If you’re a leader in a non-profit organization, you know how important fundraising is. These days, with the explosion in popularity of blockchain technology and cryptocurrencies, many people are interested in directly donating their cryptocurrencies. Before you start accepting cryptocurrency contributions, there’s some technical background that you need to know. You’ll also need to get started with an account at a digital currency exchange or wallet provider, and need to understand the tradeoffs between these options. This article will start out with some technical background, and will go on to explain a few simple steps to set up a digital wallet and start receiving charitable donations in cryptocurrency!

How Blockchain and Cryptocurrency Works

At its most basic, blockchain is a way of recording transactions on a digital ledger. Each time a transaction happens over a blockchain network, computers connected to the blockchain network perform a complex set of calculations known as mining to make sure that the transaction is valid. If the transaction is determined to be valid, it is added to the block and recorded on the digital ledger by every computer on the blockchain.

Using the blockchain, the “balance” of a digital asset in various accounts (or “wallets”) can be maintained by every computer in the network. In addition, every transfer of a digital asset from one account to another can be validated and confirmed. Taken together, this means we have a digital asset that can’t be counterfeit or spent more than once — while still being secure, fungible, and easily transferable. These digital assets can then be used as a means of payment. As the inventor of Bitcoin, Satoshi Nakomoto, famously put it: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Since these digital assets are secured and validated using cryptography, and since they can be used to purchase goods and access services like conventional money, they are referred to as “cryptocurrencies”. The two most popular cryptocurrencies in the world at the moment are Bitcoin, which is primarily used for payments, and Ether, which allows users to both transfer the value of their digital asset AND run applications on the computers connected to the Ethereum blockchain. Like any other asset, cryptocurrencies are traded on digital asset, and their value denominated in fiat currencies (like US dollars) fluctuates based on supply and demand. In the past two years, the value of cryptocurrencies has risen significantly, and many blockchain technology enthusiasts holding a great deal of wealth in “crypto” are looking for opportunities to donate some of their holdings to causes that they believe in.

Is Blockchain Secure?

There are multiple features of blockchain technology that make cryptocurrency transactions secure and trustworthy.

Blocks on the blockchain, like the name implies, are connected to every other block on the chain. It’s incredibly difficult for a hacker to tamper with a single record on this chain, since they would also have to change every other block connected to the chain, a nearly impossible task. In addition, everyone using the blockchain has their own private key that acts like a digital signature. Every transaction is cryptographically “signed” using this private key, and if any record is altered, the signature becomes invalid. Blockchains are DECENTRALIZED. That means the digital ledger is maintained by a number of peer computers all over the world, and don’t have a single point of failure. A hacker would have to acquire an unfathomably massive amount of computing power to access at least 51 percent of the instances of a blockchain to be able to alter it. The distributed ledger and complex mining process (described in the last section) ensures that only valid transactions are added to the blockchain, preventing counterfeiting and double spending. A number of software libraries are used to check the digital contracts processing cryptocurrency transactions, making sure that hackers can’t exploit unwanted behavior due to calculation overflows.

Three Options for Receiving Crypto Contributions

Coinbase

Coinbase is one of the most popular digital currency exchanges and wallet providers, and their service is very easy to use. Simply go to their website, click “Sign Up”, and fill in the required information.

They will send a verification email to the address you provided, and after you click the link they provide, you will be asked to provide a cell phone number for further verification. After one more page of personal information and a few identity verification questions, your account will be ready. You’ll be taken to your Coinbase dashboard, which will show how much of each cryptocurrency you have (at present time, Coinbase supports only four cryptocurrencies, Bitcoin, Bitcoin Cash, Ethereum, and Litecoin).

To start receiving cryptocurrency donations, click on “Accounts” in the top tab. This will take you to your four wallets, one for Bitcoin, one for Bitcoin Cash, one for Ethereum and one for Litecoin. Click “Receive” below a wallet to see that wallet’s address. Coinbase will display both a QR code and a hexadecimal string (letters and numbers) corresponding to your address. Simply share the wallet address or QR code with contributors, and they can start donating cryptocurrencies into your non-profit’s Coinbase wallet!

Advantages of Coinbase

Easy to use

Well funded and backed by Silicon Valley venture capitalists

They provide tax tools to simplify reporting

Disadvantages of Coinbase

They support only four cryptocurrencies, so you would not be able to receive donations in other cryptos

The transaction fees for converting cryptocurrency donations into fiat currency is high

Bithope

Bithope is a non-profit that uses cryptocurrencies to raise funds for charitable campaigns. At the moment, they only support donations in bitcoin, and require interested organizations to submit an application before the campaign is featured on their site.

Advantages of Bithope

A limited number of campaigns featured on their site means your organization will gain a lot of visibility if selected.

Disadvantages of Bithope

Only donations in Bitcoin are accepted.

Organizations must fill out an application form and be selected to begin receiving donations.

Set up a cryptocurrency wallet

There are a number of cryptocurrency wallets that are not connected to exchanges out there. In the past, WeTrust has described how to use the MyEtherWallet online wallet to receive cryptocurrencies like TrustCoins. Once you have an account with a wallet such as MyEtherWallet, you can share your wallet address with contributors, who can then donate cryptocurrencies to your wallet. MyEtherWallet supports all ERC20 tokens, making it possible to receive donations in a very wide range of cryptocurrencies. Alternately, you can set up a desktop wallet such as Exodus and provide your account’s address to contributors.

Advantages of a cryptocurrency wallet

Organizations can accept donations in a wide variety of cryptocurrencies

Disadvantages of a cryptocurrency wallet

Users are completely responsible for keeping their wallet private key. There is NO WAY for users to recover their cryptocurrencies once they forget this information.

Multiple approaches for a New Source of Funding

As you can see, there are multiple approaches for receiving charitable contributions in cryptocurrency. Whichever approach you choose, it will open up an innovative new source of funding for your non-profit organization, allowing you to achieve your mission of bettering the world!