The Russia-Ukraine conflict is utilising cryptocurrency and blockchain in new and unexpected ways

Ukraine's civil war is the crypto era's first big conflict, and Ukraine is, coincidentally, the cryptocurrency capital of the world. 

What was once a means of economic progress in times of peace has become a weapon of war in times of conflict. 

Millions of dollars in anonymous bitcoin donations to the Ukrainian war effort have been used to purchase thermal imagers, drones, and other military equipment for the Ukrainian army. 

Contributions to charity and relief operations are made through decentralised autonomous organisations (referred to as DAOs – more on them later), which also connect volunteers worldwide with those in need. 

The government agency previously tasked with attracting crypto industries has been tasked with maintaining the country's online infrastructure, warning citizens of air raids and missile launches, combating Russian disinformation, coordinating with Google and Facebook, and leading an army of hackers targeting Russian websites and other services. 

Meanwhile, cryptocurrency has become a new battleground in the war, with Ukraine fearful that Russia would utilise decentralised digital money to circumvent newly imposed financial restrictions. 

Crypto and blockchain are finally demonstrating what they are capable of – how they can be used for good rather than cartoon ape NFTs. 

Thus, how has crypto affected the war? 

From webmaster to guerilla hacker during World War II 

LDV's narrative, who wishes to remain anonymous, exemplifies how Ukraine's IT industry, which is centred on cryptocurrency, has swung into war. 

LDV, a webmaster for a crypto-mining investment company, awoke on February 24 to learn about the invasion and attempted to flee to Poland from his residence in Lviv, western Ukraine. 

"We desired to make a withdrawal, but the waits were prohibitively long. I couldn't have crossed the border finally if I had waited" According to him. 

He attempted to purchase a bus ticket over the border but the transaction was refused, either as a result of cyber attacks that knocked the bank offline or as a result of the Ukrainian bank prohibiting foreign transactions. 

Finally, he claimed, he came across an acquaintance prepared to exchange bitcoin for Polish cash, which he used to purchase the bus ticket. 

He is now in Poland, assisting the war effort as a hacker. 

"I'm preventing Russian propaganda through an electronic cyberwarfare team I recently joined — similar in nature to the Anonymous hacking team," he explained. 

How much money have crypto donations raised? 

Ukraine's "IT Army" is coordinated by Alex Bornyakov, the country's deputy minister for digital transformation, who spoke just two weeks ago at a conference in Denver, Colorado, about the country's long-term objective of becoming "the world's largest crypto-friendly government." 

Ukraine legalised bitcoin and other cryptocurrencies last year and is currently ranked fourth on the Global Crypto Adoption Index. 

Cryptocurrencies, decentralised banking, and other blockchain-based systems are all part of the government's ambition for not only economic prosperity, but also independence and autonomy from Russia — a means of developing a modern service economy and re-establishing ties with the rest of Europe. 

It established an official Ukrainian cryptocurrency fund when the fighting began. 

Within five days, according to crypto analytics firm Elliptic, this fund and others established for similar purposes raised more than $US33.8 million. 

This is a pittance in comparison to the $US650 million in weaponry the Ukrainian army received from the US last year, but it is significant symbolically – the crypto donations are made by individuals, not governments, and demonstrate the extent of popular support for Ukraine. 

Ukraine's war effort is partially financed through crowdsourcing. 

Come Back Alive, the non-profit organisation that is spearheading the effort, has generated over $US6.9 million in crypto donations, which will be used to deliver body armour, medical kits, and helmets to Ukrainian soldiers. 

This could have occurred without cryptocurrency, via the international financial system, but would have been detected and prohibited by a central authority, such as a regulator. 

It is impossible to halt the spread of cryptocurrency. 

Introducing a new breed of autonomous organisations tasked with the responsibility of arranging humanitarian assistance during times of war 

Alona Shevchenko has gone four days without sleeping. 

Ms Shevchenko, who was born in eastern Ukraine and now resides in London, assisted in the formation of a DAO (decentralised autonomous organisation) during the invasion. The DAO has since raised more than $US3 million in cryptocurrency for the Ukrainian army. 

A DAO is similar to a venture capital fund, except that rather than a board of directors, decisions are made through an automated system and a crowdsourcing approach. 

These processes are recorded on the blockchain, which is a decentralised network of computers that run a common piece of software. 

It is both a fundraising mechanism (commonly through the sale of crypto tokens, but often through donations) and a governance mechanism, requiring users to vote on proposals (usually those who possess tokens). 

There are numerous types of decentralised autonomous organisations (DAOs), ranging from commercial to fundraising (ConstitutionDAO, for instance, recently tried and failed to purchase an original copy of the US constitution at auction). 

Additionally, DAOs for war finances have been established. 

"Supporting our armed forces is an honour," Ms Shevchenko said. 

"I am not a pro-war guy, but when a friend phones to say that his best friend is in the trenches in Kyiv and has been given an AK without ammunition, we have to act." 

The group intends to specifically help the organisation Come Back Alive. 

Therefore, why not make a direct contribution to a charitable organisation? 

"I'm more than delighted for someone to choose a different organisation and donate straight to them." 

However, she added, DAOs are not solely about fundraising. 

Additionally, they provide as a mechanism for rapidly organising and linking people in response to emergencies. 

Whereas establishing a typical non-profit would take weeks or months, a DAO can be "spun up" in a matter of minutes. 

"A DAO," she explained, "is a community." 

"Numerous individuals have assisted me in rescuing individuals who are stranded at the border or unable to leave a dangerous situation. 

"'I want to give insulin to Ukraine,' a telegram from the United States stated. I'll put them in touch with a diabetic support group in Ukraine. 

"Any assistance that I require in Ukraine, I may obtain from a member of the society who is capable of assisting another." 

'This is a first for us.' 

The "huge new thing" that came from the Ukraine war, according to blockchain expert and RMIT economics professor Jason Potts, is decentralised autonomous organisations (DAOs) that distribute resources to those in need. 

"This is the first time we've seen this," he explained. 

"Previously, we were forced to rely on well-known international organisations such as the Red Cross or Amnesty International, which are difficult to establish and operate. 

"What is remarkable about the UkraineDAO is the speed with which it occurred. We were unaware that DAOs would be utilised in this manner." 

That is not to say they can take the role of international organisations such as the Red Cross, he noted, but they can complement them. 

Ukraine is "all everybody talks about" in the cryptocurrency circles. 

"This is an unequivocal evidence of the technology's fundamental battle-proven utility," he said. 

"This is not about CryptoKitties and pointless internet games; this is about assisting people worldwide in gathering and organising." 

Aaron Lane, a researcher at RMIT who specialises in cryptocurrency governance, cautions against haste. 

"Individuals interested in donating to these causes should conduct due diligence on the organisations behind them and the offers they make. 

"This is a very different type of participation from traditional charitable giving." 

Is it possible for Russia to circumvent sanctions by utilising cryptocurrency? 

Ukraine has voiced fear that Russian banks, the government, and private persons will use cryptocurrencies to circumvent the country's exclusion from the Swift global payment system, which facilitates foreign transfers. 

The Ukrainian authorities requested on Sunday that Binance, the world's largest cryptocurrency exchange, restrict Russian users. 

According to a recent study, Russian hacker gangs amassed around $US400 million in cryptocurrencies last year through ransomware assaults, accounting for 74% of global earnings from the crime. 

That is a sizable figure, but it pales in comparison to Russia's projected foreign currency and gold holdings of $US600 billion. 

Sanctions against Russia's central bank have rendered the majority of these reserves ineffective, resulting in the rouble's depreciation in value. 

Even a few hundred million dollars' worth of bitcoin will not be enough to halt the trend, Dr Lane explained. 

In either case, he asserted, Russians' access to cryptocurrency was futile. 

It is nearly hard to prevent a nation-state from trading crypto and accessing the blockchain network, "since the blockchain network exists anywhere the internet exists." 

"The network will not terminate a transaction just because the sender or recipient is in a specific geographic place," he explained. 

"The only way to address this is to destroy the internet infrastructure." 

He stated that in five years' time, cryptocurrency may become more extensively traded, diminishing the effectiveness of multilateral sanctions against Russia. 

"This is unlike anything we've ever encountered," he explained. 

"I believe we are about to enter unknown ground."

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