Background

2.1 Charities and their main challenges

Americans gave US $485 Billion to charity in 2021, representing a 4% increase from 2020. This figure represents voluntary donations from individuals (not aid given by governments). Charity donations are an enormous business sector.

But surveys often show that donors are not satisfied by the process, and there are many reasons why people do not donate more than they already do:

• Donors may feel a lack of connection between their donation and the benefit that it may bring.

• Charity activities are often opaque, and could communicate their activities to donors in a better way.

• Donors may not trust that their donations actually reach beneficiaries (as opposed to overhead costs, advertising campaigns, and other charity costs).

• Uncountable news about scandalous and corruptive charities (charities using money for personal uses or money laundering, or aid workers committing crimes such as sexual violence against the vulnerable people they serve)

• Charities charge high service and management fees for fundraising platforms and charities

Charities can find it difficult to engage donors, and demonstrate to them the real benefits that result from the work of the charity. They need more and better tools to build donor communities, and demonstrate transparency of their finances. They may need help with fund management and investment. They need tools to showcase their work, and they need ways to incentivise donors to give more. Finally, they need ways to manage volunteers and incentivise volunteers to participate in broader aspects of the charity’s work.

2.2 The United Nations and its Sustainable Development Goal

The 16, now 17, Sustainable Development Goals set out by the United Nations General Assembly in 2015 are a call to world leaders to act now ensuring everyone around the globe enjoys peace and prosperity by 2030. The goals are targeted at prioritising those who are furthest behind, specifically ending poverty, hunger, AIDS and discrimination against women and girls. The goals include ensuring every person’s access to water, health, education, clean energy, economic growth and justice. Governments are expected to target investment in innovation, sustainability and climate action, as well as have a particular focus on animal welfare and biodiversity.

The Global Goals are a commitment made by governments but the practical realisation of these goals on the ground is carried out by grassroots organisations. Whilst several tools track the implementation of the Global Goals, the Sustainable Development Goals Report 2022 states that the world is unlikely to achieve the Global Goals by 2030. In order to reach the goals, grassroots organisations require funding, particularly in the wake of the COVID19 pandemic, and greater transparency is needed in the development sector. Maxity provides a solution to this. As a platform using technology to direct funding at organisations least funded, and increasing transparency in the charity sector overall, Maxity is a critical partner in ensuring the Sustainable Development Goals are achieved. In addition, Maxity makes a strong contribution to monitoring progress of SDG implementation, making data of the furthest left behind more available and easily understood. Maxity’s 90 charities across South and North America, Europe, Africa and Asia are contributing towards all of the 17 Sustainable Development Goals.

2.3 Blockchain and cryptocurrency

A blockchain is a sequence of “blocks”, each one consisting of a set of transactions that have taken place. The blocks are cryptographically bound together, so that any change to any of the transactions will invalidate the block and the entire chain. The blockchain is maintained by a decentralised set of individuals, often called “miners” because they are rewarded for their efforts by the creation of tokens (similarly to how gold miners are rewarded by the discovery of gold nuggets). The most famous blockchain is the Bitcoin blockchain; it is “permissionless” in the sense that anyone can be a miner, but the cryptographic binding that is core to blockchain integrity requires a large amount of computational work to be done if one wants to mine successfully. Blockchains are decentralised; no person or organisation has control of them, but a large number of individuals contribute to their maintenance by participating in the verification and formation of new blocks of transactions.

Blockchains can be used to make new currencies, called cryptocurrencies. As mentioned, the foremost one is Bitcoin, but there are hundreds of others. Cryptocurrencies work as currencies because they have a purposefully limited supply; for example, the supply of Bitcoin will never exceed 21 million coins. There are about 19 million coins in circulation, and new ones are mined every day, but the rate of mining is decreasing so that the limit of 21 million will never be exceeded.

As well as the ownership of currencies, blockchains can be used to record ownership of other kinds of assets, such as artworks, certificates, and tickets. Whereas currencies are fungible (one dollar is equivalent and exchangeable with any other dollar), other kinds of assets are not fungible (one artwork is not generally equivalent or exchangeable with another one), giving rise to the term non-fungible token (NFT). An NFT is the record on a blockchain that a certain asset belongs to a certain user.

2.4 Smart contracts

A smart contract is a program that is intended to automatically execute on a blockchain, once certain conditions are met. Once put in place, smart contracts cannot be controlled by anyone; they will simply execute their code. The idea is that they act as a kind of self-enforcing contract between people that may provide inputs to the program, or obtain outputs. For example, a smart contract could be set up so that whenever money is paid into the contract, it can be paid out equally to Alice and Bob (50% each). Once that contract is established on the blockchain, it will be executed every time money is paid in, and no-one can change the way it disburses the money. Of course, this example is a very simple smart contract. More sophisticated examples include Uniswap (which allows users to exchange cryptocurrencies with each other) and NFT marketplaces (which allow users to buy and sell NFTs).

The original idea of smart contracts as immutable has led to some problems, because if a program is complex then inevitably bugs will be found in it. A smart contract that is immutable cannot be fixed once it is launched. Therefore, researchers have developed the idea of .

2.5 Decentralised finance (DeFi)

Decentralised finance (DeFi) is the idea that financial instruments (like investments, currency exchanges, and loans) can be offered without relying on intermediaries such as brokerages, exchanges, or banks. It works by using smart contracts on a blockchain. Well-known examples of DeFi platforms include Uniswap and Aave. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts.

2.6 NFTs

Non-Fungible Tokens (NFTs) are records of ownership of digital assets (such as images, songs, tickets or in-game assets) on a blockchain. The benefit of maintaining ownership records on a blockchain is that the blockchain is not controlled by any individual or organisation, and the record of transactions cannot be altered or erased. Anyone can see the full transaction history behind any artwork. NFTs provide a public certificate of authenticity or proof of ownership.

The term "NFT" only achieved wider usage with the ERC-721 standard, first proposed in 2017 via the Ethereum GitHub, following the launch of various NFT projects that year. The standard coincided with the launch of several NFT projects, including Curio Cards, CryptoPunks, and rare Pepe trading cards. Some NFT collections, including Bored Apes, EtherRocks and CryptoPunks are examples of generative art, where many different images are created by assembling a selection of simple picture components in different combinations.

NFTs can represent in-game assets, such as digital plots of land. Because the NFT blockchain is not controlled by any single party, these assets can be considered controlled by their owners instead of by the game developer. They can be traded on third-party marketplaces without permission from the game developer. CryptoKitties was an early successful blockchain online game in which players adopt and trade virtual cats. The monetisation of NFTs within the game raised a $12.5 million investment, with some kitties selling for over $100,000 each. A similar NFT-based online game, Axie Infinity, was launched in March 2018.

The NFT market grew dramatically from 2020–2021: the trading of NFTs in 2021 increased to more than $17 billion, up by 200x compared to 2020's total of $82 million. Individual NFTs have been sold (and resold) for millions of dollars.

This growth may not be sustainable, but the core technology behind NFTs and their usefulness as public records of ownership is of great value to artists and art collectors alike. While different types of NFTs have different values, the NFTs developed by Maxity have an important role in developing the work of charities and in forming donor communities. Integrating NFTs into future iterations of the Maxity platform will further enhance their intrinsic value, by incorporating them into the Maxity metaverse and charity decision-making processes.

2.7 DAOs

A decentralised autonomous organisation (DAO) is an organisation constructed by rules encoded as a smart contract that is often transparent, controlled by the organisation's members and not influenced by a central authority such as a government or corporation. DAOs are member-owned communities without centralised leadership. A DAO's financial transaction records and rules are maintained on a blockchain.

DAO governance is coordinated using blockchain tokens that grant voting powers. Admission to a DAO is limited to people who have a confirmed ownership of these governance tokens in a cryptocurrency wallet, and membership may be exchanged. Governance is conducted through a series of proposals that members vote on through the blockchain, and the possession of more governance tokens often translates to greater voting power. Contributions from members towards the organisational goals of a DAO can be tracked and internally compensated.

2.8 Metaverse

Metaverse is the name given to a collection of ideas and proposals for the future evolution of the internet. It will be an immersive virtual world, made possible by virtual reality and augmented reality technologies. Early versions being developed require clunky headsets, but in the future the required hardware will be integrated into the built environment, and people will move in and out of the metaverse as seamlessly as they move between physical conversations and WhatsApp chats today. As we continue to conduct more and more of our lives online through our phones and laptops, the metaverse will magnify and accelerate this process. Internet-of-things technologies will blur the distinction between what is online and what is physical.