Colleges are taking advantage of NFTs as a new fundraising mechanism
As NFTs dominate the moment, some colleges are cashing in on the craze.
An NFT (short for Non-Fungible Token) is a speculative digital asset that is unique and cannot be replicated or replaced. People often compare NFTs to original works of art; while many people own prints or replicas of the mona-lisa, Leonardo da Vinci’s original painting is on display at the Louvre. Just like art, the value of an NFT depends on how many other people would pay to own it and how much they would pay.
In June, the University of California, Berkeley auctioned an NFT based on Nobel Prize-winning research by immunologist James Allison, which helped establish immunotherapy as the fourth pillar of cancer treatment. It earned the university about $50,000.
Berkeley announced months ago that it would auction a second NFT based on Nobel Prize-winning Jennifer Doudna’s CRISPR-Cas9 gene-editing invention, but it has since put those plans on hold. Creating the NFT was legally complicated, said Richard Lyons, director of innovation and entrepreneurship at the university. Nevertheless, the university is pursuing other NFT auctions.
“We have another NFT that involves a breakthrough that speaks directly to blockchain technology, which should particularly appeal to this collector audience,” Lyons said. “We are also pursuing a possible lineup of NFTs around creative works from UC Berkeley.”
Berkeley auctioned the NFT via Foundation, an online marketplace for NFTs. Using an existing platform like this is a good way for colleges and universities to experiment with NFT auctions, said Jeremy Coffey, senior associate attorney at Perlman and Perlman who advises nonprofits. lucrative on digital currency and new fundraising platforms.
“The barrier is relatively low for organizations that just want to try to leverage NFTs,” he said. “In my experience, most organizations have tried one-time fundraisers to see how it goes and to see if there’s interest.”
Alex Wilson, co-founder of Giving Block, an organization that works with nonprofits on cryptocurrency fundraising, explained how an NFT auction works.
“If someone has an NFT, they can basically put it up for sale on a marketplace. In most cases, they’re selling those NFTs for cryptocurrency,” Wilson said. , much like it would for traditional art. If they win, the buyer will use the crypto to pay, and the seller will get the crypto in the [digital] wallet they attached to the NFT.
Often the seller will donate the product after the sale is complete.
“NFT philanthropy has really taken off this year,” Wilson said. The Giving Block has facilitated over $10 million in cryptocurrency donations resulting from NFT sales in 2021.
Even if institutions are hesitant to create and sell NFTs themselves, they should still be aware of how transactions work and be prepared to accept cryptocurrency donations resulting from NFT sales, Wilson said.
“For many nonprofits, they might see crypto coming in and not always connect the dots, but it was actually the result of an NFT selloff,” he said.
The University of Miami took a different approach when it auctioned its first NFT in August. The university creates canesvault.com, a college-specific NFT marketplace named after the Hurricanes football team, to auction an NFT of the team’s 1989 championship ring. The NFT, which included a replica of the ring and a looping digital graphic of the ring, sold for $10,000.
Miami now lists a few dozen digital championship rings, commemorative tickets, and other NFTs on canesvault.com at a variety of price points, from $50 to over $2,000. Some of the other NFTs auctioned have sold for over $5,000 each.
NFTs open up a world of possibilities for college fundraisers. Essentially, any valuable university asset could be turned into NFTs and sold to the highest bidder. According to Coffey, the only assets that may be prohibited for an NFT sale are those that have naming rights attached.
“These assets are likely no longer available to be turned into NFTs in any way without the consent of the original donors who hold the naming rights,” he said.
Creating a non-fungible token – a process called minting – is extremely energy intensive. Critics of digital assets have sounded the alarm about the environmental impact of tokens.
To help offset the energy cost of creating its NFT, Berkeley spent 10% of its profits, or $5,000, on carbon offsets.
“The best estimates we could produce for the direct impact of the first sale process were quite low, in the range of $10 to $20,” Lyons said. But the university chose $5,000 — a conservative figure — to account for future NFT transactions and potential developments in blockchain technology that make those transactions more energy efficient.
NFTs probably won’t be around forever, Coffey said. “But they are definitely a potential source of income right now.”