Philanthropy on the Blockchain

Grapevine’s founder on how DAOs and giving circles increasingly intersect

June 2024
December 2023
June 17, 2024
Supported By :
Magic Cabinet

This article was originally published by the Dorothy A. Johnson Center for Philanthropy; read the original article here.

I often talk about the power of collecting giving, specifically people coming together to pool their donations and collaborate around where to give their combined funds through giving circles. My organization, Grapevine, provides an online home for these groups, with a suite of tools and services that enable people to connect and collaborate in this democratic process.

Recently, the rise of decentralized autonomous organizations (DAOs) has become an increasingly frequent part of my conversations. A DAO is an organization that is run on the blockchain and entirely directed by its members — as opposed to one centralized team or person holding all of the decision-making power.

As people hear more about this new model — one where individuals collaborate online to pool resources and democratically decide what to do with them — I hear them asking, “Wait a minute. Isn’t that just like a giving circle?” The answer is yes, it is!

This growing blockchain movement and the growing collective giving movement have started to collide.

New Moves to Put Philanthropy Onto the Blockchain

Giving circles are a form of collective giving (learn more at WhatisaGivingCircle.com). A giving circle brings people together to collectively pool their donations and decide together how to direct the funds. They can be neighbors coming together to improve their local community, identity groups supporting others from within their own community, employees supporting the cause of their Employee Resource Group, and more.

For example, the Black Trans Lives Thrive giving circle pools $25 monthly donations from their members. Those members then vote on which organization run by and for Black trans women they’ll support with their funds.

This model of collective giving is a grassroots movement in the United States that started in the early 1990s and has already moved over billions of dollars. Many in our sector and beyond are looking to giving circles as a primary vehicle for democratizing philanthropy. They offer an alternative structure that places decision-making into a broader base of hands that are often closer to the issues and communities that funds are intended to impact.

DAOs, meanwhile, are collaborative organizations built on the blockchain to accomplish a particular goal or task.

As mentioned above, a DAO is an organization (with any purpose) where control is spread out amongst all of its stakeholders, rather than centralized and hierarchical. When people buy into a DAO, they own part of the DAO and can vote on what the DAO does with its resources. DAOs use smart contracts and governance tokens on the blockchain to ensure trust and enable participants to make consensus decisions on how the organization’s resources are allocated.

DAOs are part of the web3 movement that is decentralizing the internet by building on public blockchains. You can think of web3 as a kind of bookkeeping where many computers at once host data that’s searchable by anyone. It’s operated by users collectively, rather than a central authority.

People can buy or are given tokens for participating in web3; those tokens can be used to vote on decisions and can even accrue value. This version stands in stark contrast to web2, which is defined by platforms like Facebook and Google, and the centralization of huge amounts of user data by companies that are run by and for their stockholders and their interests. Unsurprisingly, those interests are not always the same interests as web2’s users’.

As the DAO movement has grown, the variety of DAO types has grown as well. Today, there are DAOs focused on investing and DAOs for building new products, DAOs for socializing, and more. While other DAOs — like the MolochDAO — do pool money and give grants to support web3 projects, Kimbal Musk’s Big Green DAO is the first one we’ve seen that is specifically designed to support nonprofits.

How are DAOs and giving circles similar and different?

Community, collaboration, and collective action are core parts of both the giving circle and DAO models. Their key differences are defined by the types of communities they engage and the tools they use to collaborate.

For example, the giving circle movement is primarily driven by women (Bearman et al, 2017, p. 5), and the web3 DAO movement is primarily driven by men (Fortis, 2021), although both of these are considered to be diversifying with their continued growth.

Traditional giving circles meet in-person or online and collaborate with digital collaboration tools and payment rails, such as the ones we offer on Grapevine, or more traditional channels like telephones and websites. DAOs often connect via online discord groups and collaborate using governance tokens and the payment rails of web3.

So, what happens when these two models combine? I classify the Big Green DAO as an evolutionary innovation that takes this decades’ old model of collective giving and places it on the blockchain. This is an exciting step in furthering the work of disrupting philanthropy and creating more inclusive and democratic models of giving that many in the philanthropic space have been pushing forward for years through collective giving, trust-based philanthropy, participatory philanthropy, and more.

Just as giving circles in the United States have evolved from other community-based giving models — like tandas, susus, self-help groups, and more, found in cultures around the world that go back centuries — the giving-focused DAO is an evolution of giving circles.

The Exciting Potential of Giving DAOs

Collaboration between the broader web3 and philanthropic communities is clearly on the rise. In its most simple and widely adopted form, this trend is being driven by nonprofits that are increasingly accepting cryptocurrency donations. While it’s important that nonprofits can tap into the vast and growing crypto wealth to fuel their work, this level of engagement with the blockchain technologies is largely surface-level.

I believe that the Giving DAO model represents an opportunity to leverage blockchain technology to move collective giving forward in new and exciting ways. This is because it combines what I call Social Giving 3.0 with web3, whereas Kickstarter’s crowdfunding model is combining Social Giving 2.0 with web3.

Social Giving 1.0: Galas and Events

Philanthropy has always been social; the future is no different. What is different, is the evolution of social giving toward models that build social capital (instead of spending it) to make a bigger difference.

We started with Social Giving 1.0, which is characterized by galas and other social events that enabled donors to introduce their contacts to the work of a nonprofit. This model draws upon existing social models that people would come together around — like dinners and parties — and injects a nonprofit mission. This model can work, but is expensive and inefficient and doesn’t often convert new donors beyond the one-time event.

Social Giving 2.0: Crowdfunding

Social Giving 2.0 is characterized by crowdfunding and p2p platforms like Facebook and GoFundMe that enable anyone to fundraise for charitable projects and 501(c)3 nonprofits.

This model relies on more basic psycho-dynamics like social pressure to succeed and is typically driven by a one-time campaign. This works, but spending down social capital to make a difference is exhausting and the one-time nature of these donations and interactions means these campaigns must be launched over and over again to generate ongoing support. Crowdfunding fatigue is a real and growing issue for this model.

Social Giving 3.0: Crowdgranting

I consider collaboration to be the core of Social Giving 3.0, which is what we see driving the current growth of giving circles. This form of social giving, or crowdgranting, allows smaller, more grassroots donors to become involved with philanthropy at a deeper level through collaboration. This is the model that we at Grapevine believe is the future of giving, as it leverages more meaningful drivers of engagement like social proof, social connection, and agency to align these with personal passion.

In short, Social Giving 3.0 builds social capital through the process of making a difference, as opposed to the 2.0 model that spends social capital to make a difference.

Moving giving circles onto the blockchain through Giving DAOs has the potential to propel our move into Social Giving 3.0 much more quickly. Web3 tools — like smart contracts, governance tokens, and payment rails — that scale trust and collaboration between larger and more distributed groups of individuals can dramatically scale collective giving.

The 20th century was defined by hyper-consumption and the 21st century is being defined by collaborative consumption, according to Rachel Botsman, a leading expert and author on trust in the modern world. The cooperation economy is upon us and is driving the adoption of more decentralized, democratic, and peer-to-peer models of consuming and giving. Giving circles in the philanthropy space and DAOs in the digital space are two exciting demonstrations of this trend.

Let’s learn from each other, collaborate, and move forward faster together in building a more democratic, inclusive, and impactful future of philanthropy. We at Grapevine are excited to see where the collision of these two worlds leads and intend to be an active partner and participant in driving the next wave.

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