How Web3 and Bitcoin Billionaires Will Revolutionize Philanthropy
How many crypto billionaires will there be? Rhys Lindmark, CEO of Roote, a nonprofit startup studio, answered this question at Consensus 2022 in Austin, Texas.
"By 2025, or 2030, 20% of all billionaires will be crypto billionaires,” he said, if bitcoin hits $200,000. Drilling down further, that would give the world 400 BTC billionaires and 200 ETH billionaires. That’s a huge jump from the current estimate of 19 crypto billionaires.
And just as technical innovation produces a new generation of wealthy elites, it also produces philanthropists. How the crypto generation spends its wealth may determine if humanity is able to adequately address its existential issues.
Web2 gave the world the Bill & Melinda Gates Foundation, Schmidt Futures and the Chan Zuckerberg Initiative – massive organizations that funnel money towards worthy causes. Web3, also a huge “wealth creation event,” is seeing its own class of philanthropic institutions like the FTX Future Fund, which pledged to donate $100 million this year.
For Lindmark, what separates Web2 from 3 is the idea of "SquadWealth,” or what happens when communities are able to align around emerging financial incentives. This matters for capital formation – like founding new projects – as well as philanthropy.
“Every round is a community round, with NFT degens and crypto VCs aping in together,” Lindmark said.
Not only that, but crypto seems to have an obsession with building “public goods,” he said. "These are a bunch of Web3 projects that are creating positive externalities, and they're all about giving back."
Crypto may also finally give us a “risk-adjusted investment ladder for public goods” similar to how venture capitalists value startups. "We will have seed, Series A, Series B, etc., but for nonprofit public goods,” he said.
What’s more? “Donors will be repaid through retroactive public goods funding," Lindmark said. CoinDesk spoke with Lindmark after his presentation on the Big Ideas stage to hear more about philanthropy in Web3. The conversation has been lightly edited for clarity and brevity.
How did you get interested in Web3 and philanthropy?
I really dove deep into Web3 in 2017. I had left my old company after the 2016 election in the United States – I just felt like I needed to concentrate on the bigger world, follow my curiosity and learn about Ethereum. These people are thinking in a really cool way: If we change how money works and how coordination as a society works, that is going to have a big impact. A big part of that is knowing where these philanthropists, created by printing lots of “magic internet money,” are putting their money.
We know that Bitcoin plunged below $25K, the lowest level since December 2020. In your speech, you mention if bitcoin goes to $200,000 and the rest of crypto rises with it, this would give you 400 BTC billionaires, 200 ETH billionaires and 200 other billionaires. Do you think it still will happen? Will bitcoin recover from this bear market?
All things considered, I am not an analyst, so I don't know. The price of bitcoin historically has gone up about 10x after “bitcoin halvings.” We’ll see what happens in 2024, [but] I'd say the odds of bitcoin [rising] above $200,000 are like 10%-15% and the odds that it's above $100,000 is, maybe, 25%-50%. Those are completely random numbers. But yeah, I expect OrangeCoin to go up.
So you’re confident in bitcoin?
I am mostly projecting trends – it's less that I'm bullish on bitcoin itself. I am more of a smart contract guy myself.
If crypto enables anyone to mint a token, literally print money, do you think there is an ethical obligation to donate?
I 100% think there's an ethical obligation to give away your money whether or not you can print crypto tokens. I think you have an ethical obligation to donate about 10% [of your earnings] after you make about $100,000. You don't get happier the more money you make, and every $1,000 [can be] impactful for the 750 million people who make less than $2 a day. Everybody should self tax themselves.
How can we apply crypto?
There are DAOs where you put your tokens into these yield-generating assets, but instead of giving yourself the yield, you give it to other people. It's similar to what PoolTogether has been doing with its “lossless lottery” – but you can just point it just at a charity. Crypto enables you to self tax yourself and direct where the money goes, so I hope in our future taxation system you get to choose where the money goes.
Do you think “effective altruism” is being used as a shield by the rich and powerful?
That definitely happens within philanthropy. Effective altruists, specifically as a type of philanthropist, are better than most philanthropists in being more aggressive than the “Giving Pledge,” which is a thing that Bill and Melinda Gates and others have pushed forward to give at least 50% of your wealth by the time you die.
I think SBF [FTX CEO Sam Bankman-Fried] and CZ [Binance CEO Changpeng Zhao] said they're going to give 99% of their wealth by the time they die.
Do Effective Altruists have as much of an obligation to not lose their wealth as they have for acquiring it?
I won't speak for all of them, but many that I know see wealth accumulation as a means to an end.
Why should the state or the government have a role in allocating resources?
By 2100, the way that we allocate and support public goods is going to be totally different than it is today. Right now it mostly goes through the state, and philanthropy is playing this role where it is not very transparent. The donor may choose where they put their money, but it is not accountable to anybody except the donor – so you get a market that's optimized for short-term private goods. While the government is optimized for short-term public goods, like roads and bridges.
Philanthropy can actually be optimized for the long term because it can be riskier and experiment more. In 80 years, that money will look a lot more like Gitcoin Grants. We already do it for open source software within the crypto world. Over time, there will be these “impact DAOs” and impact certificates – a whole impact economy will exist for funding public goods not just on the internet, but for communities around the world. There'll be community currencies that are baked into it. I think a lot of public goods financing, instead of coming from the government, will be through these new bottom-up mechanisms.
Is it possible to eliminate poverty?
It is 100% possible. Through industrialization and modernization plus good charity efforts, the amount of people in poverty has decreased by 400 or 500 million in the last 40 years. As more and more people in developed countries start to give back and as countries enter later stages of development … no one will be in poverty.
Do you think Web3 will help in this process?
Definitely. Web3 is a really cool technological frontier, and when new technological frontiers get developed and exploited there's a lot of value generated. That money can be pushed back into the system. There’s also the economic freedom perspective: Web3 hopefully will be part of a trend of banking the unbanked and bringing people out of poverty by providing new economic opportunities.
In addition to Coinbase Giving and FTX Future Fund, you said there would be dozens of massive Web3 foundations that give in a bottom-up way. These foundations will take the form of what Nadia Asparouhova calls idea machines, funded organisms that turn ideologies into outcomes. Could you give me an example of it? And why do you think it will happen?
An idea machine is something that is kind of like a movement of people who are looking to do something, but it's self organizing, and naturally is able to get excited people into it, but also excited capital. So you need kind of the money and the people that are starting to prioritize things and push towards these outcomes. And then once those outcomes happen, value gets created, and then the money, more people and talent kind of go back into that system. So maybe Gitcoin is a fine example of this, where you've had this bonus money that exists, people are excited by it, and then people start to co-create these giving to each other, the kind of SquadWealth. Everybody gives to each other's Gitcoin Grants, and then that allows people to start operating and creating more value, which then kind of loops back to bringing more people in financial capital into that system.
Could you explain more about the VC ladder for nonprofits? How will it work?
There are no risk adjusted ladders and also no returns to getting in early to a new nonprofit. We need to change that. The impact economy will have retroactive public goods funding and advance market commitments and a whole new kind of impact market rewarding those who get into new nonprofits early.
So why will it happen and how will it work? Is it just the same as the company, like going through the seed funding, Series A?
There are two separate things that need to occur here. The first is that the impact that is created needs to be recognized in a way and needs to have some kind of market price – this is the idea of impact certificates. I think that the impact itself needs to be recognized further down the line, five or 10 years later.
The other side is learning to measure the actual risk of new risky nonprofits that could have huge returns later. We’ll have to have some kind of equity or way to evaluate companies at the beginning based on how risky they are, because they might not all create impact but some of them might.
See also: How Crypto Could Avoid the Risks of 'Down Rounds' | Opinion
So you think this new model will attract people to donate more?
It's a good question. I honestly need to do some of the thinking myself more about this, whether this is actually something that people deeply, deeply want. I do think that if philanthropists could either get a little bit of a rate of return on some of their donations or have a little more incentive for putting money towards something risky than I think they would want to. But I haven't done the “100 customer interviews” to make sure that that's true.
What do you make of Jeff Bezos and Sam Bankman-Fried?
Sam was an ambitious kid that happened to execute really well, and now he has a bunch of money, and he's actually giving money back in a very serious way. I mostly agree with the effective altruists mindset. He's already donated $100 million through the FTX Future fund, and next year is going to give at least another $100 million and probably more. He’s trying to give $1 billion by 2025.
Do you think crypto is ultimately worth it, despite the fact that many retail participants lose out during the process of “wealth creation?”
I think Web3 is totally still gonna reshape the world, and that it is worth it. But there are so many bad things – something like $5 billion worth of crypto was lost in 2018. You know, luna – $50 billion of value lost, and so that's 10x more. Crypto has messed up a lot of lives for sure and hasn't been as inclusive as it could be.
But I think in the long run these new protocols will help us move money over the internet and will also help us kind of create our own community money. I think that's going to be a really powerful thing for society going forward.