NFT had a frenzy in 2021 as sales surged to $25 billion, prompting a Dallas-based software developer to use cash to write off millions of debt for low-income families.
“People have been making stupid amounts of money in space,” said Joshua Lapidus, whose main job is with Denver-based technology company Opolis, which helps manage medical benefits and payroll for independent workers.
The Medical Debt Project took shape last fall, much like many in the crypto space, through a group chat that Lapidus started with blockchain experts he knew. They settled on the unique theme of their non-fungible tokens – toilet paper – to poke fun at how people buy anything if it’s an NFT. About 70% of the proceeds will go to charity.
“We joked about how bad the scenery was with people selling just about anything to make money,” Lapidus said. “And we thought we needed people to buy our stuff and give some to charity.”
Called Rainbow Rolls, the project was launched in October with 10,000 NFTs of toilet paper sold. The limit was later reduced to 1,000 rolls, plus how many additional rolls are sold one week after the 1,000th roll is sold. At the moment, about 855 rolls have been purchased through word of mouth.
The NFT price is 0.1337 of the current Ethereum price, which varies. As of Monday, Ethereum is worth around $2,590, meaning the Rainbow Roll NFT is selling for around $346. Buyers use the Ethereum they bought with dollars from an exchange like Coinbase to buy NFTs. Rainbow Rolls then makes donations through the Giveth platform, which instantly 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 the funds to pay off more than $7 million in medical debt by purchasing debt in packaged portfolios. On average, every dollar given to a non-profit organization forgives $100 of medical debt, according to its website.
The project also donated 16.5% of Gitcoin, which helps fund community projects in the blockchain-based Web 3 space, and another 16.5% of Giveth, which funds social projects.
“People who bought the rolls didn’t care about the art itself,” said Michael Levellen of Rainbow Rolls, a protocol security advisor at Walnut, Calif., to OpenZeppelin, which is an open source library for developing smart contracts.
“It was about making a meaningful impact on someone’s life — for the same reason you contribute to any charity,” Levellen said.
RIP Medical Debt, founded in 2014 by two former debt collection executives, uses data analytics to help households whose income is less than twice the federal poverty level or with medical debt of at least 5% of gross income.
Low-income families are often unable to pay off their medical debts, so hospitals and collectors are keen to sell this debt for a penny per RIP Medical Debt dollar.
The donation from Rainbow Rolls was significant considering the average RIP Medical Debt gift is less than $300, said Scott Patton, development director for RIP Medical Debt.
“I think it resonated with people because if you get seriously ill, it’s not only damaging to your physical body, but also to your financial situation,” Patton said. “Everyone in America knows that even with insurance and a good life, you can be a little isolated, but you’re still vulnerable.”
States have varying amounts of medical debt available for purchase depending on their laws and statutes, Patton said, regardless of whether hospitals sell the debt or how available the secondary market is.
Texas has always been a state with a lot of available debt, he said.
RIP Medical Debt is also proposing a review of hospitals’ philanthropic policies to help prevent further debt.
/cloudfront-us-east-1.images.arcpublishing.com/dmn/52XBWLLHOFDJDM5L2HKZIG6MDA.jpg "Dallasite sells NFT toilet paper as a joke, then erases $7 million in medical debt 1")
Criticism
Like any new trend, the NFT has its critics, some of whom have criticized RIP Medical Debt for being associated with them. The main issue seemed to be the energy associated with NFT transactions.
Rainbow Rolls’ Gavin Nicholson, director of legislative affairs who works for DeSoto State Representative Carl Sherman, said those concerns are valid but may be misplaced.
“There is nothing wrong with the NFT itself,” he said. “The problem is what drives them. But no one complains when you buy a new computer because it represents value.”
The Ethereum community has long recognized the need to abandon their current model due to high power consumption. In June, Ethereum 2.0 will be launched, which, according to experts, can reduce energy consumption by 99%.
“It’s a little weird because Rainbow Rolls reached out to an audience that would normally be unreachable and managed to get them to think about important issues they weren’t normally aware of,” Nicholson said. “We brought them the problem and the solution.”
RIP Medical Debt was also surprised by the criticism, Patton said, noting that some of the objections looked like they weren’t researched enough.
“Withdrawal of contributions to write off medical debt does not help in any objection to the NFT,” he said. “You can have these problems, explore them and find solutions.”
Patton also noted that there are bad actors in every space.
“I’m just glad we’re working with good actors,” he said.
/cloudfront-us-east-1.images.arcpublishing.com/dmn/DGEV2OLJSRHK5KVI4PT3QHGFEA.jpg "Dallasite sells NFT toilet paper as a joke, then erases $7 million in medical debt 2")
Rainbow rolls 2.0?
The Rainbow Rolls team is happy with their success despite not getting any closer to their original goal of selling 10,000 rolls. Lapidus said that when the effort was launched in October, it slightly surpassed the peak of the craze. The NFT community also values knowing the artist’s identity, which Rainbow Rolls has kept anonymous, he said.
According to Lapidus, the group plans to launch a second project and is considering registering as a non-profit organization. Timing will depend on when everyone is available, but it does suggest a launch around April.
Most of the money will still go to charity, Lapidus said. The group plans to collaborate again with RIP Medical Debt and possibly some new charities.
“The people helping with this are very highly paid, very successful participants, so there was no way I could involve them in this because of the money,” Lapidus said. “If we want, there is a very simple formula to make $10 million in one night. They did it to help people.”