NFTs had a frenzy in 2021, with sales surging to $25 billion, prompting a Dallas software developer to use the cash grab to wipe away millions in debt for lower-income families.
“People were making stupid amounts of money in the space,” said Joshua Lapidus, whose day job is at Denver-based Opolis, a technology company that helps manage health benefits and payroll for independent workers.
The medical debt project took form last fall in the way a lot do in the crypto space — through a group chat, which Lapidus started with blockchain experts he knew. They landed on a unique theme for their non-fungible tokens — toilet paper — to poke fun at how people were buying anything if it was an NFT. About 70% of the funds would go to charity.
“We were making jokes about how bad the landscape was, with people selling anything to make money,” Lapidus said. “And we thought we should have people buy our thing and give some to charity.”
The project dubbed Rainbow Rolls launched in October with 10,000 toilet paper NFTs for sale. The limit was later dropped to 1,000 rolls, plus however many additional rolls are sold the week after it hits the 1,000th roll sold. So far, about 855 rolls have been bought through word of mouth.
The cost of the NFT is .1337 of the current price of Ethereum, which varies. As of Monday, Ethereum is going for about $2,590, meaning the Rainbow Roll NFT is selling for about $346. Buyers use Ethereum they bought with dollars on an exchange like Coinbase to purchase the NFT. Rainbow Rolls then makes the donations via the Giveth platform, which instant-converts the Ethereum donation into dollars.
Rainbow Rolls donated 20% of its sales, or $91,000, to New York-based RIP Medical Debt, which then used it to wipe out over $7 million in medical debt by buying debt in bundled portfolios. On average, each $1 given to the nonprofit forgives $100 in medical debt, according to its website.
The project also donated 16.5% of funds to Gitcoin, which helps fund community projects in the blockchain technology-driven Web 3 space, and another 16.5% of funds to Giveth, which funds social good projects.
“People who bought rolls didn’t care about the art itself,” said Rainbow Rolls’ Michael Lewellen, a protocol security adviser at Walnut, Calif.-based OpenZeppelin, which is an open-source library for smart contract development.
“It was about making an impact on someone’s life in a meaningful way — the same reason you contribute to any charity,” Lewellen said.
RIP Medical Debt, founded in 2014 by two former debt collections executives, uses data analytics to target relief to households whose income is less than two times the federal poverty level guideline or with medical debt representing at least 5% of gross income.
Low-income families often can’t pay their medical debts, so hospitals and debt collectors are eager to sell that debt for pennies on the dollar to RIP Medical Debt.
The donation from Rainbow Rolls was sizable considering that the average gift to RIP Medical Debt is below $300, said Scott Patton, director of development at RIP Medical Debt.
“I think it struck a chord with people because if you get a serious illness, it harms not just your physical body but your financial being as well,” Patton said. “Everyone in America is aware that even with insurance and a good living, you may be insulated a little but you are still vulnerable.”
States have varying amounts of medical debt available to purchase based on its laws and statutes, whether hospitals sell debt or how available the secondary market is, Patton said.
Texas has always been a state with a lot of debt available, he said.
RIP Medical Debt also offers to review hospitals’ charity care policies to help them prevent more debt from being created.
As with any new trend, NFTs have their critics, some of whom criticized RIP Medical Debt for associating with them. The main issue seemed to be the energy associated with NFT transactions.
Rainbow Rolls’ Gavin Nicholson, a legislative director who works for state Rep. Carl Sherman of DeSoto, said those concerns are valid but perhaps misplaced.
“Nothing is wrong with the NFT itself,” he said. “The problem is what’s powering them. But no one complains when you buy a new computer because it provides value.”
The Ethereum community has long recognized the need to move away from its current model because of high energy use. In June, Ethereum 2.0 will launch, which experts say could drop its energy consumption by 99%.
“It’s kind of odd because Rainbow Rolls reached an audience that normally wouldn’t have been reached and managed to get them to care about important issues that they normally wouldn’t have known about,” Nicholson said. “We brought the problem and solution to them.”
RIP Medical Debt was also surprised at the criticism, said Patton, noting that some objections seemed like they weren’t well investigated.
“Refusing contributions to forgive medical debt doesn’t help with any objections to NFTs,” he said. “You can have those concerns and investigate them and come up with solutions.”
Patton also noted that every space has bad actors.
“I’m just glad we are working with good actors,” he said.
Rainbow Rolls 2.0?
The team behind Rainbow Rolls is pleased with its success, despite not coming close to its original goal to sell 10,000 rolls. Lapidus said when the effort launched in October, it came slightly past the height of the craze. The NFT community also values knowing the identity of the artist, which Rainbow Rolls has kept anonymous, he said.
The group is planning to launch a second project and considering registering as a nonprofit organization, Lapidus said. The timing will depend on when everyone is available, but he estimates a launch around April.
Most of the money will continue to go to charities, Lapidus said. The group plans to partner with RIP Medical Debt again and maybe some new charities.
“The people helping with this are very highly paid, very successful contributors, so there’s no way I could have drawn them into this for the money,” Lapidus said. “If we wanted to, there’s a very simple formula to make $10 million overnight. They did it to help people.”