What is Cryptocurrency? Explain it to me like I’m seven years old…

If your nonprofit has avoided the notion of taking cryptocurrency donations because it sounds complicated or risky, get ready for an eye-opener. Our latest episode of the Good to Growth Podcast is all about how nonprofits can leverage these kinds of digital donations.

What is cryptocurrency?

Perhaps you’ve heard of cryptocurrency (e.g. Bitcoin) but aren’t sure what exactly it is, let alone how it relates to your nonprofit. Cryptocurrency (or crypto) is a type of digital currency that can be used in exchange for goods and services. This kind of exchange is all coded, encrypted, and decentralized—making it much different than the use and value of the US dollar. 

It’s an innovative form of fundraising for nonprofit organizations, and Katie sat down with an expert in the field to break down the concept. Pat Duffy is the co-founder of The Giving Block, a platform that helps nonprofits and charities to fundraise cryptocurrencies. After starting off as a federal consultant for pharmaceutical companies with a focus on collaboration with nonprofits, Pat eventually shifted to the nonprofit sector. He worked in executive leadership and fundraising roles before eventually merging his nonprofit experience with his personal passion for Bitcoin trading to create The Giving Block. 

 A new technology

With over 200 million people utilizing crypto today, it’s a viable opportunity for nonprofits to take advantage of for their fundraising efforts. But if you don’t really understand how crypto works, how can you truly take advantage? In the podcast, Pat points out that we all tend to think of new technologies like crypto in the same way and believe that a fundamental understanding of the tactical components is necessary in order to use it. The truth is that it’s not always necessary.

“How do you pick a microwave, a refrigerator, or a car? Do you have to understand how wifi works to pick an internet service provider? How do you sign up for Facebook? You don’t have to know code in order to do any of those things. You don’t need to understand combustion engines in order to buy a car. It’s like that with cryptocurrency,” he says. 

Understanding regulations with cryptocurrency

Granted, when dealing with cryptocurrency, it is important to understand and to make sure you’re in compliance with federal regulations. The IRS considers crypto to be a property asset, so it’s treated the same way as stocks. When used properly, crypto does happen to be one of the most tax-efficient ways to donate to charities today—and that’s a big reason why nonprofits should get on board. 

“In the same way you would take stocks without necessarily knowing the fundamentals of an individual company, you would accept crypto because there are tens of millions of people in the U.S. where that is their most tax-incentivized way to give. So, why not?” Pat explains.

Getting started

If cryptocurrency sounds like something your nonprofit should make use of, it turns out that starting the process isn’t as complicated as it seems. When Katie asked how nonprofits can get started with The Giving Block platform, Pat reassured listeners that getting started isn’t any more complicated than opening a bank account. And that’s actually the hardest part.

Pat notices that the number one concern from nonprofits when getting started with crypto is the idea that crypto isn’t very regulated. Some nonprofits have donors who are ready and eager to give through cryptocurrency, but the organizations are hesitant to take the plunge. Of course, crypto is heavily regulated, and the team at The Giving Block helps organizations see the exchange side of it and gain a better understanding.