Crypto goes to war in Ukraine
Hello everyone. Among the first signs of spring: an increase in pollen induced by climate change and a new Covid variant on the rise. Can we have six more weeks of winter?
Sergey Vasylchuk knew trouble was brewing when Russian troops began gathering at the border. People assured him that the massive armies were just a fake, but the CEO of Everstake, a Ukraine-based blockchain company, didn’t believe it. “I’m paranoid; I’m an engineer,” he says. He begged his employees to leave the country…Call it a vacation if you like, he told them, promising to pay for a retreat in a sunny foreign climate. Not everyone accepted the offer. Vasylchuk himself was already planning to go to Florida to attend flight school, one of his passions. When the invasion happened – two days after he arrived in the US – he worked from his US outpost to make sure his parents, who are still in Ukraine, were safe, and he did what he could for his employees. Some are now fighting the Russians. “My house is probably destroyed,” he said. He’s in South Florida indefinitely, not partying with other blockchain brethren, but working “24/7,” he says, to help his country. With crypto.
“I can only do two things in my life: crypto and aviation,” he says. He chose the former, believing that the best way to serve his country was to provide it with funds through digital currencies. Shortly after the invasion, he created a DAO. It is a decentralized autonomous organization, an entity whose reliability can be verified by the blockchain trusted ledger. Vasylchuk has partnered with Ukraine’s Ministry of Information and a currency exchange called FTX to set up a system for the government to accept cryptocurrency directly from donors. So far, the fund has raised more than $65 million, which has been split between the country’s defense efforts and humanitarian aid. This effort is one of many using blockchain-based technologies to help Ukraine and its people during these nightmarish weeks. Some have even dubbed this conflict the Crypto Wars.
It is unlikely that those who have lost their homes or loved ones would agree that crypto is the headline here. But the chaos of war often gives rise to alternative economies; in this case, it’s not so much a black market (like the one that helped rebuild Japan’s economy after World War II), but one that relies on the unique virtues of crypto. Apparently Ukrainian President Volodymyr Zelensky recognizes this, as this month he signed legislation that blessed key activities in the crypto industry, such as currency exchanges and banking integration for crypto companies.
While crypto spoils are often enjoyed by privileged investors eyeing Lambos, the technology seems almost tailor-made to overcome the challenges of a beleaguered Ukraine. “A bitcoin transaction takes 10, 20, 30 minutes compared to a bank transfer which can take two or three days, and you can’t be sure – by then [the Russians] could have bombed a national bank,” says Illia Polosukhin, co-founder of blockchain company Near. Polosukhin is also one of the instigators of a DAO called unleash, which has so far received $7 million in aid. Moreover, these crypto funds accept donations anonymously, which is particularly beneficial for any potential donor linked to Russia, whose leader is known to hold a grudge. Finally, the idea of using crypto in this way is simply appealing to those sitting on huge piles of bitcoin, ether, or other coins with incredibly high values.
But perhaps the most important aspect of wartime crypto in Ukraine is how private currencies find their way into everyday commerce. Because the banking system is fragile in Ukraine, some vendors receiving coins are not interested in performing the exchange of cryptocurrency to fiat. “It is not known what the exchange rate between the US dollar and the hryvnia will be [the national currency], and therefore having coins in crypto is beneficial,” says Polosukhin. Crypto can be especially valuable for those fleeing the country, who don’t want to travel with cash, or simply can’t get it into their bank account. For people staying in the country, Polusukhn says, Unchain is working on the equivalent of a crypto ATM card, where people can buy supplies using their digital wallets.