The future of finance is hybrid: Endaoment raises $6.67 million

 We have witnessed an explosion of different types of decentralized autonomous organizations over the past year, as traditional and new players have recognized the value of DAOs.

For instance, Wyoming approved the first legally recognized decentralized autonomous organization (DAO), the growth of the Bankless community and Endaoment.org has just raised $6.67 million.

With DeFi’s rapid growth, in tandem with the expansion of the crypto ecosystem, it is time to take a closer look at the role they play within the financial industry.  

DeFi advantages  

DAO is an emerging effective way to democratize the banking system; these are essentially online organizations owned and managed collectively. DAOs make it possible to collaborate with people and resources effectively and efficiently, in theory making them accessible to all. It posits that if enough people are interested in a common goal, they can form groups and work to change and shape the future. 

According to a paper on ‘CeFi vs DeFi — Comparing Centralized to Decentralized Finance’ written by the University of Imperial, there are three critical technological advantages to the expansion of DeFi (Decentralized Finance): 

  1. Transparency – A user of DeFi can examine the exact rules by which financial assets and products operate. In addition to preventing back-deals and private agreements, DeFi avoids centralization, which are significant limitations of CeFi’s transparency. 
  2. Control – Users can be the custodian of their assets, i.e. they cannot be censored, moved, or destroyed without their consent. DeFi gives users control.
  3. Accessibility – DeFi products can be created and deployed by anyone with a PC, internet connection, and enough knowledge, while the blockchain and its distributed network of miners operate them effectively.

Moreover, the implications of DeFi infrastructure can be a powerful tool for financial infrastructure, especially for charities, SMEs, and emerging economies, as it can allow a cheap way to operate saving accounts and liquidity to the micro-finance institutions. For platforms like Endaoment, they are crucial in enabling this.  

Endaoment 

On June 16, 2022, Endaoment.Org, a blockchain-based 501(c)(3) public charity, and Endaoment.Tech, the software development firm responsible for building Endaoment’s smart-contract driven protocol, jointly announced the completion of a combined fundraising round of $6.67 million in a mix of charitable donations and investment capital to support the charitable mission of Endaoment, the administration of the protocol, and the furtherance of its service offerings.   

Leading the financing round was Shine Capital, a consumer financial tech and crypto venture fund. Additional contributors include Coinbase Ventures and Coinbase GivingCircle Ventures and Circle Impact FundHigher Ground LabsFramework VenturesQuiet Capital, and Hypersphere, as well as notable individuals including Tim Ferriss, NFT artists Pplpleasr and Snowfro.ethNoah ZinsmeisterAdam Nash, and others. 

“Crypto builders and investors want and deserve access to the same charitable and tax-efficient products that have been available to traditional investors for decades,” said Shine Capital’s Mo Koyfman. “Endaoment offers the first crypto-native DAF platform — a non-trivial technical achievement — to enable crypto-native charitable giving at scale. Longer-term, Endaoment has the opportunity to build the de facto tax-efficient investment platform for the broader crypto community. Robbie’s passion for creating this future is unrelenting, and we are excited to back him on this most worthy journey.” 

“We’re thrilled to secure such sizable growth capital from many revered names within the wide range of disciplines Endaoment strikes a balance between,” said Endaoment.Tech CEO, Robbie Heeger. “These funds enable Endaoment.Org to continue providing world-class cryptocurrency donation options and Endaoment.Tech to push the functionality and capability of our protocol and its assets.” 

Endaoment.Org provides more than 1.5 million organizations with zero-cost infrastructure to process donations in more than 1,000 different cryptocurrencies. The scope of Endaoment’s reach continues to introduce the philanthropic community to the world of crypto while nurturing a new cohort of philanthropists on a scale that demonstrates the gaps left by legacy philanthropic institutions yet to adopt the latest technology. 

Hybrid model 

However, the Global Financial Stability Report by the IMF does point out that “the absence of centralized entities governing DeFi is a challenge for effective regulation and supervision. Regulation should focus on elements of the crypto ecosystem that enable DeFi, such as stablecoin issuers and centralized exchanges.” And that the use of DeFi could backfire, undermining domestic policies in emerging markets. Thus there are some limitations to a purely DeFi financial system. 

According to the University of Imperial’s paper, “DeFi is still in its infancy,” because DeFi uses blockchain technology, it has distinguishing features not found in CeFi, such as non-custody, transparency, and decentralization. However, the blockchain limits DeFi’s transaction, transaction confirmation latency, and privacy.

“Ultimately, DeFi and CeFi share the same goal: to provide customers with high-quality financial products and services and to power the entire economy. In summary, DeFi and CeFi each have their advantages and disadvantages, and we cannot find a trivial way to combine the best of both systems. Therefore, we believe these two distinct, but intertwined financial systems will coexist and improve each other.”

Speaking to Endaoment.Org COO, Zach Bronstein, he agrees with this hybrid outlook.”DeFi benefits from the open-source nature of the blockchain and the fact that anyone with sufficient programmatic knowledge can deploy their own smart contract. Clearly, DeFi is set up to quickly spin up new financial vehicles in a way that traditional finance cannot. On the flip side, however, some traditional financial tools and vehicles currently don’t have on-chain equivalents.” 

headshot of man
Endaoment.Org COO, Zach Bronstein

“As a 501(c)(3) organization, Endaoment operates from a compliance-first perspective, building tools that take advantage of DeFi technology while honoring existing regulatory structures. Endaoment was the first organization to build and run an Ethereum Donor-Advised Fund, a philanthropic financial vehicle that previously didn’t exist outside of traditional financial institutions. We look forward to introducing other tax-friendly financial vehicles such as Charitable Remainder Trusts, 529 accounts, and many more that currently don’t exist on any blockchain. While I anticipate that some of these tools will be built in the near future, I think it’s clear that the future of finance is hybrid – it will have both on and off-chain compliance components that will need to work together to build a new kind of financial sector.”

The Endaoment ecosystem will continue its decentralization journey this year; Endaoment.Org will become the first U.S. Public Charity to have its board oversight powered by token-gated governance. Endaoment.Tech is currently in the final stages of a security audit of its v2 smart contract protocol, whereby it will be able to hand over board oversight to community members based on their advancement of the Endaoment mission. More information on Endaoment v2 will be shared later this summer.  

Endaoment.Org’s first-of-its-kind donation platform is powered by the software development efforts of Endaoment.Tech. The Delaware-based technology company, founded in 2019, develops the blockchain-based protocols and web interfaces necessary to offer native, tax-compliant planned giving and wealth management services for those who hold digital assets.  

  • Helen Femi Williams is a freelance journalist and podcaster interested in fintech, politics, economics, and their intersections. She is the host of the letsgetlitical podcast, a fortnightly show interviewing guests from all different sides of the political spectrum, in partnership with the Mozilla Foundation. Prior to this role, she worked as an innovation consultant developing insurtech and fintech products and ideas for brands, startups, and major corporations. She studied International Relations at the University of Nottingham (UK and Malaysia).

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