Cryptocurrencies and Artificial Intelligence for Nonprofit Organizations
UNTOLD Story Media
Cryptocurrencies and Artificial Intelligence for non-profit Organizations
Non-profit organizations are increasingly turning to cryptocurrency as a new source of income, due to the rising prices of Bitcoin and other cryptocurrencies. But, in addition to potential income, some non-profit organizations can go further and look for ways to become more transparent, ensure stability and provide their donors with tax benefits.
Artificial Intelligence is truly nascent in the nonprofit industry. As Futurus president, Nathan Chappell, notes, “The nonprofit sector is always inherently behind the private sector in technologies. Much of the lag has to do with risk aversion, which stems from being measured on a cost per dollar raised calculation.” There are significant barriers for nonprofits to build their own AI solutions, including cost, resources, and time. The same cannot be said about the technology startup world.
What is a cryptocurrency?
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology — a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.
Non-profit organizations donate hundreds of millions of dollars in cryptocurrency. Why? Due to the strong tax motivation offered to donors who can transfer assets that have risen in value directly, instead of cashing them out first. As in the case of a donation of shares, when transferring a non-profit cryptocurrency organization, you do not need to pay a capital gains tax and you can write off the entire amount of the cryptocurrency donation when someone sells bitcoins and then donates cash proceeds, the amount of the donation is less and, as a result, the tax amount written off is less.
Cryptocurrencies are classified as property by the IRS, just like stocks. This means that cryptocurrency donors don’t pay capital gains tax on the appreciated crypto, so long as they’ve held it for more than a year. The bigger the donations, the bigger the write-offs for the donor. This is particularly relevant given the wild swings in the price of cryptocurrencies.
Marketing and Awareness:
Accepting cryptocurrency donations is not only a fundraising tool but also a marketing opportunity. Cryptocurrency donations create viral content in a way that traditional donations do not. Perhaps this will surprise someone, but in the world, there are 50 million cryptocurrency users, and this number is growing. When Robinhood, a popular stock trading app among millennials, began offering cryptocurrency trading, it attracted millions of new users, and even had to create a registration queue due to excessive demand. On large cryptocurrency exchanges, tens of thousands of new users continue to register daily.
A recent study showed that 18% of millennials own bitcoins. A survey conducted by eToro showed that 43% of millennials trust crypto exchanges more than stock ones. The term Bitcoin is more likely to appear on Google searches than Kim Kardashian or Justin Bieber. With the growth of the cryptocurrency investment trend, cryptocurrency donations will also grow.
In addition to Bitcoin and Ethereum, nonprofits use stablecoins to minimize volatility. Stablecoins are a new class of cryptocurrencies that try to offer price stability by linking to other cryptocurrencies, fiat money, or exchange commodities (such as precious or industrial metals). Thus, users get the benefits of digital currencies without price fluctuations.
A characteristic feature of the largest public blockchains, such as Bitcoin and Ethereum, is their transparency. Cryptocurrencies are the most transparent of all the ever-existing ways of exchanging value. Even the FBI and the Drug Enforcement Administration said they would like criminals to use cryptocurrencies more often, as they are much easier to track. Anyone can view the entire history of the Bitcoin or Ethereum blockchain from the very first transaction.
Non Profit trends:
In the nonprofit industry, future-looking predictions are more targeted. There are a few key areas for AI growth:
Mission-based AI: While a few large players are doing some amazing things with AI-based programs, there is a significant opportunity for mission-based AI technology to expand. Expect to see more programs from other large technology companies, higher education institutions, and foundations.
Donor Categorization: According to the Fundraising Effectiveness Project, donor and revenue retention are in a freefall. An organization’s capability to identify its most effective relationships will be critical in the coming years to address this concerning trend. Tech companies will continue improving AI models to determine the following:
- Giving capacity: How much will someone give?
- Giving propensity: How likely are they to give?
- Donor affinity: Who do donors know?
- Donor matching: How do donors connect with a cause?
- Donor messaging: How do you personalize communication with a donor?
Routine Task Efficiency: AI will improve routine task efficiencies for organizations. Nonprofits have legacy
processes they use because they are familiar. As they have better and more data, roles around routine
efficiency will shift. This could be any of the following:
- Improve recommendations for surfacing under and over-communicated donors
- Data cleansing
- Donor research
- Email templates
AI Access: AI models are still mostly being used by consultants, tech companies, or a few data scientists at large nonprofits. As AI becomes more accessible, for example, low code AI programs, nonprofits will have greater access to basic AI programs to drive value. How interesting would it be to autofill half the fields in every grant form because an AI program auto-populates it?
Greater AI ethics and security focus: Currently, there are only a handful of organizations working on AI ethics, but expect to see a larger surge of nonprofits (especially advocacy for disadvantaged groups) playing a role in shaping the ethical conversation related to AI. Nonprofits are uniquely positioned to have a voice in AI ethics. A related component is AI Security, which will become increasingly necessary as more sensitive donor data is being used to build and deliver AI. “The next 5–10 years will see significant adoption of AI technologies in the nonprofit sector. The low hanging fruit will be around making routine tasks more efficient to allow people to work smarter, not harder.”
Cryptocurrency donations are becoming more common. Donors who own cryptocurrencies quickly switch their support to those non-profit organizations that offer the opportunity to directly donate cryptocurrency.
As was the case with the adoption of credit cards, with each jump in the size of the user base, more and more non-profit organizations are thinking about raising funds in cryptocurrencies. Like artificial intelligence and the Internet of things, cryptocurrencies quickly became one of the leading innovative technologies that give non-profit organizations a competitive advantage.
Trustees of charitable organizations also usually have a low-risk appetite, and blockchain and cryptocurrencies may be perceived as untested technologies.
UNTOLD Story LLC, located in Brooklyn, NY, provides business development, marketing communications, and strategic fund development services primarily for nonprofit organizations.
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