They may be right that this crisis has brought crypto closer than ever before to its destiny, but not for the reasons they think. Because as much as bitcoin boosters may believe the world is now witnessing crypto’s usefulness in action, we’re actually seeing the opposite: Generally, these digital tokens are useless.
Ukraine was ready for the crypto bonanza. The not-especially-large nation ranks fourth in the world in adoption of the digital currency, in no small part because the government wants it that way. This is a country that has a deputy minister of digital transformation.
Michael Chobanian, who runs Kyiv’s Kuna Exchange for cryptocurrency, said that Ukraine offers “the perfect balance between absolute anarchy and possibilities.” The country’s parliament legalized cryptocurrency last month and will shortly roll out an e-version of Ukraine’s currency, the hryvnia.
“The Crypto Capital of the World,” reads a New York Times headline on a story from last November profiling a campaign to turn the country into a hub for the blockchain-based economy. The subhead: “It has to be somewhere. Why not Ukraine?”
Why not, indeed. The pitch to a notoriously shady industry by a notoriously corrupt nation determined to clean up its act may not have succeeded before, but it now falls on eager ears. The non-dollar contributions are rolling in, as bitcoin and Ethereum and Tether, along with more than 180 donated digital artworks now in the government’s possession as non-fungible tokens, or NFTs.
This may sound exciting, but look closer and maybe the question today isn’t why not — maybe simply why. What can Ukraine do with the immutably encoded link to a jpeg that is an NFT? Very little, except sell it for cryptocurrency, and then sell the cryptocurrency for actual legal tender.
CoinDesk reports that Ukraine has used cryptocurrency to buy fuel, food and other “non-lethal” supplies, including bulletproof vests and night-vision goggles, from military suppliers that accept it. The Kuna Exchange is also assisting the government in converting crypto to fiat. This real money is much more useful, particularly when lethal supplies are exactly what you need. But conversion to real money is also the point at which the “transparency” provided by the public, unalterable recording of transactions on the blockchain — supposedly the big benefit of cryptography — vanishes.
Even the suppliers who are accepting crypto probably aren’t holding it afterward. And as long as conversion is necessary, does crypto really promise any more convenience — or, as true devotees would put it, any less “friction” — than old-fashioned cash and credit? After all, Ukraine can reel in aid from all over the traditional global financial system, including through online fundraisers; it is Russia that has been deprived of that privilege.
Put pressure on the cryptocurrency phenomenon in Ukraine, and, squish. The most compelling explanation that remains for the special allure of this mode of contributing to the cause is awfully familiar: branding. Everyone today wants to show solidarity with Ukraine, emphasis on “show.” This may well mean actually helping, but it definitely means making sure people know you helped.
For the crypto crowd, this is the chance to hawk their holdings as a force for justice; for a government already versed in wooing these speculators, it’s an opportunity to attract desperately needed money from a class that has lots of it sitting in — well, not the bank.
What’s happening in Ukraine may well be the apotheosis of cryptocurrency, but only because the same sad little stories are playing out with the world as a stage. Like this one: Ukraine promised to “airdrop” crypto donors a free token of a newly created asset — a common tactic to prop up a venture by attracting funds from those hoping they’ll end up with more than they put in.
Some Internet tricksters pulled off a fake version of the airdrop, and the government, spooked, scrapped the plan. The donors, meanwhile, were left with nothing except the warm and fuzzy feeling of having done something good.
There’s nothing wrong with capitalizing on the perplexing blend of genuine belief and self-promotional zeal that powers the cryptocurrency market. Bitcoin is better spent on bulletproof vests than on Bored Ape NFTs. Today’s hype, however, isn’t a sign that tomorrow we’ll live life on the blockchain but, rather, more evidence that crypto mainly reflects a desire from the analog world: the yearning to look cool.
