Blockchain & Cryptocurrency: How Can a Charity Benefit from the Blockchain

Blockchain & Cryptocurrency: How Can a Charity Benefit from the Blockchain?

The blockchain is a revolutionary new technology that I like to compare to the internet before anyone knew what the internet was. If you’re reading this then you already know more than 99% of the public. The best known use of the blockchain is Bitcoin and other alt-coins, such as Ripple, Litecoin and Ethereum. However, the blockchain technology has far wider implications than that. I decided to dig into the internet and look for ways it could be used by a non-profit. After all, I will be applying for a nonprofit director position soon and wanted to throw ideas at them of new directions that will either land me the job or be the reason they pass me up. I'm not an expert. I'm simply a cryptocurrency enthusiast.

Here is a short list of ways the nonprofit sector could utilize the Blockchain:

Fundraising
-Make Donations Ultra-Transparent
-Record All Non-Profit Donated Assets
-Bring in Revenue via the Internet of Things.
-Track Community Efficiency via the Internet of Things
-Track all Financial Expenditures
-Make it Easier to Enforce Rules for Regulators

Fundraising

Currently ICOs or Initial Coin Offerings are taking the cryptocurrency world by storm. Companies are raising millions by simply offering a utility token up for sale and trade
It could make all donations radically transparent. Presently, you can trace bitcoin entirely through the blockchain and to its wallet. This results in a radical transparency so people can see where the money is at any given time. This could create trust in charities. However, it may create more questions from donors on what their money is being spent on.

If a charity created a community token that had value within the community or network of friends those friends can later redeem those tokens for a dollar amount via an exchange or company website at the market rate. They may also buy things from a marketplace with them. Websites like the CoinFactory

Make Donations Ultra-Transparent

The blockchain was created to be open and transparent. It’s a log of information such as a county recorders record book would be. Software can be developed to track every donation that comes in until it is spent. Additionally, an asset can be tracked via the blockchain.

Record all Non-Profit Donated Assets

All assets can be recorded on the blockchain, like intellectual property and copyrights. This means that the range of assets that can be donated will get much bigger. It could become the framework of Internet of Things (IoT).

The Internet of Things

The internet of things is the idea that smart objects are all linked together via the internet or in this case the blockchain and can communicate with each other through artificial intelligence. Some of these smart objects are going to be able to manage their own capacity and generate their own revenue by selling their use or notify you when they need to be serviced. This may create a new class of robot donors. If a charity owns the robots they can keep the revenue. One example of such a system is a smart car that drives itself, owns itself and pays for itself by picking up customers. Excess revenue can go anywhere you want it to.

Another example:

I live in a very rural area. The roads are often iced covered in the winter and it may be a day or two before they are cleared by a snow plow. If other cars are connected to the IoT they could send a message to the network that the roads are icy. Your car could potentially receive the message and advise you to travel a different route to your destination. Additionally, your coffee pot could recognize that your alarm clock is set for 6 AM and begin making coffee for you at 5:30 AM.

A smart community on the IoT could analyze its energy usage and garbage disposal and notify you that things need to change to improve efficiency. This is beneficial for communities trying to become self-sustaining.

Track All Financial Expenditures

The blockchain in its origin is a log. You could manage your expenditures via the blockchain for transparent expenditure reports for your donors to create trust, thus increasing your donor base because you’re trust worthy. You may no-longer need audited financial reports. Too much transparency? Yeah, I know. Imagine if it wasn’t!

Make it Easier to Enforce Rules for Regulators

The blockchain can make it easier to enforce rules by regulators. Currently someone or a body like the government sets the rules, then monitor them, and finally go out and punish them if the rules are broken. If charities existed on the blockchain those rules could become smart contracts which govern the way an organizations work. Efficiency of enforcing rules would be next to free.

There are some concerns that charities may have when owning cryptocurrencies. Questions arise involving taxes and how to handle this new asset. That’s exactly how the IRS views cryptocurrency. It’s property. Report it as such.

Here is a snippet from the IRS website.

How does the IRS view Cryptocurrency?

The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

You can find this information here: https://www.irs.gov/newsroom/irs-virtual-currency-guidance

Does a 501(c)3
have to report investment profits to the IRS?

With the creation of tokens or coins in the new cryptocurrency space that hold a changing value, one can make a profit or lose money by possessing coins or tokens from the blockchain.

Organizations under Section 501(c)(3) of the Internal Revenue Code are generally exempt from most forms of federal income tax, which includes income and capital gains tax on stock dividends and gains on sales. As long as the 501(c)(3) corporation maintains its eligibility as a tax-exempt organization, it will not have to pay tax on any profits.

You can find information here: https://www.irs.gov/charities-non-profits/private-foundations/tax-on-net-investment-income-capital-gains-and-losses

I hope I helped. Your imagination is the only limitation when I comes to how your charity can use the blockchain.

If you have more ideas please share them in the comments and