By: Nihar Neelakanti, CEO and Co-founder of Ecosapiens
In 2021 alone, NFTs generated over $40B in volume. Imagine if a rounding error of just 1% of that volume were directed toward world-positive causes: that would be a whopping $400M allocated to the health of humanity and the planet. At its core, this is the magnitude of the opportunity that Impact NFTs are trying to capture.
Non-fungible tokens as a piece of technology arrived on the scene in 2018 and, quickly thereafter, entrepreneurs in the web3 world and creators alike leveraged this medium as a novel way of monetizing content and building decentralized communities. Impact-driven organizations and nonprofits have pushed the space even further by utilizing NFTs as a new way to raise awareness via decentralized communities and to raise capital to fund and accelerate the development of environmental and social projects. By way of crypto, Impact NFTs introduce a new way to fund social good and to create a channel that further democratizes access to investments that make a real-world impact.
Evolution of the Impact Industry and Technology’s Influence
Historically, charity and donation work were organized and managed by nonprofits, corporations, foundations, and universities. These access channels have primarily been accessible to wealthy individuals and well-connected patrons through bespoke introductions. In addition, these organizations built platforms that benefited patrons beyond the virtue of doing something good, enabling individuals to build connections that benefited them outside of the mission; these are exclusive communities led by a few voices. In return for patronage, individuals and families often receive the optionality of naming rights and publicity that can drive utility from the point of virtue signaling. Lastly, it goes without saying that donations to nonprofit causes and institutions are qualified for tax deductions.
Social media revolutionized this process by creating an entirely new channel by which more people (in theory, billions) could galvanize and react to causes in real time, and even direct financial remediation with one click. While social media enabled millions more to participate in impact with speed, it also created opportunities for misinformation and predatory behavior. In other words, it’s really easy to “donate today” on Twitter without really knowing where the money is going or whether it's actually having an impact.
Opportunities for Impact NFTs
NFTs bring the best of what social media and the internet, while limiting some of the risks. NFTs have a few unique characteristics. First, they can be leveraged to build ownership-based communities, which have the potential to be stronger and more motivated than a large social media group. Second, NFTs can serve as alternative sources of raising funds for projects, including new business models. Additionally, they can display their values and virtues to others through the art and communities they associate with.
1. Stronger communities that retain low barrier to entry
Ownership-based networks tend to be strong for a simple reason: people have skin in the game. Many blockchain-based communities have sprung up fervently to leverage the power of ownership and eagerness of economically aligned individuals around specific initiatives – NFTs can act as token-gated entrance to these groups. For example, World of Women is an organization that aims to promote diversity, equity and inclusion within the web3 space. According to a research article from 2021, only 5% of NFT sales over the previous 21 months were accounted for by women. In response to this lack of representation, World of Women created a 10,000-piece NFT collection featuring art and other digital assets created by women. Since its release in July 2021, the collection has been successful in onboarding thousands of individuals to the web3 space and has even led to the release of another collection and in-person events. As a result, World of Women has become one of the top projects and communities in the web3 space – and it’s because it was built with a strong underlying mission to make a positive impact.
2. Alignment of community interest and cause unlocks a novel source of capital
NFTs can be interesting vehicles for group organization and fundraising, as ownership of the NFT gets you into the community while also building up a pool of funds that can be directed toward a cause. Some impact investing NFT communities allow holders to pool capital through their NFTs, which is then deployed toward impact investing with real-world positive outcomes. The royalty feature of NFTs means that a platform can continue to grow its treasury organically through trade volume, without increasing the supply of NFTs.
3. Leveraging art to finance impact while delighting patrons
Earlier this year, TIME launched an initiative to raise funds for Ukraine through the sale of limited-series NFTs. As part of the fundraiser, TIME galvanized the support of its Web3 community, artists, and marketplaces to waive royalties and fees, and direct 100% of auction sales toward the cause.
What the data shows is that donors giving crypto to charity tend to be much younger, and more generous than those donating cash. The average age of crypto donors was 38, while the average non-profit donor was 65 years old. This signals the younger generations’ interest in exploring NFTs and their utility in providing a positive impact.
While users participate to support a righteous cause, they are delighted by unique art pieces they can showcase from acclaimed artists. Impact NFT art is a new form of virtue signal: it’s not a name on a building, nor is it a single tweet hashtag with a limited shelf life. It’s a unique digital badge etched on the blockchain that owners can showcase permanently – and achieve in one click.
Designing the Future for Impact NFTs
NFTs are ushering in a whole new model for impact, further democratizing access to participation and unlocking digital communities at scale—all the while improving the user experience. Through the power of the blockchain, Impact organizations are able to expand their fundraising audience and build strong community bases, all the while giving NFT owners the potential to realize gains by doing good.
The great promise of NFTs and the underlying blockchain technology lies in its potential to re-align incentives that make large-scale societal and planetary problems solvable. If you’ve gotten excited by Act 1 of Impact NFTs thus far, don’t snooze on the innovators building the next layer of the space. Pick a project on the map. Grab an NFT. Dive into the Discord. And play a role in designing the future of Impact.
Nihar Neelakanti is the Co-founder and CEO of Ecosapiens, a VC-backed platform enabling consumers to fight climate change through the world’s first carbon-backed NFT. Nihar previously worked in venture capital, spending several years at VCs including Correlation Ventures, Kauffman Fellows, and most recently, at the prestigious Menlo Ventures, where he helped develop the climate thesis that sparked the idea for Ecosapiens. He is deeply fascinated by the opportunity to rethink economics in a way that regenerates the planet rather than extracts from it.
About Ecosapiens
Ecosapiens is a Web3 platform that provides ways for individual people to make a positive impact on the planet, beginning with a perpetual carbon capture digital collectible series, through which reforestation projects are funded. The platform’s namesake collection, Ecosapiens, represents a new iteration of the human species that is more connected to and thoughtful about its impact on the planet.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.