NFTs: The Next Frontier in the Social Impact Space
One of the most surprising stories in the crypto space in 2021 has been the incredible growth of NFTs. Not only have we seen enormous growth in the sales of NFTs, which grew from $13.7 million in the first half of 2020, to a whopping $2.5 billing in the second quarter of 2021 alone, but we have also seen thousands of talented new artists join the space, and many exciting social impact projects make use of the technology for social good. But before we get ahead of ourselves, what exactly are NFTs?
NFTs, or non-fungible tokens, are digital assets, such as artwork or music, which are minted on a blockchain so that they can be proven to be unique, thus creating scarcity. NFTs create a whole new set of opportunities for artists, musicians, developers, and content creators who wish to cut out the middleman, such as the auction house or independent authenticator, and provide their works directly to their customers at a reasonable cost to themselves. NFTs provide a unique way for individuals to own a piece of history, directly supporting artists and content creators, while being a part of a unique and growing space.
One of the more exciting developments in the NFT space, has been the purposeful social impact projects that have arisen. These projects have helped bring awareness and funding to many important social causes, and have been another great example of the power of crypto and blockchain in contributing to social good.
For this blog, we will briefly highlight some of the exciting ways that this innovative and exciting technology intersects with the social impact sector, and some interesting use cases for the future.
NFT Fundraising
One of the most obvious use cases for NFTs in the social impact sector is fundraising for charitable causes. There have been many high-profile examples of NFTs being sold, with the proceeds being contributed to charitable causes. One example of this involves Beeple, a well-known NFT creator, selling his Ocean Front NFT for $6 million and donating the proceeds to The Open Earth Foundation.
However, the use cases go well beyond one-off donations from NFT whales, and there are many projects and communities currently collaborating to leverage NFT projects for social good. One example of this is NFT4Good, which recently sold NFT trading cards of Asian Celebrities, with the proceeds of $80,000 going to #HateIsAVirus, an Asian American and Pacific Islander oriented anti-racism non-profit.
Even corporations are beginning to get on board with the idea, with one example being the multi-national corporation Proctor & Gamble, which manufactures Charmin toilet paper. P&G auctioned off toilet paper-inspired NFTs, or “NFTPs” (well played), with proceeds going to the charity Direct Relief.
NFTs can also go beyond digital assets, as it is possible to tokenize physical assets as well. For example, if a famous artist donated a painting to a charity, the charity could tokenize it, and then auction the token online, enabling them to reach a broader audience than through traditional art auctions. They could even fractionalize it, so that multiple investors could come on board. Having a tokenized asset can help with liquidity, as you don’t have to physically display or transport the item for sale, get it authenticated prior to sale, etc., which can make it highly attractive to investors. One other exciting aspect of NFTs is that you can work a royalty structure into it, so that each time it is re-sold, a portion of the sale goes to the original seller. In theory, this could enable charities to earn passive revenue to supplement their operations.
In the near future, I’m confident that we will begin seeing more charities dealing directly in NFTs as part of their normal fundraising campaigns. Some charities are already starting to do this, with one example being Virunga National Park, the organization that oversees the famous protected area and UNESCO heritage site in Africa. This amazing organization directly lists NFTs as a donation option on their website.
One example of a potential future use case is using NFTs for a charitable capital campaign, when a charity raises funds for a new capital project such as a hospital or homeless shelter. It is common in these campaigns for funders to “sponsor” certain components of the capital project, such as a room in the hospital, or a resource room in the homeless shelter. NFTs could be tied to the components of a capital campaign, enabling donors to purchase NFTs with artwork themed to the campaign, in which the NFT is tied to a specific component of the capital campaign.
Another potential way that NFTs can interact with the social impact sector is through DAOs, or Decentralized Autonomous Organizations. Vitalik Buterin, founder of Ethereum, suggested the possibility of setting up a DAO, with a decentralized governance structure, to sanction NFTs when it was verified that a percentage of the proceeds would go to charitable causes.
Overall, there are an infinite number of use cases when it comes to fundraising and social impact, with only a few examples and use cases mentioned above. This topic could have a dozen blog posts of its own (which hasn’t yet been ruled out!) as there are many amazing projects currently underway using NFTs to raise funds for worthy causes. But for now, we will move on to the next way that NFTs will benefit the social impact sector, and that is through greater decentralization.
Greater Decentralization and Increased Opportunity
One of the primary benefits of NFTs, from a social impact perspective, is that it comes with greater decentralization in traditionally prohibitive creative spaces. Let’s look at musicians, for example. For records, record labels typically pay out only 10-15% of album retail, with the vast majority going back to the label, and their wealthy owners or shareholders. Spotify, on the other hand, pays an average royalty of a measly $0.004 per stream. These “middleman organizations” funnel profits away from artists, and into the pockets of the likely already rich owners or shareholders.
For independent artists and creators, it can be hard to “make it” without the backing of a major record label, talent agency, art gallery, etc., and it can be extremely difficult to get your foot in the door unless you have the connections. When there is less centralization, it often means there is more opportunity for individuals, especially those from marginalized populations who would have had to face off against inequitable systems and power structures.
In a decentralized system, one no longer must go through these middleman organizations, which funnel profits away from those most in need, and can instead bring their content directly to the market. An artist could bring their art directly to the market through an NFT auction, or a musician could tokenize their new single, and sell it as an NFT without having to give the vast majority of the profits back to the record label.
In a world where most of the famous artists, musicians, content creators come from wealthy Western nations, this could help even the playing field, and create more opportunities for a diversity of content creators to reach their audience. There are already organizations, such as Black NFT Art, which aims to help individuals from an underserved population in this space make a name for themselves in the art community.
In a truly decentralized system, everyone, in theory, has the same opportunity. In reality, those from wealthier backgrounds will of course always have greater opportunity. Because, with wealth, comes more opportunities for mentorship and training, greater access to resources, and often more time to dedicate to your endeavours.
That being said, the legacy creative sector is broken, and NFTs are a massive step up with huge potential to cut out exploitative middleman organizations, and create more value for the artists themselves. Who knows, maybe in time the term “starving artist” will fade away!
Learning more about NFTs
The NFT space has potential for so much innovation, especially as it comes to the social impact sector. Despite it being a relatively new space, there are already many amazing resources online to help you learn about and engage with NFTs whether you are an artist, investor, or curious spectator. As a starting point, I recommend you check out my previous blog post, Five high quality free resources to learn about NFTs, for some great free resources on NFTs for beginners.
It is clear that the space has limitless potential, and I truly believe that NFTs will be a game changer for charities, non-profits, and social causes all over the world. That being said, I look forward to creating more posts in the future about NFTs and the social impact sector, because this post barely scratches the surface.
Check out our recent podcast episode, where we dive deeper into the topic of NFTs and social impact!
What are some of the other use cases of NFTs when it comes to the social impact space? Tweet us at @Crypto_Altruism, we’d love to hear from you.
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