Blockchain aid groups could be the future of philanthropy – Reuters

A month after Russian troops invaded Ukraine, an organization called Gitcoin has raised more than $800,000 for initiatives to support Ukraine with protective gear, food and aid. This is one of the many reasons why Gitcoin and other so-called powerful DAOs are funded with blockchain technology.

Decentralized Autonomous Impact Organizations or DAO impactors use crypto-tools as a source of public good and as an alternative way to support social initiatives. Think of it like a blockchain version of a non-profit organization.

Ukrainian aid, the fight for reproductive rights, and efforts to reverse the effects of climate change are all getting help from influential DAOs to mobilize support.

These organizations seek to correct what they see as institutional underfunding of public affairs and initiatives. The DAO (pronounced “dow”) is a fancy way of saying that it’s an autonomous body that makes decisions based on community votes rather than executive decisions. Anyone who purchases tokens for a particular DAO can vote on decisions made by the organization, such as which social cause to donate funds to.

Crypto enthusiasts created the DAO for everything from creating high-level friend groups to buying the Constitution. However, with influential DAOs, the mission becomes more philanthropic and ambitious.

In theory, the DAO and similar cryptocurrency projects seek to correct the shortcomings of traditional institutions by funding public goods that are not sufficiently supported in society. They were created to support everything from reproductive rights organizations in Texas to helping fight climate change. Impact DAOs are contrary to the idea that everything related to cryptocurrency is a quick money-maker.

In practice, things are a little messier. Impacting DAOs and aid-focused blockchain projects are a new way to disrupt the long-standing acceptance of how philanthropy and philanthropy work. Still in their infancy, they are facing barriers to accessibility and distrust from the general public due to the volatility of the cryptocurrency market. This is just one of the many ways that the crypto world intends to change the status quo.

New philanthropic model

DAOs have been around since 2016, but in 2021, as cryptocurrencies like Bitcoin and Ethereum hit unprecedented new valuations, things have changed. According to Gitcoin’s Scott Moore, more and more Web3 and cryptocurrency enthusiasts are starting to see how virtual technologies can have a more tangible positive impact on society.

Moore and co-founder Kevin Owokie created Gitcoin in 2017 to fund software developers building the foundation for Web3, which blockchain proponents call the next generation Internet. The vague idea is largely about a decentralized internet deeply integrated with cryptography and NFTs.

Although Gitcoin started out as a DAO for software funding, in later years it funded climate change-related causes, helping Ukrainians, as well as arts and culture.

“We want to prove that Web3 public goods are more than just infrastructure,” Moore said. “It’s things like the climate we live in, our health and well-being, and the diversity of our community. We cannot simply exist in this metaverse. We must also influence this world.”

Because the contributor community decides what issues the DAO’s influence will fund, Moore thinks it’s more egalitarian than an individual making a donation or new technology to an underserved community and determining how to use or spend resources.

Since these donations are made on the blockchain, another benefit of the DAO impact model is increased transparency and community oversight, said Robbie Heeger, president and CEO of Endaoment, a cryptocurrency donation platform. The blockchain is a public registry, which means that everyone can see who donated how much and who voted for what.

Significant sums of money have been raised through the influence of the DAO and traditional non-profit organizations on Endaoment: about $3 million has been donated for humanitarian aid to Ukraine, about $2 million for physics-related research and experiments, and about $500,000 for reproductive rights.

“There is such a concept that all this exists and will happen in the future. I really feel, from our perspective, that DAO impacts are not only really happening right now, raising a lot of money, but are also changing traditional philanthropic systems,” Heeger said.

20 extra steps

But developing relationships with reputable local organizations that won’t take advantage of disenfranchised communities is a key part of philanthropy that’s important to establish and something that DAOs should work on.

That’s according to Devin Matias, who as senior director of development for the Center for Disaster Charity has spent his entire career in the non-profit world, advising or working with charitable groups.

“I feel like part of what the whole crypto world and environment wants is destruction,” Matthias said. “There are moments that can be great and effective. There are times when it will only cause more problems and complicate things.”

Matthias is open to new ways to make philanthropy easier. But the philanthropic process takes time and effort to weed out organizations that can’t be trusted and build relationships with those that can. He worries that the DAO is being too rough for the charity process.

Matthias noted that, on paper, donors might be interested in these DAOs providing communities with potential answers to these infrastructure problems, but it could also further complicate existing problems.

“You have just created 20 steps to [the community] move from receiving a gift to real help,” Mathias said. “There’s a lot of power in just giving money to the right people so they can go from zero to instant influence.”

Beyond the DAO

There are several other issues of financing public goods through impact that the DAO will need to address before they are widely accepted. People can usually get the big picture, but it’s harder to convey the details of the technology, says Darrell Jones III of infrastructure development organization Web3 city3.

Jones is trying to create a thriving hyper-local community in Oakland, California by developing web3 tools such as a local cryptocurrency called Oak. city3 is not a DAO, but Jones is partnering with DAO Gitcoin Impact to create a community funding process as a form of governance to determine which local nonprofits would like to fund the community. The project is still in development, but city3 is working with the people of Auckland to get involved.

According to Jones, the language and digital tools associated with cryptocurrencies and Web3 are especially inaccessible to people outside of the ecosystem. Another hurdle that the crypto community will have to overcome is gaining the trust of the communities they want to serve, not to mention the fact that most people don’t have crypto wallets to hold digital coins.

“Details are harder for people to understand. And then using the technology as it is today is even more difficult,” Jones said. Jones noted that they are working on these issues and that city3 is still in the early stages of development.

Endaoment COO Zach Bronstein also noted that it’s not just about getting these new ideas into people’s heads; it is also about changing the narrative around cryptocurrency itself from a get-rich-quick scam to an efficient way to fund public affairs and communities.

“The more things in cryptocurrency that appear to be underage or fraudulent, the less likely it is that people will want to participate in this space,” Bronstein said. “So the more mature this space becomes… the easier it will be for us to create tools that bring real, tangible value to nonprofits.”

Real world

Some skepticism about this new technology is warranted. With the value of several cryptocurrencies falling and new exclusion technology touted as a balm for solving real problems, it’s only reasonable that many are keeping a close eye on the DAO.

Even when he goes about his mission of raising funds for various causes, the results can be puzzling.

When Gitcoin launched fundraising rounds for Ukraine, there was a mismatch between the amount of donations that could immediately help Ukrainians and the types of reasons that cryptocurrency donors care about. For example, in the 13th Gitcoin funding round, there were opportunities to fund aid to Ukraine, climate, and Ethereum infrastructure. The accounting tool that protects privacy received most of the contributions, with only a small portion going to more practical needs like protective gear. Funding arrived just a month after the start of the conflict.

“There has been too little research and too little interest to serve people who might be Web3 skeptical,” said Gary Sheng, Dream DAO co-founder.

A former Google software engineer, Sheng co-founded Dream DAO with the goal of empowering young people around the world to use Web3 for good, but is now “disconnected from his duties” after managing Dream DAO for the first six months. Sheng said he wants to better understand how DAOs can be used for people outside of the Web3 world, where “normal people are and where our grandmothers are.”

“If Web3 doesn’t significantly improve the lives of many people who might not really like Web3,” Sheng said, “then it isn’t realizing its full potential.”

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