The Wikimedia Foundation’s about-face comes after it hosted a community discussion earlier this year on the pros and cons of accepting crypto funding.
The Wikimedia Foundation’s about-face comes after it hosted a community discussion earlier this year on the pros and cons of accepting crypto funding.
The Wikimedia Foundation (WMF) has accepted a call for donations that will come in the form of cryptocurrencies. The parent company of the popular website Wikipedia has changed course and announced that it will no longer accept cryptos.
The foundation cited environmental factors and a lower proportion of donations coming in as cryptos as key reasons for the about-face. Only $130,000 worth of crypto, about 0.08% of its earnings, was received as donations in 2021.
The WMF decided in 2014 to accept cryptocurrencies. A year earlier, bitcoin, the most advertised virtual asset to date, traded for under $100. The following year, its value rose to over $700. In addition to bitcoin, the nonprofit had also accepted other virtual coins including ether, dogecoin, and other stablecoins.
The decision to scrap the crypto policy comes after the foundation published a discussion page about the pros and cons of this new asset class in early January. It closed the discussion in April after collecting responses from its user community.
“We began directly accepting cryptocurrencies in 2014 based on requests from our volunteers and donor communities. We are making this decision based on recent feedback from the same communities,” WMF said in a statement.
As a result of this change, the nonprofit will close its Bitpay account, which will prevent the organization from receiving future donations in crypto.
WMF reached out to its community to discuss the idea of receiving crypto donations. A little under 400 users voted and debated whether the foundation should stop accepting donations for digital assets. The majority approved the proposal by 232 to 94. Users who advocate stopping the process were mainly concerned about the energy-intensive mechanics of the digital currency market.
Supporters in the Wikipedia community dismissed the idea, citing less energy-intensive cryptocurrency options, noting that crypto has shown its advantages in providing safer ways for people to donate in repressive countries.
According to some estimates, bitcoin and other cryptocurrencies use more electricity than global gold mining annually. Burning this amount of energy could potentially have an impact on greenhouse gas emissions, something climate activists are doggedly trying to reduce.
Environmental activists have launched campaigns calling for cryptocurrencies to reduce energy dependency.
Bitcoin miners rely on sophisticated hardware to validate transactions as they involve complex puzzles. In order to solve these, computers devour a lot of energy. And miners get new tokens in return for validating those transactions. This is called “proof of work” where the energy consumed is a type of price paid for verifying transactions.
This process is intentionally energy intensive to keep bad actors from disrupting data residing on a globally distributed ledger.
Activist campaigns are forcing Bitcoin and other crypto-asset miners to move from a proof-of-work to a proof-of-stake model. The latter model is said to be less energy intensive as it doesn’t need to solve complex puzzles to validate transactions.
While the model proposed by can reduce CO2 emissions, it will be difficult to implement. That’s because miners invested heavily in building their hardware and would have a hard time abandoning it. And supporters of the “Proof of Work” model believe that the current concept is the most secure way to validate transactions.
Within the crypto world, Bitcoin is considered the most polluting digital asset. Its rival Ether, which runs on the Ethereum blockchain, is said to be switching from one energy-intensive model to another that will use much less electricity.
And even if cryptocurrencies move to a new validation method, WMF may not return to its 2014 position as crypto donations to the nonprofit have not exceeded 1% of their total funding.
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