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From ones and zeros to dollars and cents

Michael Theis

AP – On GivingTuesday, officials at New Jersey-based healthcare charity Sostento learned they would receive a donation of roughly USD58,000 by the end of the week.

The donation was unlike any the nonprofit had received before. It was derived from the proceeds of the sale of a nonfungible token (NFT) for a digital artwork called The NFT Guild Philanthropist – Healthcare Heroes.

You’ve likely heard of NFTs. They’re built on the same technology that underlies digital currencies like Bitcoin and Ethereum. These digital assets shot into the limelight in March after Mike Winkelman, known by his artist moniker Beeple, auctioned off an NFT for USD69 million at Christie’s. Think of an NFT as a deed or token associated with a work of digital art, like an image, an audio recording, or a video.

That token can be used to keep track of the file’s provenance and sale history, allowing someone to prove ownership of the asset.

While the technology was created to give artists more control over their work, NFTs have spawned a frenzy as collectors look to cash in. As that speculation intensifies, a growing number of charities have begun to explore fundraising efforts tied to NFTs. Although some NFT charity auctions have yielded eye-popping sums, others have had limited success. Complicating matters, NFTs use new technologies that are generating lots of questions for accountants and regulators.

Chimpanzee Cheetah painting an artwork at the Save the Chimps sanctuary in Fort Pierce, Florida. PHOTO: AP

The “Guild Philanthropist” NFT sold for 6.3 Ethereum, the equivalent of roughly USD28,000. The artist provided a donation to match the sale price.

For Sostento, accepting the donation was fairly simple. The organisation worked with Giving Block, a non-profit that helps other charities accept cryptocurrency, to convert the crypto into US dollars. The NFT will also continue to benefit charities in the future. It was created with a provision that obliges proceeds of future sales to be given to charity.

But there is still a steep learning curve associated with NFTs and cryptocurrency, said Chief Executive Officer Joe Agoada of Sostento, which develops software and communication products for the healthcare industry.

Accountants advising Sostento cautioned against accepting NFTs and other cryptocurrency directly. Working with an intermediary to convert the NFT proceeds from ones and zeros to dollars and cents was crucial.

“It took a long time to understand how we could actually make this possible,” said Agoada.

Sostento wasn’t the only group to see a windfall from these novel tokens last week. Officials at Giving Block said they helped process roughly USD1 million in charitable donations on GivingTuesday derived from the proceeds of NFT auctions. And on December 7, Giving Block will launch the inaugural NFTuesday, a day focussed on driving more NFT-derived philanthropy.

Some non-profits have entered the NFT fray as a way to reach a broader audience.

In July, officials at Save the Chimps, a chimpanzee refuge in Fort Pierce, Florida, scanned finger paintings done by three of its residents: Cheetah, Clay, and Tootie.

From those scans, they created a series of NFTs and listed them for auction on Truesy, an NFT marketplace.

Think of them like prints of a photograph. They were priced to sell at a value equivalent to about USD25. Save the Chimps set up its NFT to provide a royalty to the charity in the event of future sales.

The fundraising haul so far? Just a few hundred dollars.

“The exciting part was they were all first-time donors,” said the group’s Marketing Director Sara Halpert.

That’s the appeal for many charities that have started to dabble in the world of NFTs and, more broadly, cryptocurrency.

These collectors and investors could be a valuable new audience for fundraisers to tap, said Giving Block CEO Pat Duffy. They tend to be richer-than-average, financially savvy younger donors who are very active online.

“These are people a major-gifts officer should be connecting with and talking to,” said Duffy.