Ukraine’s War: The fragility of fiat money in times of crisis

When you’re fighting an enemy with missiles and bullets, it can be very expensive to ensure that you’re adequately equipped and funded to do so. But economic problems aren’t a new problem for the world: various financial crises such as the South Sea Bubble, the Great Depression, and the recent global financial crisis of 2008, have shown us how fragile a mere fiat currency is.

The Ukrainian government is putting the blockchain to good use by accepting donations in bitcoin as its own source of funding. And while the situation in Ukraine and although the situation in Ukraine is desperate, $57 million worth of bitcoin is not pocket change. That’s a lot of power for a government that’s embracing cryptocurrencies when the West is still trying to figure out what will happen next.

Ukraine: The war and the Bitcoin donations

The people of Ukraine are turning to Bitcoin donations to help further their cause in the war against Russia. The use of cryptocurrency donations is part of a wider campaign to appeal for foreign aid and support for the Ukrainian military.

As of today, at least $57.8 million has been contributed to the Ukrainian war effort via anonymous Bitcoin payments, according to cryptocurrency specialists.

A blockchain research firm, Elliptic, claims that the Ukrainian government, non-governmental organizations, and volunteer groups have collected the funds by publicizing their Bitcoin wallet addresses on the internet.

So far, more than 4,000 gifts have been made, with one anonymous contributor donating Bitcoin worth $3 million to a non-profit organization. Donations have also come in the form of nonfungible tokens and stablecoins like tether, and the median donation is $95.

The Ukrainian government took the unprecedented step of tweeting out cryptocurrency wallet codes for worldwide finance via both bitcoin and Ethereum — the two most popular digital currencies – from official accounts, rather than from private ones. Ukrainian Vice-Prime Minister Mykhailo Fedorov said on February 26 that the country “stands with the people of Ukraine” and that the country is now taking bitcoin contributions. 

Non-profit organizations and small local companies in the beleaguered nation have echoed the government’s call for assistance. The Kyiv Independent, an English-language daily published in the Ukrainian capital, is now taking bitcoin as a form of payment.

Beware of crypto donation scams

The biggest game-changer for Ukrainian charities is that blockchain allows for the nearly instant transfer of value. For those in a war zone, this means that charitable funds can be delivered on the spot and used to pay for things like medical supplies, food, and clothing.

This is particularly important because it allows donors to choose where their money is going. Most people want to know exactly how their donations are being spent. With blockchain-based giving, they get those assurances.

That said, donors still need to be doing their due diligence to avoid potential scams, particularly in a chaotic active war zone. Nobody should trust a stray crypto wallet floating through social media without corroborating the details. 

One organization, The Giving Block, is a platform for charities that requires a vetting process to be featured. Crypto-donations can be transparent and sure to go where they’re intended — as long as charities have opened themselves up to this kind of transparency.

Ukraine DAO

In the midst of this brutal war, an NGO called Come Back Alive has found a new life thanks to digital currency. This NGO was raising money for the Ukrainian resistance on the funding platform Patreon until it was terminated from the platform because it violated the ban on military fundraisers of the platform.

Then the firm found a second life thanks to a DAO, a “crypto collective” called Ukraine DAO which is collecting decentralized aid for a variety of Ukrainian organizations. As the state is gradually dragged into brutal urban warfare, perhaps it makes sense that the residents are petitioning for an untrackable currency – particularly as donations can be anonymous and therefore avoid any retaliation from the Russian state.

“Blockchain allows us to scale our efforts in a way that wasn’t possible for us before,” said Nadya Tolokonnikova, a spokeswoman for Ukraine DAO, in an interview with the New York Times. “The old ways of raising money sometimes are really slow and just clumsy.”

The spokeswoman, visibly affected by the Russian invasion, made her position clear when she strongly insulted Putin and also said “I hate war,” and “I love peace. I support Ukraine. Fuck Putin. I hope he dies soon.”

Advantages of Bitcoin in a war zone

When it comes to the most die-hard cryptocurrency supporters, the situation in Ukraine serves as an excellent summation of the reasons why they feel the global economic empire has to be overthrown.

The Ukrainian people are in desperate need of assistance, and some believe that bitcoin’s capacity to bypass bureaucratic red tape is the most effective approach to deliver instant assistance to a vulnerable community.

Bitcoin might be the most cost-effective, quick, and most secure manner of doing financial transactions. And if you keep it in a digital wallet, you can even keep it securely without having to worry about the invading army snatching it or the financial system failing as a result of the conflict.

Good for Ukraine… but also for Russia

The Russian economy is in crisis mode. Sanctions are wreaking havoc on the country and its banks, the rouble’s value has plummeted, and the economy is on the brink of collapse.

But help could be on the way, neither from any government or civic body, but from the same ally that is helping the Ukraine cause: cryptocurrency.

Experts are warning that Russia could soon become increasingly reliant on the blockchain as crippling sanctions wreak havoc on Moscow’s banking system. The rouble is worth less than one cent after a 30% swoon after the US and Europe cut off Russian banks from Swift. Crypto is much more resistant to punitive financial assault, and that provides an escape route for a country that’s been completely isolated from civic banking.

While Bitcoin isn’t officially recognized globally as a stateless currency, it is the paperless, bank-less, and transaction-less currency that is not strictly managed by a government or even regulated by one. Instead, it relies on an open-source system that can be used globally to disburse funds without being charged any fees along the way. In times of war, when corporate or national borders are closing off for fear of national security, Bitcoin opens up the opportunity for people to have a new financial system if they so choose, one is proving to be more resilient and useful than what the one we had until now.