Often maligned as a tool for illegal activities, Bitcoin, Ethereum and other cryptocurrencies have become something of a lifeline for Ukrainians, as donors have used the digital tokens to fund a variety of war-related causes.
More than XNUMX donations of crypto assets totaling more than XNUMX million US dollars have flowed into Ukraine since the beginning of the Russian invasion, according to Elliptic, a blockchain analytics company.
“Soon it will exceed one hundred million US dollars. It is a huge sum of money. Last week it was more than the United Nations gave," said Alex Gladstein, director of strategy at the Human Rights Foundation.
Cryptocurrency donations achieve multiple goals: they avoid the higher fees charged by traditional financial networks, transfers are virtually instantaneous, and digital tokens are mobile: anyone can donate them and the owner can access them, regardless of their location.
"There are practically a couple of million Ukrainians who fled to Europe and other countries and they must have done it pretty quickly," Gladstein said. "Think of a middle-class family. They probably own shares and have a house or part of a house. No you can take none of this with you.Ukraine is the fourth most crypto-friendly country on the planet in terms of property per head, so those who escaped were surely able to enjoy an asset that could go with them.
"Ukraine is also a huge technology center and a country where the local currency has a history of depreciation and collapse," Gladstein continued. "The other reason is that the government wants to use cryptocurrencies to raise funds for the war against Russia. Traditionally, this was done through bonus systems or government-to-government transfers. Now, thanks to bitcoin, anyone from Any site can donate to the Ukrainian cause."
Gladstein described the population of Ukraine as "computer-savvy and mobile-friendly". Due to his keen sense of technology and cryptocurrency adoption, he plays an essential role in funneling funds across borders, Gladstein claimed.
"Never before in history have we had an asset like this. It's like gold. You can have your savings in something where you just have to memorize or write the private key, and it's really powerful," Gladstein said. "I interviewed quite a few people from Argentina and Afghanistan who left their country with their value through the power of bitcoin. It's a huge humanitarian tool."
In fact, with the growth of legal cryptocurrency usage far outpacing the growth of criminal usage, the share of illegal activity in cryptocurrency transaction volume has never been lower, according to Chainanalysis, a provider of blockchain data, services and research. .
Transactions involving illegal addresses accounted for just 0,15% of each and every crypto transaction, according to Chainanalysis.
Cryptocurrency donations made to Ukraine go directly to the government, non-governmental organizations (NGOs), charities, or citizens, saving thirty percent on overhead and an ancillary fifteen percent on reconciliation fees. fees typically charged by traditional financial networks and statutes, said Avivah Litan, distinguished analyst and vice president at research firm Gartner.
“I think it is essential to dispel this misconception that blockchain is only for criminals and illegal activities,” Litan said.
Donating to the digital wallet of a Ukrainian organization or citizen can also be considerably simpler than donating to a traditional checking account, Litan said. For example, if a Ukrainian citizen or organization wants it, they can simply display a QR code on a banner or sign.
“If you take a picture of it, you would have a blockchain address to send money to,” Litan said. "That potential is there for Ukraine."
The Human Rights Foundation has published a list of legal organizations that donors can send cryptocurrency to.
Like its people, the Ukrainian government is also one of the most crypto-friendly organizations on the planet. It ranks fourth on the planet for the use of cryptocurrencies, according to Chainanalysis. To serve as an example, the government maintains its national file on decentralized blockchains, the basis of cryptocurrencies. As an unalterable record keeping system or an unalterable electronic ledger, the blockchain ensures that documentation of Russia's war crimes cannot be deleted or altered.
The Ukrainian government supports donations of Bitcoin, Ethereum, Tether, and Dogecoin.
On Tuesday, Aid for Ukraine launched its initiative to collect money from the crypto community to fund humanitarian needs and assist the Ukrainian military. The organization is supported by the Ukrainian Ministry of Digital Transformation, cryptocurrency exchange FTX, and Everstake, a Ukraine-based proof-of-stake distributor.
Cryptocurrency exchange Binance has announced that it has donated over €XNUMX million to its Ukraine emergency relief fund. Binance also launched a first crypto crowdfunding site called the Ukraine Emergency Relief Fund to let people donate crypto to provide emergency relief to asylees and children and to support on-the-ground logistics such as groceries, fuel, and supplies for homeless people. asylees.
The main digital currencies used for Ukrainian donations are Ethereum (XNUMX%), Bitcoin (XNUMX%) and Stablecoins (XNUMX%). Stablecoins are a cash-backed digital currency and are therefore more stable than traditional cryptocurrencies.
Litan stated that it was significant that Ethereum, a less popular cryptocurrency than Bitcoin, was more popular for donations to Ukraine. For one thing, Ethereum is most often used to buy and sell non-fungible tokens (NFTs). NFTs are digital tokens that represent data, media, or valuable assets such as real estate or memorabilia.
The popularity of NFTs has skyrocketed in recent times. Last year, NFTs reached €44 billion in sales.
Ethereum also recently switched to a Proof-of-Stake (PoS) settlement algorithm that is considerably more efficient and less computationally demanding than Proof-of-Work (PoW), which Bitcoin continues to use. In contrast to PoS, PoW algorithms require large amounts of electricity from supercomputers and computer farms to solve complex computational equations.
"Hence proof of work is bad for the environment," Litan said. "The European Parliament was going to ban PoW. And Bitcoin miners are always looking for the most affordable electricity."
The average cryptocurrency donation to Ukraine is €95, but there have also been notable transactions. To serve as an example, a US$XNUMX million donation appears to come from proceeds from the sale of NFTs created by Julian Assange and digital artist Pak, according to Elliptic. A CryptoPunk NFT of around €XNUMX and zero was also donated to the Ethereum account of the Ukrainian government.
The crypto donation campaign began on February XNUMX when the Ukrainian government, NGOs, and volunteer groups began posting requests for donations of crypto assets. To date, the Bitcoin, Ethereum, TRON, Polkadot, Dogecoin, and Solana addresses listed in the tweets have represented donations of US$XNUMX million, Elliptic claimed.
Crypto-asset fundraising campaigns to support the Ukrainian military are also taking place outside of Ukraine. UkraineDAO is a decentralized autonomous organization, whose goal is to collect Ether to donate to Come Back Alive, according to Elliptic.
Cryptocurrencies, of course, can be volatile and subject to wild fluctuations in value, as anyone who has invested in bitcoin or Ethereum knows. So if the money is converted to Bitcoin or another digital currency, it could already lose value before you can spend it. (It can also gain value.)
Scammers also appear to be taking advantage of the current situation to trick unsuspecting users into donating to Ukrainian causes. Elliptic has identified a number of fraudulent crypto fundraising scams currently in play.
Scammers use the “on and off ramps” of cryptocurrency exchanges to pose as Ukrainian aid organizations and steal from unwitting donors. "It's like phishing attacks," Litan explained.
Cryptocurrency exchanges like Coinbase and Gemini act as cryptocurrency banks, holding digital tokens for owners and letting users access trading networks.
Russia is also likely to use the cryptocurrency to thwart extended financial sanctions by transporting rubles across borders.
“We believe that it is very possible that Russian companies and citizens seek to use crypto assets such as Bitcoin or the US dollar-pegged stablecoin such as Tether (USDT) to avoid economic sanctions,” said Josh Olszewicz, head of research. at Valkyrie Funds, a digital asset investment manager.
The US and European countries want cryptocurrency exchanges to prevent the Russian government, oligarchs and others from using their systems to move money across borders. But that's a pretty tough job, at best, since decentralized networks thrive on anonymity.
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