How Web 3 Can Advance Nonprofits
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How Web 3 Can Advance Nonprofits

By Steven Aguiar, Co-founder of givepact

I have a confession. Only a handful of people close to me know about it.

I’ve been obsessed with crypto for nearly two years. Really obsessed. When I am not working or parenting, I am almost always checking NFT prices, researching new tokens, and skimming Discord groups.

Feels good to get that off my chest. But the fact that I felt the need to “confess” raises the question: why is there a stigma around crypto (ahem, Web 3) anyway?

There are a lot of negative stereotypes around crypto, and all are true to some degree. It is highly volatile and risky, laden with scams, hard to navigate, lacks diversity, and uses a lot of energy. As I write this, Russia is figuring out how to use crypto to avoid sanctions.

Despite these problems, Web 3 (which I’ll use interchangeably for “crypto” moving forward) has more benefits than drawbacks. Web 3 technology and consensus mechanisms allow for value to accrue back to users alongside shareholders, aligns incentives within communities, and will help mission-driven organizations raise and deploy capital like never before.

Please note the video above was recorded before we rebranded to givepact.

Users Finally Get Their Share

OpenSea, a platform for trading NFTs, commands a dominant 90% of NFT trading volume and all the associated fees. (NFTs, or “non-fungible tokens,” are a unique, one-of-a-kind digital asset that users can buy, own, and sell on a blockchain network like Ethereum.) The company is worth an estimated $13.3 billion and is expected to sometime do an initial public offering. They are on the same path mega-successful tech companies like Facebook and Shopify have taken before them.

Enter LooksRare, a decentralized NFT marketplace that launched in January 2022. When LooksRare launched, they airdropped their $LOOKS token to any Ethereum user that had traded on OpenSea, with more tokens going to more active traders. Users were able to stake, or lockup, their $LOOKS tokens to receive a percentage of the trading fees generated on the platform. The estimated APR is currently 195%.

The difference in where value accrues between OpenSea and LooksRare is radically different. For OpenSea, a centralized company, the lions share of the value is realized by the founders, investors and future shareholders. With LooksRare, the decentralized alternative, users and token holders get direct exposure to the revenue generated. LooksRare lured their first users with an airdrop worth thousands of dollars and then paid them out a percentage of revenue on top. (!!!) Could you imagine any startup or existing tech company rewarding users like this?

What it would look like for value to accrue back to users within other business models? Imagine social networks where the ad revenue is redistributed to users. Imagine a bank where transaction fees are added as interest to accounts. Imagine revenue generated from video games that’s divided up amongst players instead of corporations. It’s all happening right now.

Blockchain technology, where these protocols are immutable, open-source, and only changeable through group consensus, is making this all possible.

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Creating Aligned Incentives Within Communities

In addition to allowing users to accrue value, Web 3 also aligns community incentives. Let’s use the NFT community Cyberkongz for this example.

Originally minted in March 2021 for 0.07 ETH (about $88) each at the time, Cyberkongz is a series of 5,000 photos of pixelated gorillas. The non-fungible image of the monkey itself isn’t what is valuable, though. Ownership of a Cyberkongz NFT grants access to the project’s Discord, or group chat, which has evolved into a community of crypto power-investors who share tips and research. An exclusive trading club. Nowadays, Cyberkongz sell for a minimum of 8 ETH (or $24,000) each.

The founder of the Cyberkongz project has done great financially, between the upfront revenue generated from the primary sale at launch and their commissions from secondary sales on OpenSea. However, unlike with traditional membership business models, Cyberkongz community members are also benefitting financially, as their Cyberkongz NFTs increased dramatically in value. Whereas traditional membership business models are purely extractive (you pay a membership fee that is never seen again), NFTs and tokens generate value for the community members who ultimately make the network worth $24,000 to join.

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Mission-Driven Organizations

So, what does this have to do with nonprofits? There are already dozens of examples of mission-driven organizations using crypto platforms to fundraise and organize in the pursuit of important causes.

A great example is WomenRise.

On November 25th, 2021, Pakistani-American Maliha Abidi launched WomenRise, an NFT collection of 10,000 unique, randomly generated portraits of women. The mission of the project is to “contribute to the gender equality causes in the real world,” with 10% of primary sales revenue donated to the Malala Fund and other women’s empowerment organizations. The NFTs sold out quickly. Originally priced at 0.07 ETH, the “floor” of the collection (or cheapest one available for purchase) is now 0.46 ETH.

As with LooksRare and Cyberkongz, decentralization allowed the value created by WomenRise to be spread amongst different parties.

1) Abidi and the founding team raised enough money to focus on WomenRise as their primary business.

2) The Malala Fund and other nonprofits received hundreds of thousands of dollars worth of donations.

3) The early supporters of WomenRise saw a 7x return on their investment in a few short months.

WomenRise continues to gain traction as one of many Web 3 projects that are championing underserved communities.

Noora Health, which trains families to care for patients after they leave the hospital, sold a single NFT for $4.5 million. NFT studio ArtBlocks has raised over $23 million for a range of charities selected by their artists. Fast Food Punks, a knockoff of the much more expensive series CryptoPunks, raised $574,000 for Ronald McDonald House. KlimaDAO is completely reimagining what it means to organize around climate change. The list goes on.

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Introducing givepact, a Nonprofit Web 3 Hub

We believe the Web 3 revolution is just getting started, and that within the next decade, nonprofit NFT collections, community treasuries, and governance votes will be as common as Facebook and Instagram accounts. My co-founder Alicia Maule and I are admittedly still students of this emerging technology, but feel the nonprofit industry is lacking a space to come together and share Web 3 learnings and insights. For that reason, we are launching givepact, a community, content and events platform whose mission is to help 100 nonprofits launch Web 3 projects.

What will givepact look like? Like most other Web 3 projects, Discord will be our community hub. We also plan on continuing to build out our wiki, a collection of case studies, tools and other resources for nonprofit leaders to get familiar with the Web 3 space. We will also be hosting online and offline events, bringing in guest speakers, and looking to partner with other NFT and DAO projects we love.

Like previous technology waves before it, Web 3 is imperfect. Still, we believe in using crypto to pursue economic models where the value of digital networks accrues back to users in a significant way. It’s now possible to design less exploitative versions of social networks, financial institutions, and media companies, where users are rewarded for participating. Nonprofits, too, will be able to use Web 3 rails to fundraise and organize, creating economic value and aligned incentives for their supporters in a way that was not possible before.

Ready to dive in? Join the givepact Discord or subscribe to our weekly newsletter.