What are NFTs?
And Should Nonprofits Care?

Lou
Kotsinis

If you’ve spent any time on the web in the last year, you will have come across the term NFT or, Non-Fungible Token. Now, if you’ve been writing these off as money people can’t use to buy mushrooms, I recommend pausing and learning more, because NFTs are—and will be—a thing. First, they represent a core component of the next iteration of the web (“Web 3.0”).  But secondly, NFTs can be highly profitable. So, I want to use this post to explore how a nonprofit NFT could benefit your organization. 

Before we can discuss the benefits of a nonprofit NFT, we first have to define what it is – but before that happens, you’ll need to have a basic understanding of the ecosphere that produces and distributes the value of an NFT.  So let’s start by defining some key terms:

Cryptocurrency:

Digital currency that only exists electronically. There are many different types, but Bitcoin and Ethereum are the two most widely accepted forms. Cryptocurrency is created through a process called “mining,” which entails using computer power to solve complicated mathematical problems that in turn “produces” the coin. Cryptocurrency production and transactions (selling and buying of crypto) are then documented on the blockchain.  

The Blockchain:

A global “digital ledger” that keeps tabs on every cryptocurrency transaction that’s ever occurred. The blockchain is decentralized, meaning that users, not third-party entities (such as banks), can keep track of and cross-check the transaction entries. The blockchain, in effect, is what keeps everyone honest in the world of digital currency and commerce. 

The foundational concept behind blockchain and cryptocurrency transactions is that they are in effect, simply numbers on a spreadsheet—not paper money placed in a cash register, as in traditional commerce. Given that users, not third-party entities, validate crypto transactions, the blockchain empowers individual users to conduct open and traceable transactions. 

So, What is an NFT? 

NFT stands for non-fungible token. “Non-fungible” basically means that it’s unique and can’t be replicated. NFTs act like a digital certificate of ownership (comparable to having a digital signature) and allow you to buy and sell ownership of unique digital items, while keeping track of who owns them using the blockchain. Non-fungible here also means that there is no consistent exchange rate, so prices can fluctuate. Seen as “exclusive” entities, NFTs create scarcity and thus can be driven up (or down) in price.

How can a Nonprofit NFT benefit my organization? 

Nonprofits can purchase or create NFTs to auction off for fundraising purposes. They can also court individuals and entities that are selling NFTs and entice them to donate proceeds towards their cause.  

Here are some examples: Last December, Macy’s sold NFTs of classic balloons from past Thanksgiving Day parades. The campaign was a success, with one NFT fetching tens of thousands of dollars to donate to the Make-A-Wish Foundation. Or, there’s the instance of  Twitter CEO Jack Dorsey selling his first tweet for $2.9 million. He donated the proceeds to Give Directly’s Africa Response.

For your nonprofit NFT, consider what your organization could auction off that already exists. You might review archives to see if there are any donated pieces of artwork or content (examples might include a poster for an event or an excerpt of writing) to turn into an NFT—creating a digital version for exclusivity.  Along with the assets, contemplate which supporters might be interested in your campaign. 

Taking it a step further, you could commission an artist aligned with your cause to create original artwork that could be auctioned. Because of the nature of how NFTs work, each subsequent sale or exchange of the NFT will also be tracked and the artist, and/or your non-profit could receive commission for them, depending on the rules placed on the NFT.

Bringing it all together

In December, I wrote about how donations to nonprofits via cryptocurrency are exploding. Accordingly, as that trend increases and as more people embrace the blockchain and crypto transactions, nonprofits too will begin to explore how they can make the most of this space-that includes accessing and selling NFTs.

If you’re in nonprofit and/or purpose-driven organizational leadership, I believe that now is the time to learn about and participate in these new and exciting areas of revenue generation. This post was just the first step in that process.  I’ll be writing more about this topic in future blogs, but below, I’ve listed some resources to help get you started. If you’d like to speak further on establishing and marketing your own nonprofit NFT, I’m only an email away. 

NFT’s Explained

The Ethereum Platform

What is Cryptocurrency?  

TAGS: Blockchain, Cryptocurrency, Metaverse, NFTs