Some thoughts on Opportunities at the Intersection of Web3 and Social Change
Banks Benitez’s white paper on the intersection of Web3 and social change aims to “explore a few of the ways that the social sector (nonprofits, philanthropists, activists, social enterprises, impact investors, etc.) might be able to leverage Web3 technologies.”
The most important things about this paper are that it exists, and that it is contributing to the discussion around nonprofits and emerging technologies, specifically web3. Without robust public discussion we can never advance the charity sector’s use of technology.
The paper starts with a personal critique of the American nonprofit sector and how it lags behind other sectors in exploring emerging technologies and trends. This claim isn’t backed up with any evidence or compared with any other sector, but given its purpose as a white paper is to present his philosophy on the issue we can take the premise at face value. It might be hard to find very many people in the British charity sector who would be able to argue against this point. But saying that the sector doesn’t explore emerging technologies isn’t the same as saying that it should. Again, this is an assumption included in the underlying philosophy of the white paper and so perhaps doesn’t need much justification.
There are bigger and more important questions; How technologically advanced should the nonprofit sector be? How many organisations exploring emerging trends would it take to be able to say that the sector is doing so? But, these questions aren’t the point of this paper, its point is that nonprofits should explore merging technologies and so onto the ways in which nonprofits could use web3.
Most of the focus is on how nonprofits might be able to use web3 technologies such as cryptocurrencies, NFTs and DAOs as part of their fundraising strategy, with the implication being that the organisation continues to tackle whatever social issues they are set up to in their usual ways. I think web3 offers a far greater ambition and more interesting scope in tackling issues in new and different ways rather than simply being a means of income generation. The paper touches on this but there is much more to be explored in this area.
Accepting Crypto Donations
Should nonprofits accept crypto-donations? There are implications to consider, including tax which the paper mentions, but providing the organisation has the knowledge and means to mange cryptocurrencies, then why wouldn’t they accept crypto-donations. From the technology point-of-view it seems an obvious thing to do. But I guess the point the paper makes is that not enough nonprofit organisations know enough about cryptocurrencies to even consider it an option.
Perhaps the first step is for charities and nonprofits to explore the implications of crypto donations, create test cases, learn and share their learnings with other charities to develop some experience and expertise. Of course, the argument is always that many charities struggle to fund their day-to-day work and have no capacity for exploring technological innovation, which reflects the underlying point above.
Capturing Value via NFTs
Creating NFT artworks to sell to supporters is suggested as a means for nonprofits to generate income. Over the past few months as NFTs have become more popular (in crypto world anyway), the issues around how immutable the ownership of NFTs actually is, but there have also been cases of NFT art selling for millions of dollars to famous people, which should quite rightly make nonprofits take notice. The problem is that the value of NFTs is directly related to hype generated about them. So, creating them might be low cost but making them desirable is not. Charities struggle to generate hype. It’s not in their skill set or their mindset. The hype model for driving up the value of NFTs is to create exclusivity, and that might not sit well with the ethics of nonprofit organisations. Essentially, its the same question of whether its ok to take money from dodgy companies and use it to do good, and the prevailing stance at the moment is that it isn’t ok.
But NFTs have more potential than just as a means of recording ownership of art. The programmatic uniqueness of NFTs is also used to demonstrate membership for online communities, but still, they are fundamentally based on a philosophy of exclusivity. I think charities and nonprofit organisations should explore NFTs, but there is lots to consider aside from just the technology.
Participatory Fundraising Models
The paper talks of DAOs as a way for charities to fundraise but doesn’t go into whether a DAO could act as a charitable organisation. Legally, it couldn’t, yet anyway, but I think it’s one of the more interesting possibilities that could bridge the gap between charities and social movements. Charities are great at organising people around a cause, but require centralised control, and social movements don’t require any centralised management but often fail to produce long-lasting change beyond awareness. Perhaps a Distributed Autonomous Charitable Organisation could offer a model of wide membership like social movements with a formalised decision-making process like charities.
One interesting idea that is hinted at is a DAO as a means of managing grants, perhaps whereby charities join the DAO that has delivery and funding conditions written into the code so that as a charity achieves and reports on certain milestones the funds are issued to them. This also creates interesting opportunities for intersecting DAO’s, one run by a charity with a membership of supporters and the other run by grant makers with charities as members. The intersecting of the code could mean that as the supporters in one DAO achieve a goal, this triggers a payment from within the other DAO.
In my opinion, DAO’s are by far the most interesting area of web3 for the charity sector.
New Ownership, Organizing, and Activism Models
The paper talks about using web3 technologies to achieve power and wealth distribution in ways that are currently difficult to achieve. There are numerous examples of web3 being used to provide payment mechanisms for unbanked populations, enabling them to trade and establish greater financial security, so it’s more than just an idea within a white paper.
Democratizing Wealth Building
‘Democratizing’ can be a problematic term when talking about web3 or wealth in general as sometimes people think it means that everyone has an equal opportunity, and that isn’t the case. Economies work the same way whichever technology they use. The rich get richer, the poor get poorer. Wealth always follows a power law distribution.
The problem with digital-first economies using web3 technologies is always that at some point the have to transfer into real money economies, which immediately loses any benefits of them being digital, and makes it difficult to imagine potential uses for charities. The paper seems to struggle for ideas about this too, using musicians and royalties as the example.
Conclusion
The ‘boring plumbing’ argument, which says that charities shouldn’t be exploring emerging technologies like web3 until they have better everyday organisational technologies in place such as CRMs and impact reporting, is a strong one.
The counter argument, sometimes called ‘leapfrog’, might say that just as mobile phones brought telecommunications to African countries without the need for landlines, new technologies can be adopted without having the ‘boring plumbing’ in place, especially given that they tackle very different use cases.
As Rogers described with his Diffusion of Innovation model, there are early adopters who explore emerging technologies with the majority coming onboard later as the technology becomes mainstream. Many charities still don’t have a CRM. But I’m confident we’ll see more and more exploring web3 over the next few years. Just as technology innovation is developing at increasingly faster paces, we can expect charities to be increasingly exploring emerging technology. This exploration should be two-sided, how charities might be able to use new tech to achieve their mission, and how new tech might impact them achieving their mission.