How does the war in Ukraine affect cryptocurrency and blockchain?
There are only two mutually exclusive things a catastrophe can do to a nation: ruin it or unite to become stronger. Although Putin and his team bet on the first, they actually got the latter: Ukraine has never been as united, solidary, and decisive as from February 24th. By March 14th, which was as little as two and a half weeks of the war, Ukrainians donated 11,8 billion UAH only to the Ukrainian National Bank account. At the same time, the Come Back Alive Foundation raised $100 million from February 24th to May 16th.
Fair enough, the lion’s share of donations took place on the blockchain, mainly thanks to its speed and simplicity, much needed in an emergency like a war outbreak. Consequently, it wouldn’t be wrong to assume war affected cryptocurrency in a turnaround way. Let’s look at how war affects cryptocurrency and even try to see if war is good for crypto.
How was blockchain used since the war outbreak?
Before we talk about actual initiatives and numbers, let’s get a brief outlook on Ukraine’s relationship with blockchain before the war.
According to different sources, Ukraine is ranked fourth globally for embracing cryptocurrency, has 5.5 million people who own crypto (which constitutes 12.7% of the total population) and features roughly 130 businesses whose central direction is Web3.
A thriving market situation makes it foolish not to use blockchain as one of the main resources working towards the country’s victory. Indeed, during the first 4 days of war (by March 1st), the citizens’ donations in cryptocurrency alone had exceeded $21 million. Of course, people in Ukraine and worldwide continue donating every day. Thanks to this, blockchain once again proves the efficiency of crowdfunding and the necessity of fast access to one’s funds.
In addition to conventional blockchain-based fundraising methods, Ukraine DAO got $57 million in crypto just by March 5th, according to figures made by blockchain tracker Elliptic. This decentralized autonomous group was founded by the leader of Pussy Riot, and it raised this much cash by just selling a straightforward NFT of the Ukrainian flag.
NFTs turned out to be a grand blockchain-based instrument that helped Ukrainians fight. In the myriad of different collections, creators celebrate Ukrainian culture, depict the everyday combatant reality, or laugh at the enemies’ fails by offering to buy a piece of the Russian tank, activating the therapeutical humor function in this way. Some collections give their profits to the military, while others concentrate on humanitarian needs.
Has the war influenced crypto directly?
While it seems like the war in Ukraine was mainly an arena for blockchain initiatives to once again prove the promise of blockchain, there actually are two serious outcomes that inevitably influenced the realm of DeFi.
The first outcome is about the human factor. A huge number of Ukrainians are working in IT and particularly in the blockchain. In fact, working in these two fields is so popular that, according to Opendatabot statistics, the number of private entrepreneur accounts operating in the according profiles had grown by 16% during the Coronavirus pandemic in 2020. Namely, this business alone constituted 55% of the general number of accounts that had been opened.
Knowing this, it is no surprise that roughly 70% of blockchain companies worldwide either suffered losses or had significant blocks in deploying their products during the first two weeks of the war. It was around when people needed to relocate from dangerous areas, take care of their new homes, families, and legal statuses, and simply get their thoughts together. Of course, those who were legally allowed to (healthy men from 18 to 60 y.o. are not allowed to leave the state, apart from minor exceptions) were relocating abroad, where they spread the culture of blockchain, serving as a living example.
The second factor is a lot more about crypto and blockchain themselves. War in Ukraine has become the straw breaking the camel’s back in terms of then-approaching economical decline. Even though crises happen from time, cryptocurrency going through a world recession is a huge precedent: having originated straight from the 2007-2008 recession, cryptocurrency has never actually gone through anything like this. Apart from cryptowinters (which is a normal cyclical process), the realm of crypto has always been more or less stable. So, long story short, is war good for crypto?
Economic recessions always transform social movements, as well as incentivize economic and political systems to change. Speaking strictly about crypto, this recession will redefine the new realm of Web3. Crypto can become a more social instrument able to help countries at war instead of primarily focusing on its financial applications, which made crypto more correlated with public equity and accordingly more vulnerable to any falls. Probably, such a situation will make Web3 players rethink their focus. Besides finance applications, blockchain has splendid perspectives in governance, data privacy and storage; work with real-world assets that can become more liquid thanks to blockchain. Any accident can serve as a catalyst for unstable, ineffective, or speculative business models (or players) to eliminate, freeing up space for newer use cases.
In human history, wars have always been one of the leading turnaround points for then-existing traditions, regardless of their sphere. Complimented by the omens (which have now grown to be the elements) of global recession, this time, it has once again become such a point not only for Ukraine’s sense of solidarity but also for the whole realm of crypto to rediscover its purpose and use cases.