Bitcoin and Charities

Comments (Archived):

1. Part of the 5% is profits, marketing, and overhead costs of credit card companies, but the other part is fraud resolution, anti-money laundering, financial regulation, etc. When a new payment system reaches scale, these issues will have to be resolved there as well, somehow.

   1. coinbase is dealing with those issues every daythey are among the largest costs they face in their businessand they are part of the moats that coinbase is building up around their business

      1. Coinbase will be ok – they make more than just their 1% because of arbitrage and other methods. Their overhead is mostly fraud right now I think (correct me if I’m wrong), but I think we all assume that will diminish naturally over time as well as significantly as they simply get better at their business (as a team that strong is sure to do).

         1. they have been hiring a lot of engineers and security talent

            1. Amazing team growing at an almost unfathomable rate. Great to see. Plus, there are other technologies coming up alongside BTC that will help make the BTC ecosystem better independently of what Coinbase and the other BTC companies too, important to keep that in mind as well. It’s part of what we work on, even though it’s not core to what we do – many Fintech companies will help BTC by helping modernize payment tech in general.

      2. what we need is a couple massive (nonprofit?) payment aggregators in the nonprofit space that process just debit and bitcoin (or the like) and charge something nominal like 25bps + $0.25 and take all PCI compliance liability and handle all the payment processing…having 1.6MM charities with 1.6MM different contracts in place with 1000+ ISOs and having 1.6MM PCI concerns and then doubling all that because Coinbase or Bitpay or GoCoin or other or other or other or other is used for Bitcoin while some other company is used for credit card while PayPal may also be added to the mix … just proliferates the overhead crap that these NPs (or for-profits for that matter) waste resources on.

   2. They “hey, it’s actually just cost of doing business to charge 3% and $0.30 for online trasactions” stuff is my favorite credit card apology. It’s not, in fact the government has had to even intervene because they credit rail companies are so vicious with their fee structures. Their the ones who built a radically unsafe payment system and THEN over-charged for it. It is absolutely and in no way inevitable that any payment processor at scale will have to charge 3% and $0.30 and the assumption that it’s the case hurts payment reform significantly.

2. What a fascinating perspective on the fundraising space. I’ve never thought of Bitcoin being used that way, but it makes a lot of sense. I’ve frequently looked on CharityNavigator to figure out how much of the money actually goes towards the stated goals of a charity, and the use of Bitcoin to reduce processing fees makes it easier for every charity to make money by reducing transaction costs. It’s the last mile in making life easier for charities.

   1. yupppppppp

3. That’s another case of unbundling + disintermediation that are disrupting the status quo.The challenge is that most non-profit organizations run antiquated “fund raising software” that isn’t flexible. Solutions like Crowdrise disrupt that, and bitcoin hits the nail on the head, as an easy payment layer.

4. This is gonna take a while for main stream USA to buy into this.Has any company offered workers the option to be paid in Bitcoin?

   1. There will be no chickens until there are eggs!Building a double sided marketplace is hard. Fred is doing his part to help it along.

   2. Many.

   3. A whole bunch of drug dealers, AFAIK.

      1. I can see that but what about an auto worker, why would he care?

         1. IRS doesn’t see BTC as a currency…so there might be tax implications. I read somewhere about a town sherif that negotiated pay in BTC.

5. Doesn’t Dwolla solve the transaction fee issue AND operate with a more widely used currency (USD) at this stage? Not saying BTC isn’t a great long term solution, but it’s like asking me to pay in German Marks – which are hard to come by (Sorry Mr. Messi).

   1. yes. although you are using the ACH system when using Dwolla and that is not free

      1. An ODFI for ACH is $0.02-$0.04 per transaction – pretty much free! It’s the fraud and lack of real-time ACH balance checking, identity verification, etc that’s the problem with traditional ACH. That’s changing.

6. You’re being kind with that 20% number.While NPs are to be admired for their missions, the way most run their organizations is beyond dreadful – with giant swaths of waste (sadly I see this second-hand as you know).I hope you are right about this. Would be great. Though getting a NP to get its act together is a very, very tall order. The few you mention here are absolutely outliers in this space and certainly when it comes to operating lean.

   1. that’s been my experience too. but entrepreneurship in non profits is a good thing and will bring necessary change to the sector

      1. @kirklove is right..many non-profits have huge costs in operations. I see that in foundations as well. Non profits ought to follow the Business Model Canvass to figure out how to operate. I am on the museum board at http://www.nationalww2museu…-and the staff is amazingly entrepreneurial. They run it just like a startup. Not a lot of bureaucracy, salaries are all in line-and they believe in the mission and execute like crazy.

         1. and the staff is amazingly entrepreneurial. They run it just like a startupWhat do you think is the key to that? Why are they able to pull that off (because I’m assuming I guess that that’s atypical)?

            1. Museum kick off date was Jun 6, 2000. You can imagine what fundraising was like after the crash. Then Katrina happened. Then the financial melt down in 2008. Outside circumstances make them run lean and think differently.If you have a member of your family that was in WW2, buy em a brick and commemorate their service. http://www.nationalww2museu…Now I have to persuade them to accept Bitcoin for Bricks!

   2. Universities too. From my tiny window on this world, close to impossibly broken.

      1. SchoolCoin ——–> programmable money that can’t be used for libraries and admin salaries etc….

         1. Is that real, or something you wish for?(Though I’m up for funding the library. The development office, not so much.)

   3. I think you’re talking about two different things. The 20% number is often just fundraising costs like donor development, and I’m skeptical that can go away.The other issue, which you rightly bring up, is the tiny percentage of donations that non profits actually use for their mission. There is far too much waste.One of the things I love about our Ethiopia school project is that it’s run by an organization funded via endowment, so 100% of the money we raise (less 3% to Stripe for some of it) ends up in the field, invested in the kids.That’s far too rare in the non profit world but it inspires me to work all the harder.

      1. You’re right Aaron, I was lumping it all together which in not the best way to do it. Sounds like you are doing it right! Congrats and best.

         1. I’m just glad you raised the point! It’s an important one.

   4. “with giant swaths of waste”The money saved means they care hire more people to push paper.

7. Seems like a slightly mixed message for them to price the event at $25, as opposed to 0.04 Bitcoin. 😉

   1. Ha!! Good point. I totally missed that contradiction.

      1. People are going to have a hard time with the entire conversion thing. Remember we never took up metrics in this country and there is a reason for that. Go figure what 30o Celsius “feels like”. No seat of the pants or gut. Everybody knows what $25 feels like.

         1. “Give 2.5 centimeters, take 1.6 kilometers” doesn’t have the same ring to it.

            1. Your 0.00003231 btc ? [1]And it’s not any fun to say “0.08078 btc” [2][1] .02 cents per http://preev.com/%5B2%5D fiffy sent

8. It pays for non-profits to begin building infrastructure now to take advantage of Bitcoin. The ecosystem is not big enough today to make much of a difference in their fundraising, but ten years from now that will change.

   1. What infrastructure is needed?

      1. you have to be able to take it, and understand it internally when it comes to large donations. The bitcoin universe isn’t large enough yet for many non-profits and it’s seen as too risky. Coinbase is developing infrastructure, but for many non-profits, it’s big corporate donors that make the difference.

         1. i don’t see this moving in the direction of large donations, but that’s just my 2 pesos. it’s value prop (to me) is in micro donations and cost reduction. A double whammy of value.

   2. If the horizon is 10 years (or 3 years whatever) why is that a front burner issue “building infrastructure now”? Plus it’s a death by a thousand needles thing not something that is going to drop like an ignored bridged one day. I would think they could wake up at any time and decide to take advantage of bitcoin if the need arose and the demand was there. Not clear they need to devote resources to it right now. I guess when Fred talks about it he should consider there are people who might have the same opinion and be prepared with a rebuttal.

9. Would love to go; Bitcoin-poor.Why the barrier to entry?

   1. because we are doing the thing i am talking aboutraising money for charity with bitcoins

      1. What about the non-profit crows that wants tp learn about using Bitcoin in their context from you?

      2. <thick skull=””>got itwill be there

         1. …and …cannot afford it. 🙁

            1. I bought a ticket but will not be able to attend. Let me know if you’d like mine, I can send it to you. Email me at [email protected]

10. Excellent discussion… another component that this might address is capturing a younger donor. The cost of donor acquisition is pretty high, but even after that, the donor averages over the age of 55. It would be nice to capture donors at age 25 or so…. allowing the NP spread the cost of cultivating the donor over 25 years versus 10

11. Anyone interested in alternative ways to eliminate the fees associated with donating to non-profits, Knox Payments charges NPOs only $0.18 flat per payment. You can see how much we’ve saved charities at thesimpledifference.com (it’s modest for now, but it’s always rising!)

    1. .International payments?JLM.

       1. Someday. Someday.

12. Last year I took a look at making easier (and less costly) for startups (for example) to transfer money to nonprofits / charities. There was not enough paine in process to come up with a motivating proposition. Everyone (donors, startups, charities) seemed happy (complacent) with the current friction-reducing methods that extract 10% to 20%. Also, the technical and processing capacity for most non-profits to switch/install anything is seriously minimal.

    1. That’s why you have to make it easy! But you’re absolutely incorrect about the non-profits not caring about their donation systems. They’re all ultra-focused on getting those costs down where they can, and the costs of processing checks and credit cards are too high. You have to make the fees RADICALLY lower to actually make an impact – that’s the problem most companies have. Very hard to radically reduce fees without a new system.

       1. Hi Tommy, I just looked at your site.. I applaud your efforts wholeheartedly. I considered your idea amongst others. I settled on calculating (the opportunity of) a pure API solution that does what thesimpledifference does but offering nothing but an API to every startup that wants to move money to NPOs for a LOW flat annual fee (paid for by the NPOs). After doing the math and the interviews (lots of them), I decided to move on to something else. I am going to be cheering for The Simple Difference. Best of luck 🙂

       2. the “contact us” link in the footer of your site does not seem to work..

    2. current friction-reducing methods that extractBecause in a sense you are spending someone else’s money or you are donating a gross amount of money which in your mind gives you the buzz.

13. bitcoin might save you on the 5%…but those non-profits have to pay *real* money for things that their cause needs…and to do that, they’ve got to pay the conversion cost from bitcoin to USD (et. all)…according to this link ( https://coinbase.com/docs/m… ) it’s still 1% + 0.15 per transaction.So *better* than 5%, but still not 100% goes to the charity…just saying…

    1. the first $1mm is free with Coinbase

       1. I Didn’t know that! Very awesome! Thanks!

       2. How would someone know that?(And Is that just something special for charities?)I’m not seeing that on the website at all. As I often say itshould be front and center and part of the message.For that matter “charities” should be a link or prominently mentionedon the home page as a category that they specifically cater to. (Especially with a deal like that).

          1. it’s right on the first page of their merchants page https://coinbase.com/merchantsthey have a bunch of businesseswallet/bankingbuy sell/brokeragemerchant/payment processingso they need to have multiple pages for each service

             1. Here is the clickstream for me to find that:coinbase homepage -> merchant link -> scroll to the middle of the page. Why I missed it. Even on the page it’s the same type and style as the rest. (Also appears at the bottom which is actually where I saw it first). And I missed it the first time. And I assume so did falicon. So would others then. People don’t study websites. They take a look and see if they get hooked.Not only does it need to be splashed at the top (cost is always a question in people’s mind) but it needs to be front and center top of homepage.Instead of “Coinbase is an international digital wallet that allows you to securely buy, use, and accept bitcoin currency””Coinbase is an international digital wallet that allows you to securely buy, use, and accept bitcoin currency and the first 1,000,000 of transactions are free after that only 1%”Separately, my brain is thinking “coinbase” when I think of “bitcoin” reminds me of “AOL is the Internet” back in the 90’s. (I used to laugh at that..)

             2. this is great advice. just sent to coinbase

             3. Great point. What you did there is enhance the articulation of their value proposition.

14. Coming from Kenya, I can tell you that charity money through traditional funnels is being siphoned off through creative and corrupt means to compound the waste. This will help. This is good.

15. Totally cool! Wish I could be there.

16. …man about town interview on Saturday….philanthropy talk on Monday…..publish tax returns on Wednesday?….announce running for office on Friday?

    1. i havent’ completed my tax returns for 2013 yet !

       1. Funny story. Years ago an this guy [1] was busted with $200,000 of cash at his housed.IRS couldn’t do anything about it because he hadn’t filed his tax return for the past year yet.Had he filed he would have had even more charges and spent more time in jail. (Tax evasion).This was a guy who had asked me for advice when he wanted to buy this small pharmacy if it was a good idea. I advised against it. Later he was making a boat load of money and my ex wife said “ha ha ha you were wrong”. The cover story (for the money) was that he had picked up some big nursing home accounts [2].Turns out he was dealing drugs.(Btw, I always file on Oct 15th.)[1] http://articles.philly.com/…[2] Separately he was a really nice guy from a nice family and you would have never expected him to do something like this. Never. I point this out because it’s part of the reason I’m so cynical with things after seeing stuff like this over the years.

17. What’s stopping the bitcoin community, once it matures, from charging transaction fees similar to those of the credit card payments companies?

    1. bitkarma

       1. The fact that there aren’t more / better responses to this question isn’t a good thing for Fred’s argument…

          1. I believe fees will be similar once you bake in all the extra services such as a FDIC-type insurance, etc, Still far better than the status quo…gov’t controlled/manipulated/depreciating currency

    2. dogecoin

18. I wonder if one of the side effects of BitCoin might be to create competition for credit cards and thus have them start lowering their merchant transaction fees?I know nothing of the internal workings of the credit card industry but as a former credit card merchant who operated a low margin business I know how painful it was to deal with what as essentially a triopoly (Visa+MC+Amex).

    1. .The big advantages of the current installed base of the existing credit card industry is the sheer breadth and depth of their installed base plus their willingness to backstop credit card fraud.I have seen written reports of as much as $190Bn in credit card fraud. Wow!JLM.

       1. I am surprised by the many payment forms that request individuals to write down CC #s on paper. This would include Federal, State, and Local government payment requests. Why not a QR code to accept BTC payment?

19. I think it’s more than just the savings on transaction costs: embracing bitcoin at this stage (when it’s still a fairly niche payment technology and hasn’t reached wide adoption yet) is a signal that the NP is thinking about their entire infrastructure differently, from donor development to donation collection. Those are the types of NPs I’ll be more inclined to support; it kills me when some of my favorite charities (with appropriately high rankings on Charity Watch) seem to think that the best way to get me to give them more money is by sending copious amounts of paper mail.

    1. I agree. mail is expensive….

       1. A buck an envelope.

    2. oooh. great point. i will add to my talk tonight

    3. Worth mentioning – Charity Navigator scores are improved significantly if you can move a lot of your payments off credit cards or expensive networks like Paypal/Amazon and onto cheap ACH or BTC.

20. Have any charities made Bitcoin a payment option yet? Also, I noticed a lot of charities have a $10 minimum fee on Crowdrise. Will that be the case with BTC as well?

21. .What has always bewildered me is the notion that BitCoin is a solution in search of a problem to justify its existence.As a guy who writes a few checks to charities and crooked (at least bent) politicians, I actually do the following:1. Write an Old School plain old paper check and deliver it at the event in an envelope. I keep my checkbook on my desk and write the check on the way to the event. I never bring my checkbook to resist the temptation to give more money;2. Send an eCheck from my checking account when I pay my bills using WFB;3. Send an eCheck from my Schwab account when I’m messing with such matters; or,4. Make a wire transfer from either WFB or Schwab when the notion hits me.None of these things cost me or the charity a penny. NONE.So, for me, why BitCoin?JLM.

    1. that’s like saying “i can fax so why do i need the internet”i literally heard many people say that in the early 90si am quite certain that you will look back at this comment in ten years and shake your head

       1. .I get your pointI don’t agree it is an apt analogy. I am just completely unconvinced. I am not trying to be unconvincedThe idea that the WFBs, Schwabs, USAAs of the world sit still while their franchise — digital movement of money — is shoplifted doesn’t make sense to me.Again, a solution looking for a problem?JLM.

          1. “The idea that the WFBs, Schwabs, USAAs of the world sit still while their franchise — digital movement of money — is shoplifted doesn’t make sense to ” ~ And with that we have the problem. Disruptive technology should be adopted and integrated. Not wrestled with. There are many case studies that provide evidence for the success of organizations that adopt change.

    2. ACH transactions have a cost associated with them. Wire transfers have an even larger cost. You may not see that cost but it is being paid by one of the organizations.

       1. Exactly. Wire transfer and their associated high costs sometimes seem to be unavoidable. I’d love to see Bitcoin emerge as a viable alternative for the ~$40 foreign outgoing wire transfer fees. What does it really cost the banks to perform this service? Pennies?

    3. @JLM:disqus you’re correct here. By paying by check in $US, you have a record of your donation (your cancelled check at a minimum), and the donation value is stable over time.If you make donations to 501(c)(3) charities in bitcoin,1. in what form do you get a receipt (as req’d for tax deduction purposes)? Presumably, a handwritten or letterhead note from the recipient is okay.2. Are bitcoin charitable donations okay with the IRS? I think that’s an affirmative.3. Bitcoin price is very volatile. Unless the charity operates on a 100% bitcoin basis, it will be subject to currency exchange rate risk. Risk could be mitigated by currency futures hedging, but that’s ridiculously complicated for a charity! 4. Finally, due to high bitcoin price volatility, the $US value of your donation will change between now and IRS filing time. You’ll probably need to use a basis method, like with marketable securities. That will be a hassle!

22. There still we be transaction costs – how will coinbase make money otherwise?

23. I think bitcoin is still a bit unstable to use for something as big & serious as donations.

24. The idea that the WFBs, Schwabs, USAAs of the world sit still while their franchise — digital movement of money — is shoplifted doesn’t make sense to ” ~ And with that we have the problem. Disruptive technology should be adopted and integrated. Not wrestled with. There are many case studies that provide evidence for the success of organizations that adopt change

25. the real question is not the size of the raise, but how much of it comes from the crowdrise user base (the crowdrise network) and how much comes from the charity’s existing supportersi prefer a model where there is a very nominal fee to take money from existing supporters but a much larger fee from the crowdrise network

26. I had some experience with a non-profit fund raising last year. Apparently http://www.convio.com/ dominates that market in NA, but their software is not flexible and entrenched.I think the new crowdfunding players (like Crowdrise and others) need to work on more integration inside the existing websites of these non-profits.

27. There’s no real additional value they give between, for example, $1 million of transactions vs $5 millionIf I understand your point (and I may not so let me know) that’s like saying it takes no more effort for a realtor to sell a $10,000,000 piece of real estate than a $8,000,000 piece of real estate. (I’ve purposelessly set the number close to avoid any extra expense or time it takes to sell a 10m vs. even say a 500k property although the same principle is true).The fact is it takes all types of customers to make a business go. You lose money on some customers and you make it up with the cheddar sometimes – the big wins. At the end of the day you go on for another day.Same could be said for, say, amazon. Why not sell a $95.00 product by tacking on $2.00 after all you are selling a 5.00 product and tacking on $2.00 (forget returns or cash flow in the example I’m trying to make a point).There are all sorts of reasons in business why you would charge more even when you don’t “need” to. One big reason is (like the dog licking you know what) is you can. The other is making hay when the sun shines and taking advantage of opportunity.

28. Another factor is the ability to issue a tax-deductible receipt. That’s intrinsic to the organization who is raising, but some integration is required. Without that, you’ll only get smaller checks.

29. Start one and compete on that basis.

30. what we’ve seen at Kickstarter, which is similar but not the same, is that in the small raises, it is mostly project creators bringing their network whereas in the large raises, it is the project going viral in the network (kickstarter in this case)my bet is the same thing will apply with crowdrise

31. is the service bringing $50k of value to a $1 million raise? Or is the value really $5k? There’s no additional work, certainly, and nominal cost.Charlie, as a business decision the only thing that matters is whether you will keep the customer long term on the existing model and/or open up an opportunity for someone else to grab that customer with a better pricing model (pigs get fat, hogs get slaughtered). [1] If you want to argue that is the case then fine and I would agree. If not why in the world would you not want to have a system designed to maximize profits (once again, to repeat, other than potentially losing money because of a competitive offering). Just to be a nice guy? What am I missing?[1] I’ve always thought that overpricing something at the start is a great way to get everyone and their uncle competing. They say “hey I can bake a cupcake and retail it for way less than $8 I’m going into this business”. They don’t go so fast if the cupcake is $1.99. Finding that exact point can be important to not be the hog that gets slaughtered.

32. Nothing simple about that. :)In all seriousness, I don’t think people are choosing those services on the basis of what happens if they are wildly successful, but rather, for a worst case scenario.

33. If you have a supply chain of real ingredients and a product with a shelf life you are hardly in a simple biz my friend.

34. That’s right – it’s like Dwolla without the network, so you don’t have to make an account to use it. From a business perspective, we also own our bank login API and it’s significantly faster and more accurate than the third parties in the market today (although there are some up and comers in that market that look extremely promising!)

35. Maybe he already has. @ccrystle:disqus is very knowledgable on this front.

36. Well, I was sort of hoping he’d respond with a link!

37. Welcome to my muddled brain!

38. how much of it comes from the crowdrise user base (the crowdrise network) …..but a much larger fee from the crowdrise networkGood perspective and way to sell it.