Proof-of-donation refers to the integration of charitable donations into the functionality of a blockchain.
What Is Proof-of-Donation?
Proof-of-donation refers to the integration of charitable donations into the functionality of a blockchain. Typically, this describes a redirection of funds, set by a smart contract and triggered upon each transaction, toward a charitable destination. The charitable donation can be given to a wallet owned by a charity, or a separate fund whose funds are controlled by a DAO or other party.
Proof-of-donation is a modification of a traditional proof-of-burn that aims to bring altruism and sustainability to the blockchain transfer model. As blockchain activity scales, given the programmatic redistribution of funds, the charitable donations will likewise scale and contribute to the sustainable growth of the network.
An example of proof-of-donation is that employed by Hermez Network: coordinators bid for the right to process transaction batches using the token HEZ; 40% of each winning bid is donated to Gitcoin as a way to fund Ethereum public goods, while 30% is burned and 30% is redistributed to the network.
Author:
Jordi Baylina is one of the strongest Solidity developers in the world and a high impact contributor in the Ethereum community. He is a co-founder of the White Hat Group, which played a major role in rescuing funds from TheDAO and Parity Multisig hacks, author of the MiniMe token contract, the elliptic curves Solidity library as well as numerous other established contracts in the Ethereum space. Jordi is also a well respected auditor, most notably leading teams to audit the MakerDAO Stable Coin system and Aragon project. Founder of the donation platform Giveth, DAppNode, Iden3 and most recently, Hermez.
As a seasoned expert deeply entrenched in the blockchain space, particularly with a focus on Ethereum and smart contract development, my knowledge extends across various aspects of decentralized technologies and their practical applications. My expertise is underscored by a comprehensive understanding of concepts such as proof-of-donation, proof-of-burn, and the integration of charitable donations into blockchain functionality.
Let's delve into the concepts mentioned in the article:
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Proof-of-Donation (PoD):
Proof-of-donation is a novel approach to infusing altruism and sustainability into blockchain systems. This mechanism involves the incorporation of charitable donations into the fabric of a blockchain, often orchestrated by smart contracts. In the described scenario, funds are redirected based on predefined rules triggered by each transaction. This ensures a continuous flow of charitable contributions, promoting social responsibility within the blockchain ecosystem.
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Traditional Proof-of-Burn:
Proof-of-donation is presented as a modification of traditional proof-of-burn. Proof-of-burn involves the deliberate and irreversible destruction (burning) of a certain amount of cryptocurrency tokens. This process, in the context of proof-of-donation, has evolved to encompass a more socially conscious and sustainable model.
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Smart Contracts:
Smart contracts play a pivotal role in the implementation of proof-of-donation. These self-executing contracts with coded rules facilitate the automatic redirection of funds toward charitable destinations. In the context of blockchain, they ensure the transparent and trustless execution of predefined actions.
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Decentralized Autonomous Organization (DAO):
The article mentions that charitable funds might be controlled by a DAO or other parties. A DAO is an autonomous, decentralized entity that operates on a blockchain, often governed by smart contracts and consensus mechanisms. It allows for transparent and democratic decision-making within a community.
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Hermez Network's Proof-of-Donation Example:
The article highlights an example of proof-of-donation employed by Hermez Network. In this model, coordinators bid for the right to process transaction batches using the HEZ token. A percentage of the winning bid is donated to Gitcoin for funding Ethereum public goods, while another portion is burned, and the rest is redistributed to the network. This showcases a practical implementation of proof-of-donation within a specific blockchain network.
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Jordi Baylina:
The article is authored by Jordi Baylina, a highly regarded figure in the Ethereum community. He is acknowledged as one of the strongest Solidity developers globally, co-founder of the White Hat Group, and has contributed significantly to various Ethereum projects. His expertise is further demonstrated through his role in rescuing funds from notable hacks, his contributions to the development of Ethereum contracts, and his leadership in auditing projects like MakerDAO Stable Coin system and Aragon.
In conclusion, the integration of proof-of-donation into blockchain systems, as exemplified by Hermez Network, represents a noteworthy advancement in combining technological innovation with social responsibility within the decentralized landscape. This approach not only fosters sustainable growth but also reflects a commitment to philanthropy within the blockchain community.
FAQs
Proof-of-donation refers to the integration of charitable donations into the functionality of a blockchain. Typically, this describes a redirection of funds, set by a smart contract and triggered upon each transaction, toward a charitable destination.
What is proof of donation? ›
A charitable donation receipt is a letter, email, or receipt form notifying a donor that their gift has been received. Charitable donation receipts contain information regarding the gift (donor name, organization name, gift amount, gift type, etc.).
Does the IRS need proof of donations? ›
For contributions of cash, check, or other monetary gift (regardless of amount), you must maintain a record of the contribution: a bank record or a written communication from the qualified organization containing the name of the organization, the amount, and the date of the contribution.
What should a donation receipt say? ›
For cash donations, the receipt should mention that cash was received. For noncash donations, a more detailed description of the item or items donated should be included. Multiple items of similar nature can be grouped, such as books, clothing, and decorations.
How do I prove cash donations? ›
Proof can be provided in the form of an official receipt or invoice from the receiving qualified charitable organization, but it can also be provided via credit card statements or other financial records detailing the donation.
What is a letter of confirmation of donation? ›
A donation acknowledgment letter is a type of donor letter that you send to donors to document their charitable gifts and donations. Sometimes your donation receipt functions as a donor acknowledgement. However, that's not always the case. All donors deserve to be thanked, no matter the size of their gift.
What is an official donation receipt? ›
Additionally, receipts must contain the location of issue, the date and value of the donation. They should also include the value of any advantage, such as gifts received in exchange for the donation. Receipts must state that they are for official income tax purposes and must contain your full name and address.
How much can you say you donated on taxes without proof? ›
Cash or property donations worth more than $250: The IRS requires you to get a written letter of acknowledgment from the charity. It must include the amount of cash you donated, whether you received anything from the charity in exchange for your donation, and an estimate of the value of those goods and services.
What is the IRS rule for donations? ›
Your deduction for charitable contributions generally can't be more than 60% of your AGI, but in some cases 20%, 30%, or 50% limits may apply. Table 1 gives examples of contributions you can and can't deduct.
What documentation is needed for charitable donations? ›
Written acknowledgement from the charity is required and must be obtained from the charity on or before the earlier of the date when the tax return is filed or the due date of the tax return (including extensions). The written acknowledgement must contain: Charity name. Amount of cash contribution.
You can qualify for taking the charitable donation deduction without a receipt; however, you should provide a bank record (like a bank statement, credit card statement, or canceled check) or a payroll deduction record to claim the tax deduction.
Is it worth getting a donation receipt? ›
For this reason, it's best to set up a record-keeping system at the start of each year. Set up your record-keeping system at the beginning of each year and file all donation receipts in the same place. Getting a receipt every time you donate strengthens your tax records in case you are audited.
What are the red flags for IRS audit? ›
Too many deductions taken are the most common self-employed audit red flags. The IRS will examine whether you are running a legitimate business and making a profit or just making a bit of money from your hobby. Be sure to keep receipts and document all expenses as it can make things a bit ore awkward if you don't.
How much can I deduct for a bag of clothes? ›
How much can I deduct for household items and clothing? You can deduct the amount based on a percentage of your Adjusted Gross Income. The fair market value of donated items in good or used condition can be claimed as a deduction on your tax return. You can claim a deduction of up to 60% of your Adjusted Gross Income.
How much can I claim without receipts? ›
You can submit up to $300 worth of business or work expense claims without the strict need for receipts.
What is an official donation letter? ›
Donation letters, also known as appeals, are a tool nonprofits use to entice prospective supporters to donate. Most of the time, they include a written ask for donations like financial support or an in-kind gift. Donation letters can ask for: Individual financial donations from people and families.
What is donation receipt for a special purpose? ›
A donation which is received for a specific purpose is a capital receipts. This has to be utilized only for the specific purpose. This is a capital receipt.
What is donation recognition? ›
Donor recognition describes the practice of thanking your organization's donors for their gifts to your nonprofit. It's a way for nonprofits to express gratitude and reinforce supporters' commitment to the cause. Many nonprofits separate recognition into tiers based on the type of gift and amount given by a donor.
Is a donation a good deed? ›
Donating is a selfless act. One of the major positive effects of donating money to charity is simply feeling good about giving. Being able to give back to those in need helps you achieve a greater sense of personal satisfaction and growth, it feels good to help others.
