Blockchain first emerged in 2008, after a White Paper penned by Satoshi Nakamoto advocated this form of technology as a way to eliminate the need for a bank to mediate between buyers and sellers.
Charities have been using cryptocurrency or blockchain technology to support with fundraising for several years. The American Red Cross started accepting bitcoin in 2014, UNICEF maintains a crypto fund, and international organisations such as the Rainforest Foundation, the Electronic Frontier Foundation and Save The Children, all accept cryptocurrency as ways for donors to support their mission.
The technology is still gathering momentum: according to Fundraising UK, more than 1,000 non-profit organisations joined the crypto and stock giving platform, The Giving Block, in 2022 – and this included UK charities such as Compassion UK, Animal Free Research UK and Sands.
So what about the arts? Whilst some are accusing the arts of being slow to adopt this new technology, others are highlighting examples of where arts organisations and museums have used cryptocurrency to educate the public, create new revenue streams and engage their audiences. One UK example is the British Museum: in September 2021 the Museum co-produced a collection of c.200 digital postcards to be sold to coincide with the opening of its Hokusai, The Great Picture Book of Everything exhibition. Another example is the Whitworth Art Gallery in Manchester which, in collaboration with Vastari Labs, recently minted William Blake’s The Ancient of Days, raising over £30,000 to support local community organisations.
But what is cryptocurrency, and how does it work? Stephen Dobson, Associate Professor in Creativity and Enterprise at the University of Leeds, explains: “A cryptocurrency is essentially computer code which may be converted into legal tender through transactions recorded on a publicly visible online ledger. This ledger is called a blockchain and all transactions are verified between its users through a process called distributed ledger technology. The first established cryptocurrency was Bitcoin. Initially, it was not widely used, but by 2022, Bitcoin was regarded as the ninth most valuable asset with a market capitalisation of $872.81 billion. There are now many other popular cryptocurrencies such as Ethereum, XRP, Litecoin, Polkadot, Stellar, Binance coin and Doge.”
An NFT or “Non-fungible token” is a type of cryptocurrency that is unique and cannot be replaced by something else, and these primarily exist on the Ethereum blockchain. This is the most common way in which the arts and cultural sector is embracing cryptocurrency – with at least 21 museums and cultural organisations adopting the technology in 2021 and advocates suggesting that NFTs offer a revolution in how digital art is commodified, traded, conserved and consumed in an increasingly digital world.
So, it is clear that cryptocurrency is not entirely new to the arts and cultural sector. However, the data shows that most charities seem to be slow or reticent in adopting this technology for fundraising. According to the Charity Pulse Report 2023, 3% of charities are using crypto for donations and 11% are trialling it – with 50% not even considering adopting it.
For arts organisations that are curious to know how to use this technology to support fundraising, here are some key things that you need to know:
Cryptocurrency eliminates the middleman. The middleman in this context is the bank. The primary benefit of this is that it means no bank or third-party financial firm transaction fees, and cheaper international transactions, as there are no foreign exchange or transfer fees. The downside is that this means that the market is largely unregulated, and the value of assets is highly volatile. Additionally, just like online banking, the cryptocurrency market has also been vulnerable to fraud and/or scams. Unlike online banking, however, the bank is not there to support you if you do become a victim of crime. For these reasons, the Charity Commission recently issued a warning to charities regarding using cryptocurrencies to fundraise.
Organisations and individuals will need to start by becoming fluent with the technology. As a new form of currency, early adopters of the technology will need to spend a bit of time getting to grips with how it works before you can begin to think about accepting donations. The most common way of buying cryptocurrency is via crypto exchange. Anyone who holds cryptocurrency has a public address (this is like your bank account number) and a private key (this is like your banking password). You’ll also need to open a wallet with a wallet provider. These are just a few key points about how to get started, but you’ll also need to think about how to trade or convert crypto tokens, how to convert crypto into hard cash, and the tax implications.
It’s not just about the technology, but also the psychology. Many organisations and individuals feel reticent about adopting this technology, and this will most likely apply to your manager, staff, trustees and donors too. Successful fundraising via cryptocurrency will require fundraising professionals to be familiar with the psychological motivations and barriers to giving. A motivator might be the exclusivity of the NFT, but a barrier might be the risks associated with the technology. Another attractive aspect of the technology for donors is that they are able to track precisely how the charity spends their specific donation (this is all related to the fact that cryptocurrency tokens are unique, identifiable and traceable).
In summary, it’s important to be aware of all the pros and cons before you craft your fundraising proposition, so that you can reassure and incentivise your donors successfully. You may feel that it’s appropriate to test the proposition with trustees to see if they would donate in this way.
Despite the risks and the uncertainty, there is no doubt that cryptocurrency technology offers exciting new fundraising opportunities for arts organisations. Crypto markets are reported to be popular with those who are younger and male, and this demographic may not be engaging with your organisation. Cryptocurrency is a new source of wealth representing a whole new donor community.
This was certainly behind the motivations of the then Development Director, Luke Purser at English Heritage, who partnered with the Giftcoin platform in 2018: “We’re keen to explore innovative ways of engaging with the broadest audience of donors possible, and to build relationships with donors based on trust and transparency – Giftcoin might be one way of helping us to do this.”
For a more detailed overview of how cryptocurrency could be applied to philanthropy, see CAF’s guide, ‘Giving a Bit(coin)’.