Welcome Cryptos

The emerging benefits of cryptocurrency for the common good, philanthropy and international development.
by Peter Chasse, President - The Water Project - January 23, 2014

Maybe you've heard of them... Bitcoin, NobleCoin, DogeCoin, WorldCoin, LiteCoin.

They are a few of the most recent (NobleCoin) and most notable (Bitcoin) iterations of an emerging form of currency. They have burst into the limelight recently, catching the attention of everyone from venture capitalists to rural community leaders in South Africa.

Cryptocurrencies are a virtual form of money. And nearly every explanation of their value, potential, and future – including mine – is open for debate. Unlike US dollars or Kenya Shillings, these currencies know no borders. Laws and regulations about them are as yet mostly unwritten, though some more repressive governments are not surprisingly keenly "interested" in them because they are hard to control.

If you tend to enjoy geek speak, or love math, you'll appreciate this explanation about how they work. If you like videos and alpacas like me, watch this video about Bitcoin for a basic primer...

**For you hard-core statisticians and guardians of semantics, "trend" may be too strong a word. But "coincidentally proximate and qualitatively concordant expression of interest" just reads terribly.

As the Founder and President of The Water Project, an international non-profit working to provide access to clean, safe water, my own personal interest in these alternate currencies has again been piqued, this time by an interesting trend** amongst some of their most vocal proponents.


Over just the past few days, a number of cryptocurrency foundations have contacted us to discuss supporting our work. Each excitedly explains that theirs is a willing community of supporters who maintain an expressed desire to establish philanthropy as a core of their work. And while their central mission is to promote the adoption of these currencies, an effort which by its very nature tends to increase the value of their holdings, the tendency toward giving as part of that effort is intriguing.

Today: Centralized, Expensive, Serving a Minority

We exist in a world of centralized currencies. No longer backed by gold however, these fiat currencies are easily manipulated by a small group of central bankers. Originally intended to remain independent, few would argue that today these bankers take most of their cues from Wall Street. Adept traders make fortunes riding the whims of the "market" up and down. You and I do our best to adapt to the rise and fall of the value of the dollars in our pocket. It's a fact of our economic life that's invisible to most. I'll reserve my own detailed opinion on the benefits or risks of it all, though I've likely tipped my hand. You can certainly enjoy myriad and more nuanced opinions elsewhere online.

The fact is that the currencies we use today are centralized and tightly controlled by those whose agenda may or may not be supportive of the common good. It certainly seems to many that today's system enables a tendency toward a less than fairly proportional distribution of wealth. I'm sure I'll read some succinct and worthy arguments to the contrary below.

Regardless, the current controls and resulting systems that enable trade and exchange of these fiat currencies benefit a very small group of bankers and traders who control its gyrations and mechanics. Admittedly, prior to the advent of autonomous computerized trading platforms, this group did perform some needed work to effect money changing. They established markets and facilitated money flows and still do, albeit dramatically more efficiently... for themselves.

Unfortunately, today, as our supporter's donations make their way to our partners in Africa, these exchanges have become far more costly than the benefits organizations and individuals actually receive from these arbiters of trade. From credit card donation processing fees, to domestic banking fees, to the costly overseas transfer of funds with its concomitant dilution through currency trading arbitrage and trade commissions, and finally to the local bank fees in Kenya or Rwanda, a lot of folks take significant "cuts" along the way. Most of these fees are obscured and non-negotiable. We're told the process is difficult, cumbersome and expensive, but since we can't see it we remain unconvinced.

The bottom line is that less good gets done as a result of all this transactional overhead.

Reduced fees or favorable trading rates would be one opportunity for banks to engage philanthropically. But alas, that trend has yet to take shape.

In the meantime, the marketplace in which we operate is ripe for an alternative.

Tomorrow: De-centralized, Cheap, Serving the Majority

On the other hand, emerging cryptocurrencies are extremely low cost and in some cases nearly free to exchange and transfer. The cryptocurrency movement is based on transparency, open-ness and de-centralization in its design and implementation. At the same time, users enjoy an anonymity more akin to cash-based transactions. The critical difference being that underlying valuations are not decided by a central authority and the movement of that value is unencumbered. Though the early valuations of individual interations of cryptocurrencies are at present wildly volatile, their utility is less questionable. In this utility lies perhaps the truest value of the experiment, a point made more elequently by Erik Voorhees in his letter arguing Bitcoin's intrinsic value.

A system this open tends to be harder to manipulate and skew in favor of one population or another. When you look at the disadvantages the poor so often face in traditional banking, this one potential benefit becomes central to cryptocurrency's appeal for me, especially in emerging economies.

If for nothing else than the potential of establishing a better banking paradigm for developing countries, I'd like to learn more about supporting these platforms. As a bonus, and in the meantime, I'm caught up in what I hope is indeed a related trend.

is an example of how one crypto-community rallied to the cause of clean water raising $USD 10k in 10 hours.

The Noble Movement just launched a campaign after joining in some fascinating discussions with us.

Bitcoin100.org recently donated 1.18 BTC to offset our setup costs to accept Bitcoin donations.

Far from the goals of maximizing fee structures or creating profit centers, the currency foundations behind these platforms see at their outset an opportunity to give back. They seem to be actively encouraging and enabling philanthropy among their members, fostering a commitment to serving the common good as coins appear from the mining ether. Is it all truly altruistic (is anything?), I'm not sure. Is it refreshing? Indeed.

Since there are potentially great savings to be had in the efficiencies of this new system, discussions of alternative investments for newly freed capital are welcome. To see conversations directed toward charity is down right encouraging. Imagine if the 2-3% credit processing savings of every Bitcoin transaction at Overstock.com and other forward-thinking retailers were returned to the consumer through lower prices and then invested in philanthropic endeavors. Even half of those savings would not be a trivial sum. And that's thinking small. Some early adopters, as in any new industry, will likely amass great wealth by enabling these transitions. Will these early discussions of philanthropy's centrality to the common good, among its champions, help shape their future investments to break poverty's grip? I'm hopeful.

Beyond Fees: Enabling Trust and Accountability through Incremental Growth

Beyond eliminating bankers fees and exchange rate arbitrage, I also think there's an operational role for BTC, LTC, and the like for organizations like The Water Project (TWP).

Today, small grants are too expensive to send. Large grants are too risky to release to untested partners. I'm looking forward to lower/no cost transfers that could allow us to work with more of the smaller, less tested, but promising local water advocates. I imagine having our program team work with a growing indigenous team by transferring incremental and limited funds, "just-in-time", to complete discreet tasks. We've learned that building trust and accountability is much easier that way.

Or, how about making small one-time payments directly to a community in need of an emergency repair to a new water project (before they've had time to establish their own repair fund)? Then there's small loans to fund community owned water solutions... Tuition payments for continuing hygiene training education... There are many possibilities. All would be more flexible, tightly controlled and transparent.

Technically speaking, we could begin doing this today through Kipochi (Swahili for Wallet) in Kenya. Kipochi is a Bitcoin to M-Pesa conversion service. M-Pesa is a widely used SMS-based virtual currency in Kenya, with transactions totalling nearly 30% of Kenya's GDP according to Kipochi. Using a cell phone, customers transfer money with each other for all kinds of trade. It's already trusted and widely adopted deep in the rural country-side where we work. We have no idea how regulators would view any attempt by TWP to transfer funds in this manner, so we're holding off for more guidence.

These regulators (non-profit's like TWP have many to deal with) will slow us down for sure. Though we don't argue that there are good reasons to tread carefully when it comes to overseas money exchange. We acknowledge that transparency and verifiable record keeping are critical. Ours, after all, is the public's money. But we hope change comes quickly. A cursory glance seems to indicate it can. From a technical standpoint, these currency platforms are likely far more transparent to the public to begin with. But, alas, we'll have to let the lawyers and accountants hash out those details.

In the meantime, welcome cryptos! Your money is good here.

Ok, not precisely. Please convert all other cryptocurrencies to Bitcoin, which we can accept through Coinbase who converts them instantly to $USD fiat so there's no question about how we'll account for it all. (Anyone want to fund a research project to make that any easier?)

Update: Feb. 11, 2014 - After raising over $10k in WorldCoin, volatility returned with a vengeance to the cryptocurrency space. In a matter of days, before WDC had converted their donation to BTC to send along to us, the value of their donation was cut almost in half.

In response, the Vertcoin Community has stepped up to lend their support to help make up the difference. We have also heard from folks in the WDC Community who continue to express their drive to see a well funded regardless of what's happening in the market. Both are a refreshing sign of the altruism that does indeed seem to exist here in the crypto-community.

Update: Feb. 20, 2014 - Welcome BitGive Foundation!
We're excited to announce the first Bitcoin based fundraiser, hosted by the BitGive Foundation. You can be a part of the effort to fund a complete water project.

Update: March 21, 2014
Just a few months after accepting our very first Bitcoin, we've raised nearly $20,000USD for clean, safe water from various crypto currency commnunities... and there's no sign of it slowing down. What a great way to celerate World Water Day!

Update: April, 2014
H2O Coin bursts onto the scene with a 17.5BTC donation at launch! And we obviously love the name.

Here are the campaigns to date:
BitGive Foundation (Open)
H2O Coin (Open)
VertCoin Community (Open)
NobleCoin Community (Completed)
WorldCoin Community (Completed)

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