Just like with regular fiat donations, cryptocurrency can be used to help a charitable cause, further a political movement, and support your favorite digital creator or business. Since cryptocurrency is still in the process of achieving solid legal standing as an asset, there are some nuances that come with crypto donations. Let’s discuss the differences between crypto and fiat donations, the advantages and disadvantages of crypto donations, and how you can start accepting donations in cryptocurrency.
- Crypto donations are pro bono monetary contributions made through blockchain
- The disadvantages of accepting donations in crypto are high volatility and a learning curve when starting out.
- The advantages of crypto donations over fiat include higher reliability and privacy, faster transactions, and lower fees.
What are crypto donations?
Cryptocurrency donations are voluntary contributions to a certain entity, cause, or individual made through blockchain in the form of cryptocurrency. Since cryptocurrency is digital money, all crypto donations are monetary.
Just within the past year, crypto donations have evolved from a rapidly growing but overlooked trend to the breaking news in the industry. In 2021, cryptocurrency experienced a massive increase in terms of all donation-related indicators. Donation amounts increased by 236% year over year to $10,455, and donation volumes increased by 1,558% to $69,644,535.
This data demonstrates that cryptocurrency donors are not only larger in number but also more generous than those who make donations in fiat money. 45% of cryptocurrency donors donated more than $1,000 to charity, compared to 33% of donors using fiat money. The average donation made in cryptocurrencies was staggeringly 82 times higher than the average donation made in fiat money: $10,455 as opposed to $128 in fiat.
Pros and cons of crypto donations
There are several factors that need to be considered when deciding to start accepting or giving crypto donations. Let’s discuss the advantages and disadvantages of using cryptocurrency to donate.
- The main advantage of using blockchain technology for payments is its reliability. A blockchain network is resistant to disruption because it’s designed to operate with the involvement of all parts but autonomously. This means that if one operating part goes offline, the entire system can continue functioning without any issues.
- After confirmation and completion, each block of transactions cannot be changed or undone, making all payments irreversible in addition to being recorded on the shared network.
- Crypto donations are private, there is no requirement for any donors to provide personal information or reveal their identity.
- Crypto donations allow projects to reach an entirely new demographic of donors. The majority of crypto holders are young (72% are aged under 34) educated (71% have higher education) men (63%). This is a group that’s traditionally tough to reach and has previously not been in the financial position to contribute as much as they can now.
- Donating crypto can be a tax-friendly way to give. For example, the IRS considers crypto to be a property for tax purposes, so crypto donations are treated similarly to stock. As a result, crypto donors often aren’t responsible for paying capital gains taxes on their donations while still being able to write them off as charitable contributions.
- Because of the high volatility of the cryptocurrency market, using some coins, like Bitcoin, could cause the donation to lose value quickly. However, some projects take advantage of the volatility by holding onto the coins until they appreciate in value. Also, there are stablecoins which have their value pegged to fiat currencies like the U.S. dollar.
- Cryptocurrency transactions are not easy to account for, tax, or report due to a lack of knowledge or experience. There is definitely a learning curve that should be anticipated when starting to deal with cryptocurrency.
Fiat donations vs. crypto donations
|Crypto donations||Built-in||Transactions can be completed within seconds.||Low or no fees, depending on the currency||All transactions are recorded on the shared network and can’t be reversed|
|Fiat donations||Not guaranteed||Deposit of funds can take 1 to 5 business days||Banking fees 2.2 to 7.5% per donation||Neither donor not receiver can guarantee the donation transaction is real and complete, bank chargeback is possible|
As can be seen from this table, crypto donations are superior when it comes to the important factors for both donors and receivers. They have the technology to keep the transactions private while still ensuring integrity, and they can be instant and free, which is almost impossible with fiat transactions.
How to accept crypto donations with NOWPayments?
To start benefiting from all of the advantages of using crypto to receive donations, pick a currency and create a wallet to hold your funds. Go to the NOWPayments website, where you can easily create an account using your email and wallet addresses.
Once your account is created, you can start using the donation tools. These include:
- Donation widgets that allow you to input your API key into the code snippet and embed the code into your website to receive donations.
- Donation buttons which are codes that can be easily added to your website, blog, forum signature.
- Donation links for when code doesn’t work. These can be shared with individuals anywhere including social media.
NOWPayments is also offering custom solutions if none of these options are suitable.
To use one of these tools, for example, creating a donation link, follow these steps:
- Go to your account dashboard.
- In the menu on the left, open Payment tools and choose Donations.
- Customize your link by picking a name and inputting it in the top field. Choose which fields are shown or required from the donor to make the donation or select none. That’s it! Your link is functional and ready to be used.
- Choose from 150+ available cryptocurrencies and enjoy automatic conversion to convert the donations into the coin of your choice. The service is non-custodial which means NOWPayments doesn’t hold your funds but just deposits them straight into your wallet.
Crypto donations are a new and thrilling fundraising avenue for many organizations. The crypto community is in a position to have a significant influence because there are more than 220 million users of cryptocurrencies worldwide and many of the currencies are constantly increasing in value. For donors, using crypto is one of the most tax-efficient ways to support causes that matter to them. Due to the intrinsic qualities of blockchain technology, it has huge fundraising potential that will only continue to grow as more people get involved.