Ukraine Fundraisers Bring Out the Best, and Worst, in Crypto

If you tried to make money off Ukraine’s fundraising efforts, your soul is just as broken as your brain.

AccessTimeIconMar 4, 2022 at 6:29 p.m. UTC
Updated May 11, 2023 at 3:36 p.m. UTC
AccessTimeIconMar 4, 2022 at 6:29 p.m. UTCUpdated May 11, 2023 at 3:36 p.m. UTCLayer 2
AccessTimeIconMar 4, 2022 at 6:29 p.m. UTCUpdated May 11, 2023 at 3:36 p.m. UTCLayer 2

Cryptocurrency has been shockingly central to the unfolding invasion of Ukraine, where news this morning finds Russian forces capturing a crucial nuclear power plant and other objectives.

Some have wondered whether crypto might be useful for evading the devastating sanctions being laid against Vladimir Putin’s government and cronies (the answer: probably not). More broadly, the sanctions mark a politicization of global banking that validates many of the points on which crypto was premised.

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The crypto community has also put its best foot forward with a truly remarkable fundraising campaign. After Ukraine set up official wallets to receive both bitcoin (BTC) and ether (ETH), coiners have donated approximately $40 million.

For comparison, the U.S. government is currently debating a $6 billion package of aid to Ukraine, so crypto holders have already donated about 0.75% of what the U.S. might, maybe, give. And the crypto arrived nearly instantly, in the midst of an ongoing invasion, with no strings attached. It is reportedly already being deployed to buy supplies for Ukraine’s war effort.

That makes the crypto donations, dollar for dollar, considerably more useful than U.S. funds that will arrive … eventually. It’s a vindication for crypto as a technology, and can’t hurt the community’s social reputation.

But there has been at least one dark lining to the silver cloud, in the form of an apparent display of crass and amoral greed from crypto’s infamously bottom-feeding opportunists.

On Wednesday, Ukraine’s crypto fundraising effort announced that it would be conducting an airdrop to those who had made donations. (An airdrop is an unsolicited distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses.) There were few details of what crypto might be dropped, but a reasonable guess would have been some sort of “thank you” token with little explicit monetary value.

But even tokens with little or no explicit value can do very strange things in the casino-like crypto market. For instance, the ConstitutionDAO’s PEOPLE token in December reached a market cap of more than $800 million, though it was launched to manage just $40 million in initial donations.

That history helps make sense of what happened next: a massive surge in small donations to the Ukraine addresses. From perhaps a couple of hundred donors per hour, the volume surged to several thousand. While this looks superficially like a wave of generosity, it’s really anything but.

Instead, this surge appears to largely represent an effort to, in one observer’s words, “game the airdrop.” Most appear to have been small donations of less than $30 worth of ETH. According to one analysis, over 20% were from new wallets created only for donations.

That suggests the new donors were hoping to make a minimal donation, then get airdropped tokens in return that – who knows! – might somehow wind up being worth more than the donations. The generation of entirely new wallets further suggests a so-called Sybil attack, or users pretending to be multiple people so they can claim the airdrop more than once.

This sort of behavior has been somewhat normalized by self-proclaimed “degens” who spend time maximizing returns of all sorts across crypto systems. There’s even a certain logic to encouraging borderline abusive behavior among the users of open financial systems, because it helps test the systems’ resilience while they’re still niche and experimental. But as those systems suddenly collide with the grim reality of war, such Wild West, anything-goes behavior looks less like adversarial testing of experimental systems and more like old-fashioned war profiteering.

If you’re one of those who attempted to manipulate the fundraising efforts of a democratic nation being invaded by the forces of a vicious dictator and former spy … well, just sit with that for a moment.

Maybe also sit with the fact that blockchain records of what you did will be around as long as Ethereum exists. It's entirely possible for anyone who's curious and sufficiently motiv`ated to find out who the attempted war profiteers are. You’ve created a permanent record of your own dishonorable venality.

And, in the end, you don’t have anything to show for it. Perhaps in part because of the attempted Sybil attack, Ukraine’s minister of digital transformation announced Thursday that the airdrop would be canceled. There was mention of Ukraine issuing NFTs, but it’s unclear if these would be an airdrop or a separate fundraising effort.

So congratulations, degens – you rugged yourselves. Not just financially, but ethically.

The good news is these shenanigans will likely wind up as a footnote to the broader surge of genuinely helpful crypto donations. That would be the deepest possible vindication of crypto and open finance. Because, sure, there are plenty of selfish miscreants out there. But if you let people make their own decisions, the majority will make the right one.

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David Z. Morris

David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.