will also be able to find and sustain a following through their connections with projects and creators and by effectively communicating the impact of donations.

“If there’s one word to describe NFT fundraising, it would be ‘limitless’,” says the report. It certainly seems that, when it comes to NFT fundraising, we’ve only just scratched the service.

To access the full report, including in-depth information to help you launch a NFT fundraiser and the case studies of five nonprofits maximising the potential of NFT charitable giving, click here

Click here for more F&P articles about NFT fundraising. 

This news is republished from another source. You can check the original article here.

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