Using cryptocurrencies for social impact, is it possible?
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The extreme volatility, along with more than 40 known hacks on cryptocurrency exchanges since 2012, make it a very risky asset, except for those who can afford to lose what they invest. However, recent developments point to the long-term potential of using cryptocurrencies for social impact. We tell you.
According to the Green Biz portal, crypto technologies are being promoted as a replacement for banks, a new way to buy art, investment opportunities, and also to generate change on behalf of people.
What are cryptocurrencies?
According to Fondeadora, cryptocurrency is understood as “digital or virtual currency protected by cryptography,” this system makes it almost impossible to counterfeit or spend it twice. Many cryptocurrencies are decentralized networks based on blockchain technology, “a distributed ledger enforced by a disparate network of computers.”
A defining characteristic of cryptocurrencies is that they are typically not issued by any central authority, making them theoretically immune to government interference or manipulation.
In other words, it functions as an asset, and its advantages include cheaper and faster money transfers and decentralized schemes that don’t collapse at a single point of failure.
While as disadvantages are its price volatility, high energy consumption for mining activities, and use in crime. Despite their contradictory essence, they could contribute on the path to sustainability.
Cryptocurrencies for social impact
While there is resistance to cryptocurrencies, not only because of their risky nature for investors, but also because of their negative impact on environmental sustainability, digital currencies can increase access to finance for the unbanked and those living under corrupt regimes. .
More than a billion people worldwide do not have access to a bank account because centralized banking systems exclude them. — The World Bank.
This is because they cannot prove their identity and therefore lack financial accessibility. Many of them live in Africa and Asia, in this sense, cryptocurrencies have allowed them to pay for items digitally and become more connected members of society.
If social benefits are balanced with environmental concerns, cryptocurrency could have the potential to create the world’s first authentic global carbon market, as Jim Gold of GreenBiz reports. Such prospects mean that deliberation is still ongoing as to whether the environment and society will be better off or worse off under this virtual scheme.
Remember that the Bitcoin boom preceded the 2008 financial crisis, fueling a desire for greater autonomy from what many saw as a corrupt banking system.
Likewise, financial innovation was lagging, and its momentum gave developers a new outlet for their skills. Web3 — a new kind of internet service built using decentralized blockchains — is the result.
Certainly, this technology can bring with it the benefits of ownership, privacy, security, opportunity, and collaboration, as artificial intelligence expert Lasse Rouhiainen points out.
Investing with a Cause
According to the philanthropic organization Fidelity Charitable, the trend of cryptocurrencies in philanthropy is growing. Particularly the Millennial generation being the most actively involved.
If Millennials combine their interest in digital currency with their charitable values, the non-profit sector could see a significant influx of digital asset donations.
However, there is confusion surrounding the tax implications of this type of asset. As cryptocurrency increases in popularity and continues to appreciate in value, investors will have an increasingly prominent tax burden. Therefore, it is time to consider possible strategies. Could digital currency be the engine of social impact? Only time will reveal.