Keep Cool Deep Dive #0005: CHANGE

WTF is Programmable Philanthropy

Here’s a thought experiment. Imagine that Vincent van Gogh wanted 5% of the proceeds from all his paintings to go to a charity that benefited the mentally ill. Nevermind that such charities were probably few and far in between in the 19th century. How much money would van Gogh have raised? 

Unfortunately, the answer is probably roughly ~$0 USD in present day terms, since van Gogh only rose to international fame posthumously .

But what if van Gogh grew up as a Gen Zer? He would have had a chance at more charitable impact, even if his work didn’t take off until 2050 or even 2150. 

As cryptocurrencies and digital goods boomed in both price and media mind share this summer, a lot of the world got a crash course in the concept of “web3.” web3 is the third stage in an increasingly referenced framework that splits the internet’s history into three epochs. “web1” was the foundation of the internet, characterized by open protocols and static web pages. In “web2” we’ve seen the proliferation of user-generated content; the internet has become a lot more dynamic and social. And at the same time, a number of giant companies have monopolized the majority of the spoils . 

What does 
web3 look like? The concept gestures at a (potential) future in which more and more transactions and interactions on the internet are executed programmatically, without the need for third parties to help facilitate them. Transactions in a web3 world are also easily verifiable since they are coded into applications and contracts that are transparent. For a deeper dive via Twitter thread on other potential implications, see here .

We recently sat down with Sonia Nigam, CEO of Change, to discuss how her business is positioning itself for this programmable future. 
Change is building the go-to donation infrastructure platform for nonprofits to raise funds from brands and their customers (for example, think of donation options built into a rewards platform). 

Here’s how Nigam sees web3 impacting Change’s evolution: 

“We see programmable philanthropy as the next frontier of fundraising. Blockchains are an interesting technology because of how transparent they are.” 

For those of us who may be less familiar with WTF we’re talking about here, let’s work through some examples. Artists frequently specify that a certain percentage of proceeds from their artwork benefit causes of their choice . The same is true of digital artists in the web3 world who work with 
non-fungible tokens (“NFT”s), which are unique, transferrable receipts of ownership . One benefit of NFTs is that all details of how proceeds from sales should be handled can be programmed directly into their ‘smart’ contracts, i.e. contracts that are executed by code. Here’s Nigam with more: 

“Usually if an artist says they’re going to donate 10% of the proceeds for a specific cause, that’s a black box; you don’t know where that money is actually going. On blockchains everything is public, everything is attributable.”    

Further, on many marketplaces, NFTs are programmed with rules for how royalties from secondary sales (i.e. re-sales after the original action) should accrue as well. This brings us back to one Mr. van Gogh . Not only would the 21st century version of van Gogh be able to raise money for charity on the initial auctions of his pieces with ease. All future re-sales of his artwork could also include set royalties for the causes of his choice in perpetuity. Perhaps even drawings of his that were 
discovered centuries after his death could incorporate his original vision for how the proceeds should be allocated. 

The web3 version of philanthropy is thus not just programmable. It’s infinitely repeatable . Here’s how Nigam described it: 

“Today, if you go and buy a t-shirt online, and the original seller stipulates that 10% of proceeds go towards carbon removals, if you go to eBay and resell it, you’re probably not going to hold yourself to that same donation percentage. With smart contracts, because it's baked into the product, even on re-sale, we’re seeing the ethos of the product survive.”

Finally, another benefit of bringing philanthropy into the digital age will be efficiency. You’d be surprised how frequently 5-10% of a donation you make goes to a payment processor, Donor Advised Fund, or some other third party company. One of the key promises of web3 and blockchain technology is eliminating middle-men where possible. 

As an example, in the world of remittances, this means 
less money for companies like Western Union when people opt to use Bitcoin instead. In the world of philanthropy? Change is working hard to ensure a higher percentage of each dollar given actually flows through to nonprofits .

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Non-Fungible… Transfers? Encoding philanthropy 

Change has formed partnerships with NFT marketplaces to make programmable philanthropy a reality. Among the marketplaces with whom Change is working is SuperRare, which has become a go-to platform for some of the most stellar digital artists in the space , including Beeple, whose $69M auction made headlines back in March . Nigam described her partnership with SuperRare as follows: 

“With SuperRare, our dream is that when creators specify their sales prices and royalty fees, you also have a section where you can choose nonprofits and select a percentage. By making it a seamless part of the experience, we are going to empower the type of person who wants to give 1% or 2%, but doesn’t have the time to manage the logistics behind it. We’re trying to unlock a whole world of digital giving that we think right now is completely untapped.”

So far the work is in the proof of concept phase. One of the first pilots Change and SuperRare worked on was an auction from documentary photographer 
Rizakan Kumas, whose work concentrates on the Middle East. As the Afghan refugee crisis caught the world’s attention last month, Kumas auctioned an NFT of a photograph of Afghani children on SuperRarePranksy, a notable NFT collector, won the NFT auction with a bid worth roughly $30,000 . 

Nigam describes what happened next with palpable excitement : 

“We were able to route the funds directly to the nonprofit, all seamless, all transparent, no work on the part of the artist or nonprofit necessary.”  

Sales volume for NFT art is ballooning. And charitable contributions are already flowing too : Art Blocks, a project that curates generative NFT projects from different artists, 
raised more than $20M (you read that right) for different charities in the month of August alone .

Art Blocks Curated: Fragments of an Infinite Field

The work that Change is doing to ensure that these transactions happen in a secure, seamless, and replicable fashion is paramount. This moves us out of a world where donations are elective, opaque, and logistically burdensome. 

And NFTs are just the tip of the iceberg (ideally). There’s an even larger opportunity to usher in a new age of programmable philanthropy that could encompass many of the transactions that we engage in in the future. Let’s explore where this is headed.


Programmable decarbonization 

NFTs with built-in charitable contributions are just one en vogue example of what the future of programmable philanthropy might look like. Beyond pixelated profile pictures and on-chain art, where else can the concept of programmable philanthropy manifest? 

The answer, it turns out, is almost everywhere. As notes Nigam,

“NFTs are just smart contracts. The underlying technology is all the same.” 

As web3 moves us towards a future in which more and more transactions are facilitated by smart contracts, the opportunity to integrate charitable contributions into said code are innumerable. 

How do you get more people to actually integrate this functionality into applications? One of the best ways is to provide simple tools and documentation for developers. And that’s exactly what Change is doing. Nigam shared that Change is already working (currently in stealth) with a major blockchain to offer open-source dev tools that will allow anyone building on the protocol to integrate decarbonization directly into their applications. 

Why decarbonization? Blockchains , particularly those based on 
proof-of-work (“PoW”) based consensus mechanisms, have faced considerable scrutiny this year due to their networks' high electricity consumption . You’ve read the headlines : “The BitCoin network was responsible for as many emissions as [insert small European nation here] last year.”  

Here’s Nigam on where their blockchain partnership project is headed:   

“The vision with [redacted] is to put out dev tools so that any developer building on the chain can introduce carbon removals or climate contributions.” 

What does this mean for climate tech more broadly?  Well, based on the initial project Change is spearheading, we can start to appreciate the promise and scale that programmable decarbonization could have . 

The dev tools that Change is building for one blockchain are a great example of tech that will allow applications built on top of the protocol to deal with these concerns squarely, assuaging user’s carbon footprint concerns while adhering to the web3 ethos of building a better future. 

Perhaps we can imagine even more ambitious goals here however, such as applications that are not only carbon neutral, but carbon negative . 

One blockchain, Celo, claims to operate with a 
carbon-negative footprint. Celo sets aside funds to its Carbon Offsetting Fund in parallel to the rewards it provides to the nodes that validate each new set of blocks in its blockchain. These funds more than fully offset the carbon footprint from the electricity used in its consensus mechanism. Based on our research this is executed more manually than not as of yet… but it’s a step in the right direction .

Under the umbrella of programmable philanthropy that we’ve explored in this piece, the potential for programmable decarbonization is particularly exciting (especially for us at Keep Cool ). Whether it’s future apps using Change’s dev tools or entire protocols committing to a carbon-negative footprint , as transaction volume scales, we could see the most popular of these turn into voracious carbon vacuums. 

Part of the beauty of this future state lies in the automatic, recurring nature carbon removals would have if programmed directly into applications or even protocols . Moving carbon removals from an elective choice to a process enshrined in code would be no small step. 

That’s not where the value of programmable decarbonization ends however. Nigam shared that given the cutting-edge nature of the web3 world, many of Change’s partners opt to direct their climate impact funds towards more ‘frontier’ removal technologies. 

“In the web3 industry, there’s less onus on international verification. People are working on a technology that’s not internationally verified after all. That’s their bread and butter . They’re much more willing to make riskier investments in frontier carbon removal technologies.”

Frontier carbon removal projects are also those that receive the most incremental benefit from consumer demand. These technologies, like Charm Industrial’s 
crop waste → bio-oil conversion and carbon sequestration system, need capital to help prove the viability of their processes and to subsequently scale them. In turn, some of these frontier removal technologies might prove to be more effective and permanent 10-20 years down the line than existing technologies that provide the bulk of carbon removals today. And even if they’re only a complement to existing solutions … we need all the help we can get. 


The Challenges

Of course, it’s easy to get swept up in the hype, overstate the ease and simplicity of what we’re discussing here, and to frame all web3 technology as a panacea for the world’s ills. In practice, there’s a lot of work behind the scenes that still needs to happen . 

As those of us in the trenches on the climate side of things know, getting money flowing into carbon markets is one thing. Understanding the differences between carbon offsets and removals and then verifying that all these products are doing what they say they’re doing is a whole other matter. Nigam notes that Change partners with 
carbonfund.org for their current carbon offset integrations. For carbon removal options, especially frontier carbon removal tech, considering how complicated and rapidly evolving the space can be, Change works with third parties to source partners. 

Further, if we zoom out and consider the entire spectrum of philanthropy, a lot of Change’s work involves coaching and handholding nonprofits. It’s not like the modal nonprofit has a crypto wallet at the ready to receive payments in Ethereum : 

“Nonprofits are reading headlines everyday about massive auctions and fundraisers, and they want a piece of the pie, but they don’t have the engineering resources to begin to understand it.” 

Of course, that’s a boon for Change’s business, too:
 
“They’re actually really excited; we haven’t seen one nonprofit push back for regulatory or logistical reasons, which is really impressive considering how cautious and regulated the nonprofit space is in general.” 

Finally, on the corporate partner side, not every platform and potential partner for Change is  leaping out of their seats to incorporate charitable giving or carbon removals like SuperRare is. 

“A lot of these organizations are very wary of greenwashing; most things that are charitable or climate-driven are community-driven at this point. You’re not going to see a CEO sit down and say “Let’s do this initiative because it’s the right thing to do.” They’re going to say 'We need X number of creators that actually want this and show that it’s a tangible value add.'” 

As with many of the initiatives that are critical to climate impact and impact more broadly, incremental change will need to come from the bottom-up as much as the top-down. Whether it's consumer preferences for things in the web2 world, like carbon removal options at check-out in e-commerce stores, or in the web3 world as we’ve explored in this piece, demand has to be there before the majority of businesses and apps implement it. Vote with your wallet (and your blockchain usage), folks.


In sum?

With broad-scale adoption of blockchains and web3 technology still a ways off, Change continues to focus on APIs in addition to the work they’re doing with smart contracts and dev tools for blockchain developers: 

“For us web3 isn’t a pivot. It’s a pillar. If our goal is to bridge nonprofits and for profits, it’s important that we serve both web2 and web3. APIs are still what we think about most of the time.”

The grand vision for Change is to bridge for-profits with non-profits, regardless of whether we’re talking about dollars vs. Ethereum or web2 APIs vs. burgeoning web3 solutions. What’s important is that nonprofits transparently receive 100% of funds donated to them without having to jump through a bunch of hoops. Don’t take it from us though; take it from co-founder Amar Shah, who brought us home as follows: 

“Transparency has been our number one priority since we started this company and the increase in adoption of web3 is just another way for us to execute on it.” 

So, what’s the net net for us at Keep Cool? In the same way that Change is placing calculated bets  on the future of programmable philanthropy, we think those of us who are serious about reversing climate change should consider how to advance programmable decarbonization too. Whether or not NFTs and crypto “eat the world” as their most ardent adherents hope remains to be seen. But in the scenario where they do, we’d do well to make sure they eat tons and tons of carbon too.


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