What makes some people far more generous than their peers? Researchers in the field of psychology are currently seeking to answer this very question. Already there are some intriguing findings which indicate that wealth, empathy, trust, and other considerations combine in a way which can reliably predict generosity. For charitable organizations the interplay of these competing factors is far more than an abstract curiosity. The generosity of the public is how these organizations function and without their continued support they wither and die.
Cryptocurrency is such an important development for the third sector because there are already strong indications to suggest that people are more open to charitable giving with cryptocurrency than with fiat. Understanding the reasons behind this phenomenon demands a deep dive into the psychology of the human mind and why we choose to give.
We would like to thank the team at SocialGood for their contributions to the design and implementation of the research and to the analysis of the result.
Wealth And Generosity
When considering how wealth affects an individual’s generosity, the temptation is to look to examples of wealthy philanthropists and take our lessons from here. After all, you can’t give away money you don’t have. It therefore seems logical that greater wealth would naturally equate to greater giving. This, however, is not the case.
As published in the academic journal Proceedings of the National Academy of Sciences, psychologist Paul Piff PhD uncovered the very opposite to be true. The paper, “Higher Social Class Predicts Increased Unethical Behavior,” showed that people with greater wealth displayed less empathy and more self-interest under test conditions. As Piff told Reuters, “The more money you have, the more focused on yourself you become, and less-sensitive to the welfare of people around you.”
In most cases then, wealth is actually a strong inverse indicator of whether a person is likely to give. People with less are more open to acts of kindness and altruism, and those with new wealth are more likely to donate than those born into it. Since wealth generated by cryptocurrency is by definition new wealth then it naturally follows that those who have become wealthy in the blockchain sector are more disposed to acts of charity.
The philanthropic project “Pineapple Fund” is one such case which clearly demonstrates this phenomenon in action. The fund was created by an anonymous donor known only as “Pine” who converted 5104 BTC into $55 million. The money from this fund is going to charities such as The Water Project, Internet Archive, and Green Steps.
One of the biggest issues to face the third sector is one of trust and a variety of studies have shown that public trust in charities has decreased. According to research by nfpSynergy, only 54% of people interviewed say they trust charities ‘a great deal’ or ‘quite a lot’, which is down from 60% the previous year. Whether this is the beginning of a trend or not is hard to know, but more importantly a majority of people do not currently place great confidence in charitable organizations.
What then, can improve trust? Research conducted by Populus, in the UK, found that the top factor in determining how much the public trusted a charity was that they were “Transparent about where money goes.” In this regard blockchain technology can certainly assist. A decentralized, immutable ledger which can trace exactly where the money is coming and going from allows much greater transparency and improves confidence.
Certainly then, blockchain technology seems like a natural solution to one of the biggest issues in the charity sector.
Addicted to Giving
Is it possible that charity is not completely altruistic? William Harbaugh is a professor of economics at the University of Oregon who conducted research into how we feel about making charitable donations. He created tests in which a person was either taxed a certain amount for charity or could volunteer whether or not to donate. In these test conditions he found that the pleasure centers of our brain were activated in both cases but that they were most strongly activated when we made the final decision ourselves.
It is clear then that choice is an important factor in how we feel. When we have our agency removed from us, the pleasure, or feel good factor, is significantly less. However, this may not be the strongest motivator in charitable giving. Norihiro Sadato at the National Institute of Physiological Sciences in Japan discovered that our own social standing plays a vital role. Precisely what this means is that giving feels good, but when others are witness to our generosity in action it significantly increases our good feelings about it.
We’ve created an infographic to better explain this idea to you:
One project which is tapping into these powerful personal and social motivators is Social Good Project, whose currency is SocialGood (one word). SocialGood is “The cryptocurrency for [a] better society”, which allows greater choice and greater social engagement than ever before. By using SocialGood a person who makes purchases with companies who are participating in the ecosystem will receive a cashback payment. Part of this payment is then sent to charitable organizations. The individual can therefore start to make purchasing decisions based on whether they stores are participating.
Better still, Social Good Project can post a record of the charitable donation to that person’s social media accounts, increasing their social standing and tapping into powerful psychological motivators. An AI algorithm assesses which charities have the strongest likes and approvals from that person’s social group and then suggest to that user they donate again to those charities in the future. Since social approval and acts of generosity both activate the pleasure centers of the brain it is certainly possible to say that these activities could prove mildly addictive, in much the same way as sugary drinks can become addictive, but with none of the disadvantages of rotting your teeth.
Is Crypto The Future of Charity?
For a whole host of reasons it seems clear that cryptocurrency presents great opportunities for charity and charitable giving. Firstly, the cryptosphere is an area of new wealth and the newly wealthy are more open to acts of generosity. For charities to be successful in raising funds they should focus on areas where the audience is receptive. The cryptosphere is one such area.
Secondly, the public as a whole are much more receptive to acts of altruism when they trust and respect the charities involved. Blockchain and cryptocurrency could prove to be one way of keeping better track of charitable donations and improving trust.
Lastly, and perhaps most important, giving feels good. Giving when others can bear witness to it feels even better. A project such as SocialGood taps into our deepest psychological motivators and encourages us to give more freely and more regularly than we might otherwise. Some might argue that true altruism requires no social reward, but that is a entirely narrow assessment of what charity is. There is no reason why charity cannot benefit both parties, both giver and receiver.
Old money was not created for the purpose of charitable giving and already cryptocurrencies such as SocialGood are providing a model which significantly improves on fiat donation. As adoption of it increases there are strong indicators that the future of charity may very well lie in cryptocurrency.