GIVING IN THE DIGITAL AGE: WHAT CAN BITCOIN TELL US ABOUT FUTURE-PROOFING CHARITY?

4 November 2013

It was reported this week that a Norwegian man who bought $27 of the online currency bitcoin in 2009 and forgot about it until this year was shocked to find that his holding was now worth $886,000. This is just the latest in a series of stories about the increasingly high-profile peer-to-peer (P2P) currency, and set me to thinking whether there are any implications of the rise of bitcoin for charitable giving.

Bitcoins are an anonymous, decentralised, P2P electronic currency. Understanding what this actually means is not all that easy (I spent four years studying maths at university, and I struggled) but it is definitely fascinating, and if cryptography or computing floats your boat, then I heartily recommend reading this very interesting FAQ. For the purposes of this blog, however, it doesn’t really matter exactly what bitcoins are, only that they have become popular enough to gain some mainstream attention.

This is certainly true: following a flurry of reports in April this year that the end of bitcoin was nigh following the closure of the online illegal marketplace Silk Road, which saw the price of a bitcoin slump from $266 to $50, there have been more positive developments. The price of a bitcoin has recently bounced back to $197, and acceptance into the mainstream continues to grow: a coffee shop in Canada recently launched the first ever bitcoin ATM and it was reported over the summer that a pub in Hackney, London has become the first pub in Britain to accept bitcoins as payment. (This pub is incidentally one of my locals, although I have yet to use my bitcoin wallet to buy a round of drinks, I’m afraid…)

Okay, so bitcoins are an actual thing. What, if anything, does this mean for charities? I should say at this point, for anyone who harbours scepticism about speculation on how faddy new technological developments might affect charitable giving, that I definitely hear you. I have a healthy dose of that scepticism myself, and I’m aware that this blog could look about as naive in a year’s time as a treatise on why owning a tamagotchi increases people’s likelihood to volunteer. With that note of caution in mind, I still think it is worth thinking these things through and trying to stay ahead of the curve (even if the curve actually ends up bending in a different direction).

The first thing to say is that if your immediate thought was “wow- I should try to think of a way to allow people to give bitcoins to charity”, then someone else has already beaten you to it. The Bit Give Foundation was launched in the US earlier this year to “accept charitable donations from the bitcoin community and provide charitable gifts to environmental and public health causes worldwide.” We can’t really draw any conclusions at this point about how successful this might prove to be, as the foundation has only been in existence for about three months and hasn’t even been granted its 501(c)(3) tax-exempt status yet (basically the US equivalent of charitable status). However, there are some interesting lessons we can draw from the operating model of the foundation.

The main thing to notice is that what is not on offer here is a way for individuals to give bitcoins directly to charities of their choosing. Rather, donors give to a central organisation (i.e. the foundation) which then makes onward grants of its own choosing. This makes sense in the case of bitcoin, because one of the limitations of the currency is that it relies on both payer and payee being members of the bitcoin community. Whilst it is perfectly possibly for charities to join this community, very few of them have so far, and it is understandable that most organisations would be hesitant about putting resources towards getting involved in a new technology that is still relatively untested and where the possibility of raising donations is speculative at best.

This will almost certainly be the case whenever a new technology of this sort arises: charities are unlikely to be amongst the early adopters unless their charitable aims are such that it makes sense for them to do so (for instance the Free Software Foundation is among the handful of US nonprofits that currently accept bitcoin donations). However, those in the early adopter community can play a role in making the technology relevant to charities by setting up an intermediary that can translate giving using the new technology into more traditional donations.

The model used by the Bit Give Foundation is comparable to that used by some “round-to-the-pound” or “electronic change” initiatives such as the Pennies Foundation, which allow people to make micro donations to charity whenever they make a payment at specified outlets. Allowing every individual to choose the exact charity they want and effectively channeling each micro donation to that charity would be almost impossible due to the requirements it would place on the payment mechanism and on the recipient charity in order to be able to accept such payments. Instead, the Pennies Foundation aggregates all the micro donations made by individuals and apportions these to a range of specified charities. So the donor is only able to make a general gift to charity rather than to a specific charity.

This loss of donor choice is a feature common to other new, technologically-enabled methods of giving too. For instance ATM giving, where individuals are given the opportunity to make donations as one of the functions when using an ATM. Obviously it would be impossible to using existing ATMs to enable donors to have free choice of charities. Instead, they are offered a short list of organisations or appeals from which they can pick. So there is some element of choice, but in an extremely limited form.

It is not a problem if  donors’ ability to choose is limited at first when using a new form of giving. This is, in fact,  a likely consequence of the standard split between early adopters and followers which characterises the emergence of any new technology. What is crucial is that those donors are still able to choose to use other methods of giving so that their freedom to give to any charity they choose is not impinged.

The problem will come if a technology become so ubiquitous that charities or donors that aren’t able to participate are left behind, or if it necessitates the ongoing presence of intermediaries which make all the decisions about where donations go, so that choice is taken out of the hands of the donor. The ability to exercise choice is an important element of charitable giving, and something that we must take care to protect as new forms of technology emerge and present new opportunities for social action.