{"id":404067,"date":"2022-02-07T17:41:37","date_gmt":"2022-02-07T14:41:37","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/"},"modified":"2022-10-05T13:20:28","modified_gmt":"2022-10-05T10:20:28","slug":"cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/","title":{"rendered":"#Cryptocurrency-funded DAOs running charities isn\u2019t as bad as it sounds"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a35c4dc3e4ed\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a35c4dc3e4ed\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/#Cryptocurrency-funded_DAOs_running_charities_isnt_as_bad_as_it_sounds\" >Cryptocurrency-funded DAOs running charities isn\u2019t as bad as it sounds<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/#New_terrain\" >New terrain<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/#Legal_questions\" >Legal questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds\/#Wild_rides\" >Wild rides<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"Cryptocurrency-funded_DAOs_running_charities_isnt_as_bad_as_it_sounds\"><\/span><strong>Cryptocurrency-funded DAOs running charities isn\u2019t as bad as it sounds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div>\n<p><a href=\"https:\/\/www.politico.com\/news\/2022\/01\/31\/crypto-wyoming-arizona-tax-payments-00003910\" target=\"_blank\" rel=\"nofollow noopener\">Cryptocurrency<\/a>\u00a0is becoming a\u00a0<a href=\"https:\/\/techcrunch.com\/2022\/01\/07\/regulating-crypto-could-create-american-super-apps\/\" target=\"_blank\" rel=\"nofollow noopener\">more familiar way to pay for things<\/a>.<\/p>\n<p>One option is as part of a crowd, through a\u00a0<a href=\"https:\/\/www.investopedia.com\/tech\/what-dao\/\" target=\"_blank\" rel=\"nofollow noopener\">decentralized autonomous organization<\/a>. In this relatively new kind of group, also called a DAO, decisions and choices are governed by holders of one kind of cryptocurrency token, such as Ethereum or Bitcoin. DAOs also use \u201c<a href=\"https:\/\/www.coindesk.com\/learn\/what-is-a-dao\/\" target=\"_blank\" rel=\"nofollow noopener\">smart contracts<\/a>\u201d that make decisions through online votes by all participants who wish to weigh in and other forms of automation.<\/p>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" title=\"Future of Finance | Big Tech vs Big Banks Video\" src=\"https:\/\/fast.wistia.net\/embed\/iframe\/2767e997um?dnt=1#?secret=Rszn4Co5R4\" data-secret=\"Rszn4Co5R4\" frameborder=\"0\" scrolling=\"no\" width=\"640\" height=\"360\"><\/iframe><\/p>\n<p>DAOs are essentially clubs that harness both crowdfunding and cryptocurrency to operate in arenas from\u00a0<a href=\"https:\/\/decrypt.co\/88894\/11-most-interesting-daos-of-2021\" target=\"_blank\" rel=\"nofollow noopener\">art to sports<\/a>. They are also cropping up in\u00a0<a href=\"https:\/\/medium.com\/@chriswjnr\/a-charity-dao-structure-226e7dc9aaf6\" target=\"_blank\" rel=\"nofollow noopener\">philanthropy<\/a>.<\/p>\n<p>One good example is the\u00a0<a href=\"https:\/\/dao.biggreen.org\/\" target=\"_blank\" rel=\"nofollow noopener\">Big Green DAO<\/a>. Launched in late 2021, it\u2019s tied to a\u00a0<a href=\"https:\/\/projects.propublica.org\/nonprofits\/organizations\/275083595\" target=\"_blank\" rel=\"nofollow noopener\">decade-old<\/a>\u00a0food justice charity that had revenue in excess of US$9 million in 2019.<\/p>\n<p>Big Green\u2019s founder is\u00a0<a href=\"https:\/\/www.coindesk.com\/tech\/2021\/11\/30\/kimbal-musks-big-green-dao-is-a-big-step-for-web-3\/\" target=\"_blank\" rel=\"nofollow noopener\">Kimbal Musk<\/a>, who is Elon Musk\u2019s brother and a member of Tesla\u2019s board. The DAO version of his nonprofit promises to \u201c<a href=\"https:\/\/dao.biggreen.org\/\" target=\"_blank\" rel=\"nofollow noopener\">disrupt philanthropic hierarchies<\/a>\u201d by reducing\u00a0<a href=\"https:\/\/theconversation.com\/nonprofits-that-scrimp-on-overhead-arent-necessarily-better-than-those-spending-more-111700\" target=\"_blank\" rel=\"nofollow noopener\">overhead spending<\/a>\u00a0and shaving other expenses.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"New_terrain\"><\/span>New terrain<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Based on my\u00a0<a href=\"https:\/\/scholar.google.com\/citations?hl=en&amp;user=UsFwZekAAAAJ\" target=\"_blank\" rel=\"nofollow noopener\">research regarding crypto-assets<\/a>, I believe that there are\u00a0<a href=\"https:\/\/medium.com\/@chriswjnr\/a-charity-dao-structure-226e7dc9aaf6\" target=\"_blank\" rel=\"nofollow noopener\">several considerations<\/a>\u00a0that donors and charities should keep in mind as these arrangements emerge.<\/p>\n<p>First, DAOs have little if any formal infrastructure. Some states simply require one individual to be designated as the agent of record.\u00a0<a href=\"https:\/\/www.wyoleg.gov\/2021\/Introduced\/SF0038.pdf\" target=\"_blank\" rel=\"nofollow noopener\">Wyoming passed a law in 2021<\/a>\u00a0\u2013 the first of its kind in the United States \u2013 that legally recognizes DAOs as legal entities. It still requires the DAO to be organized as a Wyoming-based\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/l\/llc.asp\" target=\"_blank\" rel=\"nofollow noopener\">limited liability company<\/a>, with an individual identified as the registered agent.<\/p>\n<p><a href=\"https:\/\/www.coindesk.com\/tech\/2021\/11\/30\/kimbal-musks-big-green-dao-is-a-big-step-for-web-3\/\" target=\"_blank\" rel=\"nofollow noopener\">In theory<\/a>, at least, when combined with the quick nature of how DAO decisions are made, this means that nonprofits can achieve more and respond more quickly to changing circumstances, while spending less on administrative staff and other kinds of overhead.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Legal_questions\"><\/span>Legal questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Until now, most\u00a0<a href=\"https:\/\/www.charitynavigator.org\/index.cfm?bay=content.view&amp;cpid=6540\" target=\"_blank\" rel=\"nofollow noopener\">cryptocurrency donations to charities<\/a>\u00a0simply\u00a0<a href=\"https:\/\/www.cnbc.com\/2021\/12\/24\/what-to-know-about-making-cryptocurrency-donations-to-charity.html\" target=\"_blank\" rel=\"nofollow noopener\">provided capital to eligible organizations<\/a>\u00a0that operate like any other standard nonprofit.<\/p>\n<p>For tax purposes,\u00a0<a href=\"https:\/\/thegivingblock.com\/resources\/faq\/?\" target=\"_blank\" rel=\"nofollow noopener\">donating cryptocurrency<\/a>\u00a0is like giving away stocks, bonds or other property, rather than donating money. This means, typically, that cryptocurrency donations actually provide donors with a\u00a0<a href=\"https:\/\/theconversation.com\/how-elon-musk-can-save-big-on-taxes-by-giving-away-a-ton-of-his-tesla-stock-172036\" target=\"_blank\" rel=\"nofollow noopener\">larger tax benefit<\/a>\u00a0versus cash donations. If a donor were to instead liquidate their cryptocurrency prior to making a gift, they would first have to pay\u00a0<a href=\"https:\/\/taxbit.com\/blog\/understanding-the-cryptocurrency-tax-rate\" target=\"_blank\" rel=\"nofollow noopener\">capital gains taxes<\/a>, and they would have less money to give away.<\/p>\n<p>However,\u00a0<a href=\"https:\/\/www.zenledger.io\/blog\/what-is-a-dao\" target=\"_blank\" rel=\"nofollow noopener\">it\u2019s unclear<\/a>\u00a0<a href=\"https:\/\/nonprofitlawblog.com\/dao-what-is-it-what-does-it-mean-for-nonprofits\/\" target=\"_blank\" rel=\"nofollow noopener\">whether funds can legally<\/a>\u00a0flow to, through and out of a charitable decentralized autonomous organization.<\/p>\n<p>Nonprofits are subject to regulatory enforcement and need to be chartered in a particular state. So far, it\u2019s unclear how regulators, such as the\u00a0<a href=\"https:\/\/www.irs.gov\/charities-and-nonprofits\" target=\"_blank\" rel=\"nofollow noopener\">Internal Revenue Service<\/a>\u00a0or\u00a0<a href=\"https:\/\/www.irs.gov\/charities-non-profits\/state-links\" target=\"_blank\" rel=\"nofollow noopener\">state charity offices<\/a>, will be able to monitor or audit these groups.<\/p>\n<p>It\u2019s also unclear whether the very nature of DAOs is compatible with charitable donations.<\/p>\n<p>In most, if not all, instances of for-profit DAOs \u2013 or even DAOs organized for a specific one-time purpose, such as\u00a0<a href=\"https:\/\/www.constitutiondao.com\/\" target=\"_blank\" rel=\"nofollow noopener\">attempting to purchase an original copy of the U.S. Constitution<\/a>\u00a0\u2013 cash or <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>reciated property that is contributed to the organization is exchanged for\u00a0<a href=\"https:\/\/www.coindesk.com\/learn\/what-is-a-governance-token\/\" target=\"_blank\" rel=\"nofollow noopener\">governance tokens<\/a>. The tokens essentially represent a fractional form of collective ownership.<\/p>\n<p>This could be problematic. When donors make charitable contributions, they relinquish the money or asset they just gave to the charity. A\u00a0<a href=\"https:\/\/www.pgdc.com\/pgdc\/story\/rev-rul-86-63\" target=\"_blank\" rel=\"nofollow noopener\">basic condition<\/a>\u00a0for having a donation be eligible for favorable tax treatment by the authorities is that the\u00a0<a href=\"https:\/\/www.charitynavigator.org\/index.cfm?bay=content.view&amp;cpid=31\" target=\"_blank\" rel=\"nofollow noopener\">donor gets nothing of value in return<\/a>.<\/p>\n<p>The authorities may eventually determine that the distribution of virtual tokens to donors, even if those tokens aren\u2019t used for anything outside the scope of the nonprofit, violates this precondition.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Wild_rides\"><\/span>Wild rides<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The clearest risk with those gifts is probably their volatility.<\/p>\n<p>Overall, the cryptocurrency\u2019s total market value sank to\u00a0<a href=\"https:\/\/www.tradingview.com\/markets\/cryptocurrencies\/global-charts\/\" target=\"_blank\" rel=\"nofollow noopener\">$1.6 trillion on Feb. 3, 2022<\/a>, down from $2.85 trillion three months earlier.<\/p>\n<p><iframe loading=\"lazy\" id=\"9Inzv\" class=\"tc-infographic-datawrapper\" style=\"border: none;\" src=\"https:\/\/datawrapper.dwcdn.net\/9Inzv\/1\/\" width=\"100%\" height=\"400px\" frameborder=\"0\"><\/iframe><\/p>\n<p>Charities either need to convert these donations into U.S. dollars right away, <a href=\"https:\/\/www.cfoselections.com\/perspective\/accounting-and-reporting-for-stock-gift-donations-to-nonprofits\" target=\"_blank\" rel=\"nofollow noopener\">as they do with donated stocks<\/a>, or gamble regarding their future value.<\/p>\n<p>Despite all the operational, financial and legal obstacles nonprofit DAOs face, I\u2019m excited about the opportunities with these crowd-managed charities funded by cryptocurrency donations because of their potential for a high degree of transparency paired with low overhead.<\/p>\n<p>[<em>Get the best of The Conversation, every weekend.<\/em> <a href=\"https:\/\/memberservices.theconversation.com\/newsletters\/?nl=weekly&amp;source=inline-weeklybest\" target=\"_blank\" rel=\"nofollow noopener\">Sign up for our weekly newsletter<\/a>.]<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img loading=\"lazy\" decoding=\"async\" class=\"js-lazy\" style=\"border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;\" src=\"https:\/\/counter.theconversation.com\/content\/174763\/count.gif?distributor=republish-lightbox-basic\" alt=\"The Conversation\" width=\"1\" height=\"1\" \/><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https:\/\/theconversation.com\/republishing-guidelines --><\/p>\n<p><em>This article by <a href=\"https:\/\/theconversation.com\/profiles\/sean-stein-smith-493423\" target=\"_blank\" rel=\"nofollow noopener\">Sean Stein Smith<\/a>, Assistant Professor of Economics and Business, <a href=\"https:\/\/theconversation.com\/institutions\/lehman-college-cuny-3494\" target=\"_blank\" rel=\"nofollow noopener\">Lehman College, CUNY<\/a>, is republished from <a href=\"https:\/\/theconversation.com\" target=\"_blank\" rel=\"nofollow noopener\">The Conversation<\/a> under a Creative Commons license. Read the <a href=\"https:\/\/theconversation.com\/cryptocurrency-funded-groups-called-daos-are-becoming-charities-here-are-some-issues-to-watch-174763\" target=\"_blank\" rel=\"nofollow noopener\">original article<\/a>.<\/em><\/p>\n<p><strong>Related article :\u00a0<a href=\"https:\/\/www.chamberofcommerce.org\/nonprofit\" target=\"_blank\" rel=\"noopener\">How to start a nonprofit<\/a><\/strong><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more like this article, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/technology\/\" target=\"_blank\" rel=\"noopener\">Technology category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/www.chamberofcommerce.org\/nonprofit\" target=\"_blank\" rel=\"noopener\">How to start a nonprofit<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Cryptocurrency-funded DAOs running charities isn\u2019t as bad as it sounds Cryptocurrency\u00a0is becoming a\u00a0more familiar way to pay for things. One option is as part of a crowd, through a\u00a0decentralized autonomous organization. In this relatively new kind of group, also called a DAO, decisions and choices are governed by holders of one kind of cryptocurrency token,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":404068,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/img-cdn.tnwcdn.com\/image\/hardfork?filter_last=1&fit=1280,640&url=https:\/\/cdn0.tnwcdn.com\/wp-content\/blogs.dir\/1\/files\/2022\/02\/Charity-Bitcoin-DAO-Big-Green-hed.jpg&signature=04eb5be16cc1bd00d427fc97667dd1f6","fifu_image_alt":"#Cryptocurrency-funded DAOs running charities isn\u2019t as bad as it sounds","footnotes":""},"categories":[18],"tags":[76127,133890,133886,133888,133889,133887],"class_list":["post-404067","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology","tag-cryptocurrency","tag-cryptocurrency-funded-daos-running-charities-isnt-as-bad-as-it-sounds","tag-how-to-start-a-nonprofit","tag-legal-questions","tag-new-terrain","tag-wild-rides"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/404067","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=404067"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/404067\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/404068"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=404067"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=404067"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=404067"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}