Cryptocurrency is a source of undiscovered revenue for many associations, but allowing it into your organization could cause members and the public to turn against you. Before getting into the crypto space, there are some things you should know. Cryptocurrency has become very popular.
The total market cap was still over $1 trillion as of late May, even after a few rough months. Cryptocurrency donations have also been going up steadily. The Giving Block, a platform for making crypto donations, says that the number of donations went up 1,558 percent from 2020 to 2021. Paul Lamb, the principal consultant at Man on a Mission Consulting, said that crypto philanthropy is here to remain and will keep increasing.
Still, cryptocurrency has its detractors, and groups like the Wikimedia Foundation are facing calls from society to stop accepting cryptocurrency donations, mostly because of how they affect the environment. Because of this, your group might be hesitant to let them in. So, what should users know before deciding whether to take cryptocurrency donations? Think about what Lamb says here.
How Crypto affects nature
One of the most common complaints about cryptocurrency is that it hurts the environment. Some coins, like Bitcoin, can take a lot of energy to mine: In the U.S., in 2020, nearly 40 billion tons of carbon dioxide were made by mining Bitcoin. And the Cambridge Bitcoin Electricity Consumption Index says that Bitcoin uses about 136,38 terawatt-hours of electricity yearly, which is more than the Netherlands or Argentina.
Undoubtedly, some currencies, like Bitcoin, use a lot of electricity. But when talking about energy use at that level, Lamb said, you also have to think about your carbon footprint. He pointed out that Bitcoin uses renewable energy. Estimates about how much Bitcoin uses renewable energy range from 40% to 75%.
Finding eco-friendly alternatives
Lamb talks about alternatives to Bitcoin, some of which are much better for the environment. How transactions are verified makes a difference in how well they work: Bitcoin uses a “proof of work” system to verify transactions. This means that a block on the blockchain is only considered valid if it took a certain amount of computing power to make it. For this system to work, miners have to compete to be the first to solve math puzzles.
This makes it hard for anyone to cheat the system. On the contrary hand, the well-known coin Cardano verifies transactions using proof of stake. This method doesn’t require validators to solve complicated equations, so it’s better for the environment. If you want to get into Crypto but are worried about how it will affect the environment, you could ask donors to give you money using currencies like Cardano.
Be ready for resistance.
Crypto is also criticized for its legitimacy, usefulness, and value in and of itself. There are also worries about its volatility and the idea that it’s usually used for bad things, so the government can’t keep track of criminal activity. Lamb said that we hear about how Crypto is being used in the news, or at least about some of the big things that have made Crypto look bad.
That’s not something a group would want to be linked to. A lot of people use cryptocurrencies like Bitcoin. Big companies like Tesla are now using Bitcoin, and the government and financial institutions are looking for ways to use it.
Cryptocurrency Donations: How taxes are handled
Cryptocurrency is processed as property for tax purposes, which is good for people who want to donate it because they won’t have to pay capital gains taxes on it. On the other hand, running your association may become a bit harder. Lamb said that tax reporting could be hard, depending on how you accept cryptocurrency donations.
On the other hand, running your association may become a bit harder. Lamb said that tax reporting could be hard, depending on how you accept cryptocurrency donations. But if you make a crypto wallet where donors can send cryptocurrency directly, you own it and need to notify this activity.
A Group of New Donors
People are concerned about certain aspects of cryptocurrency, but if your organization is willing to take cryptocurrency donations, you may be able to get more people to contribute to it. This could mean additional financial support to assist you in achieving your objective. Ask yourself, Is this good for my members? It should be the first thing you do before doing anything else.
If most of your contributors and members are of a certain age or have less experience with technology, this choice might not appeal to them. Even if many cryptocurrency holders are young, Lamb believes that taking cryptocurrency donations is a fantastic way to interact with younger people.