On GivingTuesday, officials at New Jersey-based Sostento healthcare charity learned they would receive a donation of around $ 58,000 by the end of the week.
The donation was unlike anything the nonprofit had received before. It came from the proceeds of the sale of a non-fungible token, or NFT, for a digital artwork titled “The NFT Guild Philanthropist – Healthcare Heroes”.
You’ve probably heard of DTVs. They are built on the same technology that underpins digital currencies like Bitcoin and Ethereum. These digital assets were in the limelight in March 2021 after Mike Winkelman, known by his artist nickname Beeple, auctioned off an NFT for $ 69 million at Christie’s. Think of a DTV as an act or token associated with a digital work of art, such as an image, audio recording, or video. This token can be used to keep track of the provenance of the file and the sales history, allowing someone to prove ownership of the asset.
While the technology was created to give artists more control over their work, NFTs have sparked a frenzy as collectors seek to cash in. As this speculation intensifies, a growing number of charities have started to explore NFT-related fundraising efforts. While some NFT charity auctions have brought in mind-boggling amounts of money, others have had limited success. To complicate matters, NFTs use new technologies that generate many questions for accountants and regulators.
The Guild Philanthropist NFT sold for 6.3 Ethereum, the equivalent of about $ 28,000. The artist made a donation corresponding to the sale price. For Sostento, accepting the donation was quite simple. The organization worked with Giving Block, a nonprofit that helps other charities accept cryptocurrency, to convert the crypto to US dollars. The NFT will also continue to benefit charities in the future. It was created with a provision that requires the proceeds from future sales to be donated to charity.
But there is still a steep learning curve associated with NFTs and cryptocurrency, said Joe Agoada, CEO of Sostento, which develops software and communications products for the healthcare industry. Accountants advising Sostento have cautioned against directly accepting NFTs and other cryptocurrencies. It was crucial to work with a middleman to convert the DTV product from ones and zeros to dollars and cents.
âIt took a long time to figure out how we could actually make this possible,â Agoada said.
Sostento wasn’t the only group to see a bargain from these new tokens last week. Giving Block officials said they helped process around $ 1 million in charitable donations on GivingTuesday from the proceeds of the NFT auctions. And on December 7, Giving Block will launch the inaugural NFTuesday, a day focused on promoting NFT-derived philanthropy.
Some nonprofits have joined the fray with the NFT to reach a wider audience.
In July, officials at Save the Chimps, a chimpanzee shelter in Fort Pierce, Fla., Scanned finger paintings made by three of its residents: Cheetah, Clay and Tootie. From these analyzes, they created a series of NFTs and auctioned them on Truesy, an NFT marketplace. Think of them as prints from a photograph. They have been appraised for sale at an equivalent value of around $ 25. Save the Chimps has set up its NFT to provide a royalty to the charity in the event of future sales. The fundraising loot so far? Just a few hundred dollars.
âWhat’s exciting is that they were all first-time donors,â said Sara Halpert, group marketing director.
This is the attraction of many charities that have started to venture into the world of NFTs and, more broadly, cryptocurrency. These collectors and investors could be a valuable new audience for fundraisers, said Pat Duffy, CEO of Giving Block. They tend to be wealthier-than-average young donors, financially savvy, and very active online.
âThese are people that a major gifts agent should hook up with and talk to,â Duffy said.
It is less common for donors to give NFTs directly to nonprofits, but so too.
Earlier this year, entrepreneur Eduardo Burillo donated an NFT titled “CryptoPunk 5293” to the Institute of Contemporary Art in Miami. The artwork, part of a 10,000-piece series, depicts the pixelated avatar of a person sporting a short haircut, pink lipstick, and a Mona-Lisa-like expression. As of Thanksgiving, the average selling price of a CryptoPunk was just under $ 500,000.
While NFTs may seem new as an instrument of philanthropy, token assets are similar to other ephemeral art forms, such as performance art, video art, or art installations, said Alex Gartenfeld, artistic director of ICA Miami.
The case of ICA Miami is unique, at least so far. No other museum has yet accepted NDT in its collections.
The biggest challenge for nonprofits – especially those that want to own an NFT as an asset – is that existing accounting rules don’t really address NFTs, says Brian Mittendorf, professor of accounting at Ohio State University which focuses on nonprofit organizations. The NFT is technically different from the work of art itself, which raises stubborn questions about what is and is not valued, or even what could be considered part of a museum’s collection. .
âIt captures both the challenges of charities entering the cryptocurrency arena and the challenges of charities seeking to raise funds on hard-to-value items,â Mittendorf said. âThere are only open questions from an accounting point of view.
Regulators, including the Securities and Exchange Commission, are starting to consider how and when to treat NFTs as collectibles or securities. The eventual outcome of these decisions could have ramifications for charitable accounting offices.
Charities are also experimenting with NFT-based fundraising in a way that goes beyond the realm of digital art.
Environmental group Beneath the Waves, which focuses on ocean conservation, is auctioning dozens of NFTs that each represent an actual shark tag, with starting prices ranging from $ 500 to $ 20,000. Owners have the right to name their tagged shark and will receive updates on its movements in the oceans. One of the NFTs authorizes the owner to participate in the group’s marine research efforts in the Caribbean. The auction closed at $ 23,000.
Rewilder.xyz, a new organization, uses NFT auctions to raise funds to purchase land for reforestation efforts in the Amazon. For each donor who donates a minimum of 1 Ethereum, equivalent to approximately $ 4,400, the group will create an NFT allowing the owner to receive periodic updates on the land they helped purchase. So far, the effort has raised almost 60 Ethereum, equivalent to around $ 241,700 at the time of writing.
âBasically you buy a photo of the land,â said Robbie Heeger, CEO of Endament, a charity that sponsors donor-advised funds built on the Ethereum blockchain and helps other organizations accept crypto giveaways. . Endaoment helped Rewilder establish the campaign.
âIt’s another way to engage your donor community in a sense of ownership and ownership of the work that takes place in the nonprofit,â Heeger said.
Save the Chimps had environmental concerns regarding fundraising with the NFTs. The computer process for keeping records of crypto transactions consumes a lot of energy. These concerns have led some organizations to reconsider accepting digital currencies as gifts. Earlier this year, Greenpeace announced it would stop receiving donations from Bitcoin, for example.
Save the Chimps chose to list its NFTs on Truesy, which trades on Tezos, a digital currency network that uses a less power-consuming process than Ethereum to perform the complex calculations needed to prove ownership and provenance of a digital asset. In other words: these NFTs are greener than average.
The charity remains interested in the future of NFTs and their usefulness for philanthropy, spokesperson Seth Adam said. Whether that means showcasing NFTs in its annual auction or collaborating with other artists, he said, “We are always looking for new NFT opportunities.”
This article was provided to The Associated Press by the Chronicle of Philanthropy. Michael Theis is a writer for The Chronicle. Email: [email protected] The AP and The Chronicle receive support from the Lilly Endowment for coverage of philanthropy and nonprofit organizations. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropic coverage, visit https://apnews.com/hub/philanthropy.
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