How war in Ukraine became war on the blockchain

Cool story, crypto bro

If there’s one thing Ukraine does not need right now, it’s $19 worth of Dogelon, or 50,000 AssangeDAO coins, or an NFT of an alien shiba inu. But that’s what the war-torn country got, along with more than $50 million of cryptocurrency since it opened up bitcoin and Ethereum wallets and announced the addresses on Twitter last week.

The bitcoin, ether and USDT that landed there will help the country’s war effort. But the random assortment of coins getting sent Ukraine’s way points to a problem with the narrative of crypto as the new war bond: Along with the fungible tokens, you get a lot of funk.

The novelty of crypto is driving donations. World War III? More like World War Web3, am I right?

• For a generation that’s only experienced war as a video game, sending crypto to the front seems like a natural move.
• The pro-crypto argument: Cryptocurrency can route around financial barriers and move funds quickly to places where they’re needed. “It’s actually a massive step up from the pallets full of cash that were previously sent into conflict areas,” KRH Partners’ Tomicah Tillemann told The Washington Post.
• But Ukraine isn’t under sanctions. The Ukrainian government placed some restrictions on internal money movements as it imposed martial law, but the world’s financial plumbing remains open to the country. Some money-transfer companies have even waived their usual fees, making sending cash there cheaper.
• Ukraine’s army needs weapons, ammunition, fuel and food, not digital artwork. To buy those, it’s converting the crypto it received into … pallets of cash.

The blockchain is making Ukraine’s fundraising public. The transparency is arguably helping fuel more donations.

• People think of crypto as private and anonymous, but it’s not, really. If you have someone’s wallet address, you can see all of their transactions recorded on the blockchain. Sites like Etherscan make this easier. For donors, it can be satisfying to see the money moving in real time. People in Silicon Valley call this “social proof,” and the blockchain provides it.
• You don’t need the blockchain for this, though. GoFundMe has a Ukrainian relief hub where you can see exactly how much various Ukraine-related campaigns have raised.
• And while you can see the money going in and out of Ukraine’s official wallet, there’s no way to know how it’s being spent. The blockchain is designed to be trustless, but on this, you’ll just have to trust someone.
• For some, that’s the point. Patreon removed a Ukrainian nonprofit’s campaign for violating its rules on funding military conflict. GoFundMe has similar prohibitions on buying weapons.

Will crypto turn the tide of war? No.

• President Biden moved last week to send $350 million in military aid to Ukraine. The EU followed up with $500 million in an unprecedented pledge of military assistance. And the White House is asking Congress for another $10 billion. The amounts flowing through crypto are a drop in the bucket.
• And crypto’s high transaction costs are taking a bite out of what Ukraine’s receiving. Bitcoin transaction fees tripled in the past week. Gas fees on Ethereum, which traffics in a variety of tokens, have been more stable, but people have long complained about how expensive they are.

If we might make a modest suggestion for those who want to make a difference to the millions of Ukrainians in need of food, shelter and medical treatment, how about the Red Cross, which puts 90 cents of every dollar it receives to relief programs, an excellent ratio among nonprofits? Red Cross affiliates have called for $272 million to fund relief efforts in the country, where they’ve been operating since 2014. Oh, and if you absolutely insist, the Red Cross does take bitcoin.

— Owen Thomas (email | twitter)

A MESSAGE FROM MODERN TREASURY

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