🔥 Impact DAOs > Nonprofits
How Impact DAOs are solving nonprofit problems
DAOs are less of a crypto thing and more of a web3 thing.I think web3 has so much potential in solving nonprofit inefficiencies - Kimbal Musk, Big Green DAO
Nonprofits: The Status Quo
Public trust is the currency of the nonprofit sector. And unfortunately, trust in nonprofits is failing. Only 56% of Americans trust nonprofits, according to 2022 research conducted by Edelman Data and Intelligence in partnership with Independent Sector.
Simply put, the standard nonprofit model is no longer adequate to meet the needs of the present day.
The world is facing unprecedented challenges that require radical new thinking and fundamental change. For example, income inequality is at an all-time high, the climate crisis is accelerating, and the reputation of key institutions (such as banking, law, and government) is at an all-time low.
Today’s nonprofit system is 120 years old, and has simply failed to evolve. The era of hyper-connectivity ushered in by the internet has radically transformed the way we live and work. Nonprofits are still stuck in the past.
Chief among the sector’s problems is rampant inefficiency. Some of the systemic problems include:
High fundraising and operating costs.
Risk-aversion and talent constraints due to a mindset of appeasing donors.
Centralized grantmaking, with the board of directors and executive team allocating funds without input from subject matter experts.
Slow pace of delivery owing to bureaucracy and red tape.
Lack of transparency and accountability makes it hard to track where the money goes and how it is being used.
Abuse of power (e.g. biased decision-making owing to personal connections).
Global NGOs trying to solve local issues without understanding the local context.
Meta nonprofit structures extract value from every donation that passes through them for local projects. On an average nonprofits charge 15% cut every time they act as a passthrough.
Lack of collaboration among nonprofits as they compete for limited donor funds.
Reliance on donations and government funding, which can be unpredictable and unreliable.
The nonprofit sector is stagnant. Top nonprofits are over 100 years old. Few founders enter the arena. Those that do are actively discouraged. And competing with the incumbents is nearly impossible - Nate Van Cleve, Tech Impact Entrepreneur
Enter Impact DAOs
Web3 and the DAO model offer solutions to many of these problems. Above all, they provide a blank canvas for experimentation and reimagining new ways of doing things.
Web3 tools and technology, coupled with first-principles thinking, offer a powerful new way to address problems at a scale.
Our study of thirty Impact DAO builders reveals exciting new ways in which DAOs are innovating. Some of the DAO model’s advantages include:
As an internet-based organization, it is borderless and open. Anyone from anywhere can participate.
Fast and permissionless to set up.
Mission-first orientation - infrastructure can come later.
Access to global talent and expertise.
Decentralized power and decision-making.
Built-in incentives for mission-aligned actions. The community decides on the activities and rewards people for actions that create value.
Tokenomics to fund operations and impact without reliance on donors.
Peer-to-peer transactions eliminate intermediaries (and associated fees).
Radical transparency with the use of blockchain, every transaction is accounted for and publicly viewable.
Ability to engage donors, volunteers and other stakeholders through DAO governance processes.
Internet-level scale and speed.
Efficiency thanks to automation through smart contracts.
Fast, easy and low-cost crypto fundraising.
Use cases of Impact DAOs and Web3 tech
Impact Market, the world’s largest UBI program focusing on recipients in the world's poorest, least accessible areas (war zones, refugee camps), uses web3 technology to deliver UBI directly to those in need. They have carried out successful operations in 37 countries in the last two years alone.
Impact Market is the web3 version of GiveDirectly and are partnering with UN WFP on UBI as decentralized protocol provides reach impossible with human aided UBI delivery.
Kimbal Musk's Big Green DAO is disrupting the grantmaking process. The US nonprofit Big Green decentralized its own grantmaking function in Sept 2021, and has recently completed its first year as a full DAO. They have benefited from efficiency improvement thanks to automation, cross nonprofit collaboration, and the ability to leverage grassroots expertise.
India Crypto COVID Relief, a crypto fundraising campaign that began its life on Twitter. After gaining viral status, the group raised over a billion dollars during May 2021, at the height of India's COVID crisis. The campaign was completely volunteer-run, powered by a global community collaborating on Discord. Armed with crypto and blockchain technology, the relief fund operated on a completely transparent basis, with every transaction publicly viewable on the blockchain.
Gitcoin, the largest crowdfunding platform for open-source web3 projects, operates as a DAO structure. It holds grant rounds every quarter according to the quadratic funding model. The creation of our upcoming ImpactDAO book was possible in large part thanks to receiving two QF Gitcoin grants as part of this process.
Pact DAO is facilitating hyper-local mutual aid in New York City. They are achieving this primarily by equipping neighborhood organizations with web3 collaboration tools and quick-setup multisig wallets for transparent fund management.
All for Climate is building a global movement of climate activists to enable change at a local level. Unlike traditional organizations such as Greenpeace, however, All for Climate DAO operates publicly on Discord, and anyone can join. They provide training and crypto fundraising support to incubate decentralized climate initiatives (e.g. Regen Unite), each with its own multi-sig.
Impact DAOs > Nonprofits
Impact DAOs offer a radically new way of organizing, fundraising and allocating resources for causes. They are a new operating framework for our digital lives.
Powered by web3 technology (i.e. blockchain), smart contracts and decentralized apps, DAOs can achieve scale, impact and efficiency that is not possible with the prevailing, traditional nonprofit model. Many have already demonstrated large-scale reach.
Our upcoming Impact DAO book profiles 12 exemplary Impact DAOs and gives a breakdown of everything you need to know to build in web3 for a better world ❤️
The Impact DAO book coming this month here.
🐇 Dig Deeper
📺 The Nonprofit problem 👇
🎧 Listen to Impact DAO Builders on how they are solving for large scale societal problems.
If you have any comments, ideas or simply want to say 👋 connect on Twitter or here on Substack
To the future ✌️