Why cryptocurrencies are exciting news for charities
It’s time to rethink money: new currencies are being created in the digital world. Technologies, not central banks, are now in charge of making sure that currencies remain secure.
Back in 2017, the economy was booming. Bitcoin prices shot to their highest level, and so did the public’s awareness of this currency: it was like the gold rush for cryptocurrencies,’ says Marius Messerli, a cryptocurrency investor. A software developer, Messerli sold his company and has been focusing on Bitcoin and other cryptocurrencies since 2013. ‘Cryptocurrency prices have corrected themselves over the past year,’ says Messerli. As part of this, Bitcoin (BTC) has once again risen to amount to 70 percent of the market capitalisation of all 1,000 or so cryptocurrencies. Messerli explains that things have quietened down a bit in 2019. He believes that there is a consolidation phase underway: ‘Lots of investors are waiting to see what Bitcoin and its challengers are going to do over the next few months, and how institutional investors are going to act.’
Tax expert Thomas Linder, from the law, tax and compliance firm MME, also talks of a phase of consolidation. He is an expert in crypto charity funds, and has been working with blockchain projects since 2013. He assisted with setting up the charity Ethereum, which is now the second largest cryptocurrency. Ethereum is now just one of many crypto charity funds established in Switzerland. Linder gives two reasons why people in Switzerland are opting for the structure of a charity: ‘The concept of the blockchain is a good fit for a political system shaped by decentralisation, co-determination and direct democracy. And a charity is considered to be an ideal legal structure because it is only obliged to pursue its charitable purposes, meaning that it is protected against vested interests. It is hard to change a charity’s purposes, and project sponsors can trust that their funds are being used to these ends.’
Transparency from one person to the next
‘The currency question wasn’t our top priority when we set up Ethereum. It was about developing a decentralised technology that was independent of banks or other intermediaries, on a global scale,’ says Thomas Linder. In simple terms, the blockchain meets two key requirements. First off, unlike with traditional currencies digitally posted by banks, cryptocurrencies are transferred directly from one person to the next. To do this, you need an electronic wallet. The money flows straight from this wallet to the recipient’s wallet, without passing through a bank. The transfer is not guaranteed by an institution, but by the blockchain, which stores all the transactions that take place. And secondly, the data is publicly accessible and transparent. ‘Just this week, I saw that a transaction of 300 million dollars had taken place,’ says Marius Messerli. The blockchain stores all the transactions. For Bitcoin, the addresses of the sender and recipients, plus the amount transferred, can be seen by anyone at any time. However, the general public usually only know the people behind these addresses if the people in question make this information available. As a result, Bitcoin is called ‘pseudonymous’, rather than ‘anonymous’.
Even though Bitcoin, Ethereum and all the rest are based on technology, Marius Messerli thinks that the key lies in the currency aspect itself: ‘Without that, nobody would be talking about them.’ That’s why he takes a positive stance on Libra, a currency being planned by Facebook, as Facebook’s activities are guaranteed to attract the attention of the public. As he explains, ‘Libra will force politicians to get to grips with this topic.’ Marius Messerli thinks it is only logical that the USA, in particular, is beginning to get interested in this issue. ‘If someone set up a cryptocurrency that was independent of the dollar, the USA would lose its position of being the leading monetary power.’
Effective impact monitoring
Transparency and traceability mean that cryptocurrencies are also exciting news for charities. ‘For example, if I want to support a project in a developing country, using a cryptocurrency enables me to check whether the money has actually made it to the project in question, and where it’s gone from there,’ says Thomas Linder. This equates to effective impact monitoring. Independence from state institutions is an advantage that ensures secure funding in countries with unstable political systems or insecure currencies. Marius Messerli also gives another example of a major area of potential: ‘If I put out a call for donations in a cryptocurrency, people can donate in the same way, no matter where in the world they’re based.’
Bitcoin Bitcoin, set up in 2009, was the first cryptocurrency. Satoshi Nakamoto was behind it, but we still do not know whether Nakamoto was the pseudonym for a person or a group. In 2008, Nakamoto published a white paper describing the basics of this cryptocurrency. www.bitcoin.org www.ethereum.org