New Zealand cryptocurrency enthusiasts are raising money for charity. For IRL, Shanti Mathias explores whether the model will work.
Ankita Dhakar wants to get 100,000 women into STEM by the end of 2022. A hundred thousand, I repeat, wanting to make sure I got that right, by the end of 2022? “That is the mission,” she tells me. The goal is lofty, and the means of achieving it is unusual; Dhakar plans to raise the money to do this by selling NFTs.
NFTs, or “non-fungible tokens,” are an application of the blockchain technology that also creates cryptocurrencies like bitcoin and ethereum. As my colleague Josie Adams has explained, NFTs are different from cryptocurrency because they’re non-exchangeable: each one is unique. While NFTs have been around for a while, they’ve become very popular this year, as celebrities like Grimes, internet figures like the family from ‘Charlie bit my finger’ and artists like Damien Hirst have all minted NFTs, making many thousands of dollars.
“People were already not able to understand blockchain, then comes this NFT hype, which made things worse,” says Walter Langelaar, a senior lecturer in design innovation at Victoria University of Wellington. Langelaar runs New Zealand’s only tertiary-level blockchain course in the design and culture of cryptographic technologies.
The hype is real. Dhakar, a cybersecurity engineer based in Hamilton, says that she chose NFTs for her project because the search term has been trending on Google; people are interested. Her plan is to mint 10,000 unique pieces of art as NFTs on the Ethereum blockchain. Anyone who buys one of these digital objects, as well as other interested individuals, will be invited to join a Discord community who will then vote on which charities to give the proceeds to.
Dhakar hasn’t quite decided on the charities that will be voted on yet, but she feels that there are a lot out there that help get women into tech. I ask what concrete things help get women without technology backgrounds into the tech field. Mentorships are good, she says, and so are internships; these are the kinds of things her donation to charity will enable.
“I saw that there were tremendous amounts of money for these authentic pieces of artwork. I thought, ‘I have skills in graphic design, branding, web design, coding’ – it was this weird combination of everything I’m good at,” says Christian Dixon-McIver, founder of the Cardano Kiwis project. The charity aspect was a way to differentiate his NFT project from others and make it more meaningful; after a trip to Queenstown, Dixon-McIver had learned how endangered kiwis were and wanted to do something to help.
Each Cardano Kiwi NFT, a pixel-art kiwi, has different traits, like colours and accessories. As with many other NFTs, the artworks are product of a human and computer collaboration; while the traits were designed by a person, a computer generated the tokens so that each one is unique and some are more rare than others. The NFTs, cute and colourful, have sold well. Dixon-McIver guesses that most of those who purchased the tokens were more interested in the collectible value of the art than the charity aspect.
On the other end, he also had trouble convincing Kiwis for Kiwi that his donation was for real. “They thought I was a scammer,” Dixon-McIver says, laughing. Eventually, he got through to them, only a few days before the project launched. “There was a huge fear in myself – what if we don’t sell enough?” he continues. Crypto is unpredictable; it can be “sunshine and rainbows one day, then bleeding red the next”.
But the fears were unfounded, and Cardano Kiwis tokens were popular. After converting the ada cryptocurrency to New Zealand dollars, Dixon-McIver and his collaborator Josh Smith were able to make the $50,000 donation on a private Zoom call with the charity, then posted the receipts in the Discord community, to demonstrate transparency. There was enough money left over for Dixon-McIver to quit his job, and start planning for season two of the kiwi project.
It’s exciting to see the possibilities of new technologies being used for social good, but the regulatory environment hasn’t yet caught up. Dixon-McIver notes that his project was a tax nightmare: there’s little guidance on whether NFTs should have GST applied to them, and with ever-shifting currency value, the tokens are taxed at the conversion rate of the timestamp of when they were bought, rather than when they get turned into non-crypto currency. Encrypted technologies promise transparency – you can see every transaction – and anonymity – you don’t know who is behind each transaction. This makes paying taxes difficult.
That’s something Alison Mackie is trying to change. As the community manager at Blockchain NZ, an organisation that helps connect, promote and advance the use of blockchain technology for its members, she has been writing submissions to government bodies, including the Reserve Bank, about how to make the regulatory environment in New Zealand work better for blockchain users.
“There’s a narrative that [crypto] is a cash grab,” she says. She sees regulation and education around how these technologies work as essential to change this. Langelaar, like Mackie, hopes the New Zealand government will be able to catch up to the technology. “There’s an impression that the government is lagging behind,” he says. “[But] that might change fast.”
Better regulation will also help prevent crypto scams. As a highly speculative market with considerable public interest, based on a system that requires some technical knowledge to understand even at a basic level, blockchain technologies are often used to target vulnerable people. Scammers contact people online or by phone and offer crypto “investment opportunities” if they deposit money into a bank account, and will be shown falsified data of the investment growing, though no actual crypto trading takes place. Internationally, lockdowns have encouraged these types of frauds.
Scams like this make it harder for people to feel convinced about the legitimacy of any crypto project. Dixon-McIver has tried to promote transparency with Cardano Kiwis, running livestreams and answering questions posed to him by the community, and Dhakar assures me that she intends to do the same. Still, there’s little external accountability, and there are thousands of projects to choose from, making it difficult for people wanting to support NFTs to tell what might be legit.
“At the moment, the whole crypto market, including NFTs, is entirely speculative,” says Langelaar. “There is no mass adoption … a lot of [the success] we’re seeing is social media influencers leveraging their user base.”
This is a concern for Mackie, too. “We are still in the stages of people not understanding [crypto] and taking advantage of it,” she says. She expects the market to settle down eventually, but there are still lots of unknowns.
The hype around NFTs has created a saturated market. The NFTs the musician Grimes sold in February for millions of dollars have already lost up to 84% of their value, according to Fortune. I ask Dhakar, who is hoping to use NFTs to fundraise for women in STEM, whether the volatility concerns her. Value is subjective, she says. “With my project, it’s not about the money, it’s about creating awareness and using that money,” she says. Still, the money will help her reach her goal of getting a hundred thousand women into STEM. She doesn’t know quite where all those women are going to come from, but she hopes they’ll be inspired, and the money will benefit female-led companies like hers.
Is raising money via cryptocurrencies an effective strategy for charities? HeartKids, a New Zealand charity supporting children with heart disease, made headlines when it signed up to The Giving Block, a US-based organisation that allows people to donate to charities via cryptocurrencies. Dixon-McIver, who used to work in a call centre for charities, points out that many of the current tactics used by charities to encourage donations are intrusive and “predatory”: people door-knocking in charity uniforms when they’re actually temp workers; consumers entering raffles where it’s unclear how much of the proceeds go to charity; insistent and constant phone calls from fundraisers. Many of the people who bought his Cardano Kiwis had never donated to charities before – at the very least, crypto may be a way to expand the pool of donors.
There’s a reason, though, that despite the excitement around blockchain technologies, they’re not in widespread use by individuals yet: they’re simply daunting to use. “It’s really intimidating to the everyday person,” says Mackie. As part of her work with Blockchain NZ, she provides education to make crypto more accessible.
“[Crypto] is all kinds of confusing,” Langelaar says. “I wouldn’t say [it’s] difficult, but there’s a lot of newness.” Novelty is off-putting; he says that someone setting up a crypto account will probably need to use at least four new apps or services before being able to buy anything, so the learning curve is steep.
For outsiders, there are many reasons to be sceptical of blockchain; those I spoke to for this article largely agreed that the technology is not yet ready for everyone to use. There are some environmental concerns around the use of blockchain, although this is a “misconception,” Mackie says; newer currencies mostly use “proof of stake” to verify transactions with money, rather than the more electricity-hungry “proof of work”.
The technological literacy required to use these technologies means that those profitting are often well educated and have consistent internet access (although it’s certainly not necessary to have a technological background; Mackie has an arts degree, and Dhakar originally studied business). As with many new technologies, those best set up to take advantage of blockchain will have some degree of privilege already.
Those who have had a taste of the blockchain world feel convinced that this is the future. “This is like in 1991 when the first website went live,” Dhakar says. She only heard of NFTs a few months ago – she doesn’t even own any yet – but she’s already launching her own project. She throws around terms like the metaverse and Web3. I don’t quite understand what any of this means, or what it might imply, and I’m not sure if anyone else does either. Still, my scepticism wanes for a moment. Blockchain technologies raise big questions about centralisation and digital ownership, questions that urgently need to be addressed. Maybe these technologies can change society for the better.
Dhakar has big plans: conferences that will be free for the NFT owners, awareness campaigns, maybe a game where the characters can trade and sell digital objects – in the future, you could make money from purchasing a sword in a game, or spend cash buying extra lives. Attach the word “NFT” or “crypto” to something, and the nearly unbelievable gets a bit closer. “It’s been very weird [watching NFTs become popular],” Langelaar says. “It’s silly internet money [that] signals a new kind of philanthropy, new kinds of redistribution of wealth.”
Says Dhakar: “We don’t know who will be buying…I’m not sure what’s going to happen.” Her NFT project, Cyber Cosmos, launches on December 12. I wish her luck. She’ll need it.
Public Interest Journalism funded through NZ On Air.