Russ Wiles

The Republic | azcentral.com

The Barrow Neurological Foundation recently received a donation worth more than %2410%2C000 in bitcoins%2C a type of digital currency.

The donation is similar to gifts of stocks%2C real estate and other non-cash assets.

The anonymous bitcoin donation will help to fund neurological research involving memory processes conducted by Dr. Peter Steinmetz%2C a bitcoin enthusiast himself.

For years, charities and other non-profits have been more than willing to accept common stock, real estate and other assets besides cash.

Now some have started to accept bitcoins.

The Barrow Neurological Foundation in May received a five-figure donation of bitcoins, putting it among the first high-profile non-profits to receive the digital currency. The anonymous gift of more than $10,000 from an Arizona resident will help fund the memory-related research of Dr. Peter Steinmetz, program director of neuroengineering.

More:Bitcoin firm to sponsor college-football bowl in Florida

"This is a novel way for research to be funded," said Steinmetz, a bitcoin enthusiast himself. "It's almost appropriate actually, that a cutting-edge method of funding is used to fund cutting-edge research."

Many of the people who donate to non-profit groups prefer to use assets such as common stock, mutual funds or real estate that have appreciated in value, rather than cash. By giving appreciated assets, donors still can take a charitable income-tax deduction for the full market value of the assets, assuming they itemize deductions. Yet they don't need to pay the capital-gains tax that otherwise would apply when such assets are sold.

Despite a market slump in bitcoin prices earlier this year, many investors are still sitting on sizable unrealized gains. Hence the rationale for donating some holdings for charitable purposes. Bitcoins currently fetch a little more than $600 each, down from a high of more than $1,000 but well up from initial prices below $1.

The market was unsettled this year by the failure of a large Tokyo-based bitcoin exchange, which closed after reporting the loss of about 850,000 coins in a hacking attack, with nearly one-quarter of the total since recovered. The company is engaged in U.S. bankruptcy proceedings in Dallas.

"It did scare people a bit," Steinmetz said of the bankruptcy and ongoing investigation, with millions of dollars worth of digital coins still missing. But the market's subsequent stabilization "makes you more confident in a way," he said.

Non-profits seeking to accept bitcoin donations must learn the process, which involved a bit of a learning curve that took a few hours, said P. Alan Knobloch, director of major gifts and planned giving for the Barrow Neurological and St. Joseph's Foundations in Phoenix. "By establishing that, we can take future donations of bitcoins," he said. "We look all around the world for support."

The foundation accepted the donation in bitcoins but immediately converted that into U.S. currency, using an exchange called BitPay. That company gained some headlines June 18 by announcing it would sponsor a college-football bowl game and allow ticket purchases using bitcoins.

The vast majority of retailers and non-profit groups haven't yet embraced digital currency, but that situation is slowly changing. Overstock.com was one of the first national retailers to accept bitcoins for payment, and Expedia.com and Dish Network are among those who jumped on the bandwagon in recent months. Dozens of small companies and non-profit groups accept bitcoins, too.

The amount of the bitcoin donation to the Barrow foundation wasn't specified. But Steinmetz and Knobloch said the donor, whom they wouldn't identify, was encouraged by a recent IRS announcement clarifying that bitcoin transactions should be given capital-gain treatment.

Barrow and St. Joseph's have more than two dozen medical researchers, including Steinmetz, whose work is supported by donations and grants.

He recently participated in a study, published in the current edition of the science journal PNAS, that measured how well epilepsy patients remembered a list of words in sequence. The patients had been implanted with electrodes to monitor seizures, allowing brain activity to be evaluated at the level of single neurons.

One finding was that memories for any given word are recorded on a relatively small number of widely scattered brain cells, but with the total number of cells involved for all words stretching into the hundreds of thousands, if not more. The research aims to better understand how the brain forms memories, which cells are involved and how those cells are affected by illness and disease.

Medical research groups, like many non-profit organizations, face a competitive market for donations. An ability to accept bitcoins, along with other types of assets, gives those such as the Barrow foundation another fundraising tool to use.

Steinmetz said his research faced a funding gap that the bitcoin donation will help to close.

Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.

Bitcoin basics

What are bitcoins? They are the most prominent form of digital currency — a means of exchange done over the Internet. Unlike dollars and other mainstream currencies, bitcoins are not issued or regulated by governments, nor recognized as a legal way to pay debts.

Who controls the bitcoin network? Nobody owns it; all users control it. It's like the Internet, which is controlled by users who follow a basic set of rules.

What are bitcoins worth? Slightly more than $600 each, down from a peak above $1,000 but well above initial prices below $1.

Can I buy things with bitcoins? Yes. A small but growing list of retailers will accept them, including Overstock.com, Expedia and the Dish Network — even Virgin Galactic for when you're ready to book space travel.

How do I get started? You set up an account by installing a bitcoin "wallet" on your computer or mobile phone. One way is to download software from bitcoin.org.

Are bitcoins safe? Yes and no. Among the caveats, there's always a danger that the system could be corrupted and bitcoins stolen or counterfeited, though those also are risks for other currencies and methods of payment. On a personal level, users must safeguard their passwords and computers to minimize the dangers of theft. From a markets perspective, bitcoin values fluctuate against the dollar and other currencies, meaning prices could fall while you hold them. In terms of commerce, bitcoin transactions are anonymous so there's little recourse if you're not satisfied with a purchase.

— Russ Wiles

Unfamiliar territory

Bitcoin has been around for about five years and has attracted considerable media attention, but most Americans still aren't familiar with it. Only 10 percent of more than 1,700 respondents in a poll this month by the Morning Consult said they knew a lot about the digital currency and an additional 27 percent said they knew some details. But 28 percent of respondents said they knew little and 36 percent said they knew nothing.

Among groups, the survey indicated men are more familiar than women with bitcoin, while college graduates are more familiar than those lacking degrees. Also, knowledge rises with income, and young adults know a lot more about bitcoin than seniors.

— Russ Wiles