Future Tense

What Is Ukraine Going to Do With All That Donated Cryptocurrency?

A tweet from the Ukraine asking for cryptocurreny donations on top of a backdrop of crypto coins.
Photo illustration by Slate. Images via Chesnot/Getty Images and Ukraine/Twitter.

On Saturday, Ukraine’s official Twitter account put out a call for financial aid as Russia pummeled it with artillery for the third day in a row. “Stand with the people of Ukraine,” it wrote. “Now accepting cryptocurrency donations. Bitcoin, Ethereum and USDT,” followed by wallet addresses where the country could accept people’s digital coins.

Naturally, a Twitter call for crypto aroused skepticism. Hours after Ukraine’s tweet, major blockchain network Ethereum’s co-founder Vitalik Buterin took to the social platform urging people not to send their crypto to the addresses listed without verification. “There have been *a lot* of hacks alongside this invasion,” he wrote in a since-deleted tweet. “This info environment is as hostile as it gets, exercise extreme vigilance.”

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Warnings like these, however, were dwarfed by the number of tweets in which people pledged their crypto to the embattled country. (Some of them may have been sent by bots, judging by the slew of numbers at the end of their Twitter handles, but many were real people or groups eager to donate.)

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Watching this unfold in real time on Twitter alongside images of Russia’s brutal attacks in Ukraine was, to say the least, surreal. Crypto—which so many have long viewed as “magic internet money,” digital play currency for gambling, or a Ponzi scheme—was suddenly being solicited by a nation at war to aid in its relief efforts. For all the derision, cryptocurrency—decentralized, non-state-backed digital currencies whose transactions are easily traceable on blockchain networks—had potentially come into its ultimate use case of enabling fast, borderless transactions from around the globe when the regular banking system wouldn’t cut it.

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Adding to the surrealness was the enthusiastic involvement of crypto Twitter, the social hub for talk about Web3 (a blockchain-based version of the internet not controlled by tech giants like Google and Facebook) and nonfungible tokens (one-of-a-kind digital tokens tied to artworks or collectibles). Normally a nonserious social bubble eschewing political talk in favor of “good vibes” (you’d never know there was an ongoing pandemic if your only media consumption was NFT Twitter, for instance), this online community got a wake-up call in the form of Ukraine’s request for their favorite tender. Several big-name NFT artists and collectors donated works worth upward of $1 million to the country, while others quickly assembled to raise funds through collaborative projects.

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All of this raises some important questions. First, how is Ukraine going to effectively use the cryptocurrency it’s receiving? Who’s in charge of these allegedly government-controlled wallets? Logistically, how will they turn cryptocurrency into much needed supplies and services? And who are the people from all over the world who feel compelled to send their personal crypto to the country, and why are they doing it?

First, it’s critical to heed the warnings of those who cry “scammer” when it comes to any entity seeking crypto donations on Twitter, not to mention address the downsides of cryptocurrency donations.

Vancouver-based Jagdeep Sidhu, chief technology officer at Blockchain Foundry Inc., did just that, noting to Slate via Twitter DM that donating crypto precludes the ability to write off donations when filing taxes, since donors are sending their funds to digital wallets, not a registered nonprofit. He also tweeted his reservations about sending crypto directly to the wallets Ukraine posted on Twitter, elaborating to Slate, “Centralized businesses are much more capable to determine accurate ways to donate. … Twitter has been hacked many times.”

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Ukraine’s Twitter account wasn’t the only one to tweet out its donation addresses, however. Mykhailo Fedorov, the vice prime minister of Ukraine and minister of digital transformation, shared the same wallet addresses on the social platform. Slate reached out to Ukraine’s Ministry of Digital Transformation’s press contact, who confirmed that the wallets shared on Twitter were “set up by Crypto Fund of Ukraine that was created by Kyiv-based crypto exchange Kuna.”

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The Crypto Fund, they added in a quote attributed to Deputy Minister of Digital Transformation Oleksandr Bornyakov, is collecting, holding, and exchanging the crypto into fiat: “The Crypto Fund literally operates as a crypto bank for the government to fund the Ukrainian Armed Forces against Russian invasion. With this money the Crypto Fund of Ukraine has bought thermal imagers, drones, heat vision goggles and other military equipment needed for the Ukrainian defenders.”

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Another donation effort, Aid for Ukraine, aims to turn cryptocurrency into U.S. dollars to spend in the country with the help of U.S.-based exchange FTX (whose name graces the Miami Heat arena). Started by Anatoly Yakovenko, the co-founder of blockchain network Solana, and Sergey Vasylchuk, CEO of crypto staking service Everstake, (both Ukrainian) the fund aims to “build a bridge between the crypto enthusiasts who want to support the Ukraine, with a crypto exchange [that] also wants to support Ukraine,” Vasylchuk tells Slate.

The Solana team helped set up smart contracts for the cryptocurrency donations, while Vasylchuk reached out to contacts in the Ukrainian government he’d established while assisting in their creation of a Central Bank Digital Currency (a digital coin pegged to the country’s fiat), including staff at the Ministry of Digital Transformation, he says. The plan is to convert the fund’s crypto to USD through FTX, and send those dollars directly to Ukraine’s central bank. Vasylchuk says they plan to do this within a few days

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So far, the fund has raised more than $1.4 million that could go to the military, civilians, or other recipients in Ukraine—Vasylchuk is more focused on the technical aspects of the donation process, so he isn’t sure. What he does feel confident in is the country’s central bank, which he says “can guarantee that this money will be used in the proper way.”

As for the regular citizens sending their hard-won crypto to Ukraine, many cite their ability to easily and directly contribute to a cause that otherwise feels so out of their hands. As a friend of mine who donated what little ETH he had to Ukraine’s wallets said, “It felt like the only way I could contribute.”

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Arjus Dashi, who’s based in Italy and sent SOL (the cryptocurrency of the Solana blockchain) to Ukraine, tells Slate, “So far the worst war we have ever had here was World War II. I’m born in 1991, so for me it was lived only through history books and imagination. The least I can do is help in some way.” As for donating via crypto, “It’s fast … and very cheap.” He donated directly to the SOL address shared by Fedorov on Twitter.

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Other crypto holders took their efforts a step further. “Seeing the news about what was happening in Ukraine, my first instinct was to ask myself, is that outside of my niche?” says self-described “good-for-nothing [NFT] influencer” Andrew Wang, 23, “because I talk about NFTs, joking about monkeys and cat pictures all day.”

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On Feb. 24, he tweeted asking whether Web3 or NFTs could do something about what was going on in Ukraine. In addition to the responses virtually laughing in his face and calling him a crypto bro, he found shared interest from his global, extremely online community. He teamed up with other NFT creators and enthusiasts Satvik Sethi, Giovanni Gussen, Vitaliy Raskalov, and Aleksandra Artamonovskaja, and in a matter of hours, they attracted several big-name NFT artists to participate in a project now called RELI3F. (The “3” is a nod to Web3.)

In total, 37 artists selling their work as NFTs contributed to a collection released on Friday. The pieces sold out almost immediately, initially raising $1 million, half of which was split among three funds: Come Back Alive, which supports the Ukrainian armed forces; local Ukrainian media outlets “vetted by” English language journal the Kyiv Independent; and volunteer paramedic organization Hospitallers. (The RELI3F team is waiting to see what Ukraine might need next before donating the rest.)

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One of the artists who participated, U.S.-based Emily Tompkins, donated a piece she describes as a “commentary on my grandfather fleeing fascism.” She sees crypto as a solid way to share funds with a country under attack, particularly after seeing on the news people in Ukraine wait for hours to access cash-depleted ATMs—they “need liquidity rapidly,” she says.

London-based digital art curator Artamonovskaja was wondering what she could possibly do to help the situation in Ukraine when she came across Wang’s tweet and got in touch. Born in Ukraine, she says she was able to connect with a government official she knew from the country to help her figure out where RELI3F could donate, along with other Ukrainian artists, four of whom she brought into the project.

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One, Julia Beliaeva, was still in Kyiv with her young child when she donated her NFT artwork.  She requested aid from the team to help her escape, so they transferred 1.77 ETH to USD (then more than $5,000) and sent that directly to Beliaeva’s bank account, so she could use it while making the roughly six-hour car trip to neighboring Moldova.

If you ask Wang, this all happened because of the “tools of Web3,” which extend beyond cryptocurrency. They include the smart contracts used to facilitate NFT sales, the multisignature wallets that ensure no single member of a project can abscond with their raised funds, blockchains that allow anyone with internet access to see where a fund’s crypto ends up, and the international community that’s already engaging in this decentralized space. These are tools the Web3 diehards deeply believe in, and they were frankly excited to get to use them for public good.

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When people think of NFTs and cryptocurrency, they often think of the scammy hype cycle, in which creators heavily promote an NFT or crypto project to get more and more people to buy in. This ideally increases the NFTs’ or coin’s perceived value, so that the creators can get rich. RELI3F and other crypto holders donating to Ukraine seem to be harnessing the power of that model for humanitarian reasons, instead.

“A lot of us in crypto … try to stay away from politics. We always talk about good vibes, and WAGMI—We’re All Gonna Make It,” Wang says, referring to the idea of mutual financial success in the NFT community. But seeing what was happening in Ukraine changed that for him. “It’s real life, and you can’t run away from it … seeing that crypto donations were being made [to Ukraine], it felt like a good moment to mobilize.”

Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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