Crypto Donations Are About More Than Censorship-Resistance

In light of Russia’s invasion of Ukraine, humanitarian and military-adjacent organizations have received millions of dollars in charitable contributions from overseas – a massive outpouring of international support for Ukraine’s resistance.

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And while (in most cases) fiat money remains a viable way to support Ukraine, a decent amount of the donations has come in the form of cryptocurrency:

As always with crypto, shills and opportunists abound. Gavin Wood, founder of the cryptocurrency polkadot (DOT), suggested he would donate $5 million if the government promoted the token by “post[ing] a DOT address.” In other words, he would donate if the government would accept his token. A few days ago, Vice spotlighted a deeply tasteless but also probably well-meaning meme depicting a Bored Ape NFT expressing support for the people of Ukraine.

Apes aside, the question remains: Why crypto? It’s not as if there aren’t other ways to donate – the Ukraine Twitter account posted information about direct money transfers with fiat currency, and Come Back Alive accepts contributions via the SWIFT-linked international banking system.

Ukraine, unlike Russia, has the support of the vast majority of the world. It’s Russia that’s lost some access to SWIFT, and it’s Russia whose banks and corporate sector are being aggressively sanctioned by Western governments (with notable exceptions being made for its oil conglomerates). Ordinary Russians, the vast majority of whom have nothing to do with this war, are now facing down potential bank runs as the ruble collapses.

See also: Ukraine's Quest to Become a Crypto Jurisdiction of Choice

You would think crypto would be more useful to Russians than to Ukrainians, except that, of course, digital currencies are often traceable and can be just as censorable as other currencies, depending on how they’re used, thanks to regulations on fiat on- and off-ramps.

My sense is that the reason for all the donations in ETH has to do with the broader buzz around crypto, and the habits already developed by investors and entrepreneurs in this sector. Fundraiser DAOs (decentralized autonomous organizations) are good at raising huge amounts of money extremely quickly. It’s not about “censorship-resistance” and instant transfers as much as it’s about keeping money in the system. If you’re already dealing with crypto on a regular basis, it makes sense to send your charitable contributions in crypto, too.

It’s problematic for a few reasons, one of which has to do with Ethereum’s ludicrously high gas fees – you’re getting far less bang for your buck, when you donate with Ethereum than when you donate with fiat money.

There’s also the issue of wishy-washy middlemen: Why attempt a group auction via a DAO, or pick up an NFT, rather than make a direct donation to the organization of your choice? All it’s doing, really, is putting a mediator in charge of your money (sort of ironic, for an industry premised on doing away with mediators).

A strange caveat with UkraineDAO is that donors to the group bidding party will eventually receive $LOVE tokens, apportioned pro rata according to what they put in (donate 1% of the ETH in the pool, and you’ll get 1% of the $LOVE tokens). The official website for UkraineDAO insists that these tokens “have NO utility nor value, but are a beautiful testament and reminder of your contribution to a noble cause,” but methinks the DAO doth protest too much. $LOVE tokens are just ERC-20s, bespoke cryptocurrencies on the Ethereum network. They can trade on decentralized exchanges like Uniswap, if they’re liquid enough; speculators could eventually swoop in and pump the price of $LOVE, generating a market outside of the DAO’s control.

None of this is exactly predatory, but these kinds of theatrics might confuse some prospective donors. If you want to give money, you can just give money – direct donations are very much still on the table.