The Nfts for Charities — How Non-Profits are Raising Money with Tokens

From nowhere, NFTs have emerged as a cultural phenomenon and a potent fundraising tool for NGOs. Record-breaking auction prices, enticing celebrity endorsements, and inspiring record-breaking charitable donations totaling more than $3.5 million! This year’s surge in crypto donations can be attributed to the growing trend of nonprofits collecting NFT proceeds, which has been eye-popping.

Non-fungible tokens, often known as “NFTs,” have likely been bandied about a lot recently. On an online marketplace, basketball fans are exchanging digital clips in NFT format. Direct Relief may thank Charmin for getting on the NFT bandwagon, as the company is offering digital artwork inspired by Charmin toilet paper.

Nonprofits and their donors are starting to think about how to use new technologies for altruistic purposes, given the amount of money floating around in NFTs and the digital art world. Any new technology raises questions, and I hope to address a few of those questions in this article for nonprofits interested in the NFT trend.

What Are NFTs?

Non-fungible tokens (NFTs) are a digitally-only way to prove ownership of a piece of property. The majority of NFT assets are digital, although physical assets can also be used to implement NFTs. An NFT’s ownership history is recorded and tracked through the use of a technology created in connection with virtual currency (referred to as “blockchain”). The blockchain employs encryption to verify transactions, making it a secure system. NFTs are generally stored on a public blockchain connected with the cryptocurrency Ethereum, but blockchains can be either private or public depending on the use case.

NFTs and Charities

To put it another way, the sale of an NFT to raise money for charity is very much like a regular art auction. To claim a charitable deduction, an artist or collector who offers digital art to be auctioned off for a good cause may have to have the work appraised first. Donations and asset valuations must be carefully documented by the charity. If an acceptable valuation can be established, prospective bidders should be informed of the item’s worth. As a result, victorious bidders must be sent receipts detailing how much of the winning bid the item’s fair market value exceeds.

Because the market for NFTs is so new and prices change so widely, the charity auction process will require a great deal of finesse when valuing NFT assets. When Beeple “dropped” artwork onto an NFT marketplace last year, the artwork was sold. A $1 piece that was resold ten times and now has a value of $7000 was purchased on October 30, 2020, and resold on January 9, 2021. Digital artwork and other NFT-assets that are contributed should be valued by specialists who can document the appraisal properly and ensure that everything is properly recorded and accounted for.

How NFTs can support charities

A significant donation from the NFT effort can mean the world to many mission-driven organisations. Small nonprofits can potentially treble their annual operating budget with a single six-figure donation.

NFTs can assist organizations in the following four ways:

• Corporate giving partnerships

Brands with a lot of clouts can move quickly to capitalize on the latest fads and concepts. Working with a well-known business partner, NFT artists can collect substantial sums of money for charitable causes by hosting an auction.

• Celebrity-driven NFT auctions

Another strategy to increase your NFT fundraising awareness and attract bidders is to establish a connection with a well-known figure. The late NBA legend Kobe Bryant’s eight never-before-seen images will be auctioned off by NFT platform Cryptograph and photographer Davis Factor in August 2021.

• The NFT as a charitable investment

For the philanthropic collector, donating an NFT rather than cash (or cryptocurrency) is an option. When it comes to charity auctions or other fundraising events, Yahoo remarked that “this would be comparable to how people donate valued objects.” Find out if the charity is willing to keep the NFT as a long-term investment, or if they prefer to sell it and take the money in cash as the result.

• Direct donations to charities

NFT artists often only want to find a worthwhile charity and work with them directly, without the need for endorsements from celebrities or corporate sponsors. As a result, we’ve seen a lot of great partnerships between NFTs and nonprofits.