by Mary Emasah
TL;DR: NFTs provide a secure, transparent and tax-efficient way for individuals and businesses to support charity organizations and other humanitarian causes worldwide.
Did you know that some digital creators make far more money auctioning NFTs than other famous living artists? For instance, digital artist Pak’s The Merge and Clock sold for $91.8 million and $52.7 million, respectively. While those figures are exceptional, many people don’t realize the most expensive auctions are for philanthropic causes.
Clock was a fundraiser to build a legal defense for Julian Assange after his controversial imprisonment in May 2019. NFTs have also benefited charities. According to The Giving Block, charities like MSF Australia, Big Green and Pencils of Promise have received NFT donations worth millions.
Hold up … NF-what?
An NFT (non-fungible token) is a unique, irreplaceable physical or digital item.
The US dollar is fungible, for example. You can exchange a $1 note for another $1 note and have the same value. The same goes for Bitcoin. You can exchange one Bitcoin for another and have the same thing, but not with NFTs.
Original artwork, on the other hand (which can be popular and expensive), is non-fungible. The pieces are unique, one of a kind and not interchangeable.
People buy, sell and trade NFTs on NFT marketplaces like OpenSea, Coinbase and Magic Eden. Legacy online auction site eBay even recently announced its acquisition of NFT marketplace KnownOrigin to accelerate its foray into the space.
Why do NFTs appeal to charities and philanthropists?
Charities worldwide leverage NFTs’ popularity to increase awareness of and raise funds for their programs and activities. Cancer charities such as Alex’s Lemonade Stand and Cancer Warriors have publicized auctions of NFT art. At the same time, international crypto exchange Binance launched the platform “NFT for Good” to contribute to sustainable global development. Lesser-known (but impactful) Honey Badges helps fund global charitable initiatives.
Aside from the benefits to charities, NFT donations also allow corporations and individuals to fulfill their social responsibility to help others. For instance, Jack Dorsey, former Twitter CEO, minted an NFT out of his first tweet. Dorsey did it to help low-income families in Africa recover from the COVID-19 pandemic. The NFT sold for $2.9 million.
There are many advantages of individuals and corporate bodies giving valuable NFTs to charities, including the following:
- NFTs provide transparency: Blockchain technology promotes transparency and accountability. Anyone can check the blockchain ledger for transactions made, the time of each transaction, the sender and receiver addresses, and the value of the transaction at the time of execution. This feature makes NFTs ideal for international donations.
- NFTs support borderless donations: As a side benefit of blockchain technology, NFTs allow individuals and enterprises to donate directly to charities and humanitarian activities beyond their geographical locations with minimal restrictions or third parties.
- NFTs are long-term endowments: Philanthropic creators can design their NFT parameters so their preferred nonprofit can earn from the NFT in perpetuity. They can do this by setting a smart contract so that each time someone buys the NFT, a percentage of the profit goes directly to the nonprofit’s digital wallet address.
- NFTs are tax efficient: NFT donors don’t have to pay capital gains tax on their donated NFTs. The receiving charities are also exempt from paying capital gains tax when auctioning the NFT. This way, the charity gets the total value of the donation.
- NFTs are a win-win: While the charity funds its program, the donor or buyer of the NFT gets a social status bump. Everyone can see that they donated or purchased an NFT to give to charity. This social status explains why so many organizations and celebrities choose NFT donations.
I’m interested. How do I make an NFT donation?
Since NFTs function like cryptocurrency (except that you cannot exchange them for each other), you can donate an NFT the way you would donate Bitcoin. A business or individual can make an NFT donation in several ways:
- The perpetual gift route: You can design and mint an NFT or commission a creator to create one. You then set the parameters so that whenever someone buys the NFT, a nonprofit gets a percentage of the profit.
- The onetime gift route: You can purchase or mint an NFT and gift it to the charity by sending it to their crypto wallet address. The nonprofit can then auction the NFT immediately or in the future and use the proceeds to further its cause.
- The onetime proceeds route: You can sell your NFT and send all or part of the proceeds to the charity in cryptocurrency. Jack Dorsey chose this route when he sold his tokenized tweet and used the proceeds to support African families.
NFTs are changing how people donate to charities and humanitarian causes. It is an excellent way for individuals and organizations to give back to the community. Learn more about NFTs, Bitcoin, cryptocurrencies, DAOs and more at Web3 Comms. Sign up for our newsletter to learn more about today’s online innovations faster!