Philanthropy is going crypto. The global conversation about money was shaken when cryptocurrency entered the scene. More investors are adding cryptocurrency to their portfolios, and it’s time to consider how cryptocurrency can support and sustain other elements of financial management—not just buying or selling. Cryptocurrency gives consumers greater autonomy, and therefore, control when it comes to their money. Its nature as a fully digital currency makes it easier to send money, and it provides a greater sense of privacy for the buyer.
As cryptocurrency can help investors broaden their portfolios and diversify their finances, it can also help investors contribute to a wider range of organizations, charities and causes—resulting in a more engaged and more impactful type of giving.
Cryptocurrency investors already have a generous spirit, but many are surprised to hear this because of the stigma surrounding cryptocurrency usage. According to Fidelity Charitable, 45 percent of cryptocurrency investors donated $1,000 or more to charities in 2020. By contrast, only 33 percent of their peers in the overall global investor population have given that much.
Thanks to the control and flexibility that cryptocurrency offers its users, generosity can become a regular part of money management. The primary way that cryptocurrency will transform philanthropy is by making it an automated experience that gives the consumer full control over how the funds are managed.
There is a real opportunity to tie the wealth creation possibilities of cryptocurrency with a mission to positively impact the world. It’s time for cryptocurrency users and companies to understand that decentralized finance is about more than wealth creation. It can also be about generosity, philanthropy, and contributing to the greater good.
Moving From Tech Innovation to Financial Donations
Forging a new path for philanthropy in the digital age requires the right technological tools. At Sandclock, we believe that bridging the gap between blockchain as a technological invention and blockchain as a method for philanthropy will require ultra-programmable money. Before cryptocurrency can become a vehicle for philanthropy, it must leverage yield generation strategies that split yield from principal. It is through this process that users achieve high rates of return that compound their yield and create micro-endowments.
Blockchain-based money markets like Aave, Curve, Yearn and Compound have grown exponentially in recent years. According to DeFi Pulse, over $100 billion is currently locked in various decentralized finance protocols. Various protocols offer yields on stable coins ranging from a modest 5 percent to 20 percent in most cases, with substantially higher APYs in newer blockchains like Solana, Terra and Avalanche.
But the key to making it work is a set of advanced algorithms that interact with various money markets on various blockchains. This allows users to generate yield on deposits and empowers them to use the platform as a blank canvas to create infinite strategies, allocating their principal and yield as they see fit.
Users can choose for their principal or yield to auto-compound, while the rest can be used to donate. Consumers can invest into dollar-cost average vaults that will buy crypto based on a predefined schedule, create DAOs that provide exit liquidity to NFT floor undercutters and give funders fractional ownership of the bought pieces or establish perpetual endowments that support global refugees through prepaid cards.
Cryptocurrency investors know this: The decentralized finance world hasn’t been sufficiently battle-tested yet. Innovators and regulators are both still figuring out how to protect the investment community and leverage the benefits of cryptocurrency at the same time, moving forward in innovative ways without neglecting the potential issues of the technology.
The good news is that platforms like Sandclock are working toward compliance goals so that more users can adopt cryptocurrency as part of their investment portfolios. Sandclock is also one of the first to pursue SOC-1 and SOC-2 certification and work with well-established insurance providers to protect users’ funds in case of an unexpected loss, only furthering the stability of the investment.
As cryptocurrency companies and decentralized finance (DeFi) protocols continue to grow, so will generosity among their users.
Connecting with users’ desires to leverage cryptocurrencies and blockchain tech for wealth creation while also catering to their human drive to support global causes will be the key differentiating factor for generosity-based cryptocurrency in terms of adoption and growth.
Alexander Hughes is the chief legal and compliance officer at Sandclock.
