The Breakdown - Ukraine and the War Airdrop That Never Came

Starting point is 00:00:00 I started this discussion the other day, but I think it bears repeating and probably a lot more discussion in the days, weeks, months, and years to come. I believe quite strongly that this is the first time in modern history that individual citizens have been able to en masse donate money to directly support a war effort in a country that they are not in, a country that is in fact very far away. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io, Arculus, and FtX, and produced and distributed by CoinDesk. What's going on, guys? It is Thursday, March 3rd, and man, do we have a wild discussion for you today around the Ukraine AirDrop? First, however, if you are enjoying the breakdown, please go subscribe, give it a rating, give it a review, or if you want to get a get deeper into the conversation.

Starting point is 00:00:57 Come join us over on the Breakers Discord. You can find that at the link in the show notes or go to bit. dot lee slash breakdown pod. Also, a disclosure, as always, in addition to them being a sponsor of the show, I also work with FTX. And one final thing this week, I am excited to have an additional sponsor just in time for tax time, CoinTellie. Cointelli is here to make crypto tax reporting stress-free for both individuals.

Starting point is 00:01:24 individuals and accountants. Designed by CPAs, CoinTellie supports hundreds of crypto platforms and provides accurate calculations so you don't pay any extra on your taxes. CoinTellie also charges no added fees for up to 100,000 transactions and offers 24-7 customer support from tax advisors. Check them out at cointell.com. That's coin T-E-L-L-I.com. Thanks to CoinTellie for joining as a sponsor of the breakdown this week. Now, let's come back to Ukraine. I've obviously been covering this situation pretty closely, but to recap, last week, two big things happened. Last week on Thursday, Russia invaded Ukraine. The world very quickly had to come to grips with an invasion happening in Europe. The markets instantly tanked, and over the weekend, the West's economic response became a lot

Starting point is 00:02:15 clear. Sanctions were ratcheted up. Russian banks were to be disconnected from Swift, and the West even went after Russia's central bank reserves. We woke up at the beginning of this week with the Russian economy crushed. The ruble fell as much as 40% before recovering. Companies, especially energy companies, work to remove themselves from the Russian economy. BP, Shell, Exxon all disentangling their ties with Russian energy companies. Technology companies stopped servicing Russia. And in general, a major economic isolation set in. However, as all that was happening, Ukraine was obviously in a fight for its life, and not just an economic fight, a very real guns sending bullets at each other kind of fight.

Starting point is 00:02:59 Over the weekend, the official Ukrainian Twitter account posted a donation address for crypto. Initially, it was just Bitcoin, ETH, and USDT, and would later expand to Pocodot, Salana, Doge, and more. Millions of dollars in crypto donations poured in, and the government, government did not wait to put it to use. On Tuesday, Michael Chobanian, who's the founder of Kuna, which is a Kiev-based exchange that has been helping the government, said that at least $14 million of the then $26 million that had been raised had already been dispersed. Michael pointed to two funds, the crypto fund of Ukraine, which was spun up over the weekend to buy food, gas, medical supplies, and firearms for civilians, as well as to help evacuate them,

Starting point is 00:03:41 and a second wallet, which was coordinated by the Ministry of Digital Transformation that was funding the Army directly. Kuna is helping the government convert their crypto to fiat, saying the government doesn't know how to properly manage the crypto, and they also said they're trying to help ensure the donations are quote-unquote clean, blacklisting dubious transactions. If it comes from the dark web, Michael says, there's not much I can do with it later. Michael also said that there has been huge demand among their wealthy clients for Tether or USDT. At this point, there already was a ton to discuss about this unprecedented direct citizen fundraising effort for a war. People were already talking about how much had been raised. They were questioning the crypto

Starting point is 00:04:21 entrepreneurs who demanded to be able to pay in their own token. But mostly everyone was just watching this new phenomenon. But then, on March 1st, Ukraine tweeted an air drop has not been confirmed. This, as you might imagine, spurred a ton of speculation. Was Ukraine about to do an airdrop to people that had donated? And if they were, what would they airdrop? Would it be a national Ukraine token, some donor thank you token? Would it be an NFT? 24 hours later, on March 2nd, the official account tweeted, AirDrop confirmed. Snapchat will be taken tomorrow on March 3rd at 6 p.m. Kiev time. The reaction was intense and immediate. Darren Loud tweeted people buy useless governance tokens,

Starting point is 00:05:04 but will they donate for useless government tokens? Stay tuned. to find out. Lily Francis wrote, so a nation at war that took crypto donations is literally going to air drop and create a token. This timeline is insane. Zero X quit wrote, good morning, woke up to the news that Ukraine will be doing anirdrop based on a snapshot that will happen in 24 hours. I have a feeling we're about to witness the most successful fundraising effort crypto has ever seen. We've been preaching these use cases for years and now the payoff. Luke Martin, Ukraine making history tomorrow by being the first nation state to airdrop the token on those that donated. One lesson that everyone in crypto is familiar with, after a first mover tries something new,

Starting point is 00:05:44 there will be more attempts. Countries airdropping coins. Wild times. Michael Casey, the chief content officer at CoinDesk, says, if WNYC sends you a coffee mug for re-upping your annual donation, is it too much to ask for the people of Ukraine to send you a token of appreciation for buying their bullets? Chow Wang said a nation-state managed to raise over 35 million worth of crypto amid foreign evasion and then air-dropping tokens back to donors is the most historic timeline I've seen in a while. But Nathan Head maybe had the best simple tweet about this. I've read that Ukraine tweet about an air drop like five times and I still can't believe it's real.

Starting point is 00:06:20 Bro, what on earth? Well, whatever the takes, the number of donations skyrocketed. Nate Alex shared a chart from doing analytics separating people who care versus people who care about money. The number of donations per hour jumped from the low hundreds to more than 3,000 per hour after the AirDrop announcement. Over the course the next day, tens of millions of dollars more worth of donations came in. However, it wasn't just sincere folks who were motivated to get off their duff by theirdrop. It was also a legion of people in accounts trying to game the system. 9x9x9x9. said every single Ethereum block now has transactions that are donating

Starting point is 00:06:56 to Ukraine. 95% are either 0.001th or 0.01 ath, try to trying to capture the max value of the airdrop. So far, 25,000 addresses have donated. This is going to be so controversial either way how it will end up. Larry Sermak from the block writes a lot of donations to Ukraine are now Sibbles and people are donating less than they are paying to miners for getting the transactions through. Awawat trades writes donate to Ukraine without Airdrop. I am neutral and don't want to fund wars in any way. Donate to Ukraine if Airdrop. Let me send funds from 10 different wallets. Nexo is the go-to platform for all things crypto. Invest in the hottest coin. out there and start earning risk-free interest of up to 20% APR, paid out daily.

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Starting point is 00:08:25 Stay safe from hackers with no cords, no charging, no Bluetooth. Just crypto security made simple. Buy Arculus on Amazon today. The breakdown is sponsored by FTXUS. FtXUS is the safe, regulated way to buy a. sell Bitcoin and other digital assets with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that

Starting point is 00:08:58 supports both Ethereum and Solana NFTs. When you trade NFTs on FTCX, you pay no gas fees. Download the FTCX app today and use referral code breakdown to support the show. That gets us to this morning. Donations, as I mentioned, hence, soared. We're at 54.7 million in donations across over 100,000 transactions. And it is chaotic out there. Hours before the appointed snapshot, people started noticing a world token showing up. CoinDesk reported that 7 billion tokens were created and sent to Ukraine's address, which then sent them to a different wallet that started to seat a pool on uniswap.

Starting point is 00:09:37 Blockworks tweeted just in, Ukraine government starts to airdrop world tokens to donors on Ethereum. However, very quickly these reports were called. out because there were red flags everywhere. The token was spoofing the Ukraine address and was actually a scam and also showed signs of a super inefficient distribution, giving all donors roughly the same tokens instead of having it proportional to what they had donated. Also remember, we were six hours early from the snapshot. Larry from the block frankly correctly called out giving the scam the force of authority that these media pieces about it did. And it wasn't long before CoinDesk updated their pieces and Blockworks deleted its tweet, but that was hardly the

Starting point is 00:10:15 only excitement this morning. Mikhailof Fetterov, the Minister of Digital Transformation, tweeted, after careful consideration, we decided to cancel Airdrop. Every day, there are more and more people willing to help Ukraine to fight back the aggression. Instead, we will announce NFTs to support Ukrainian armed forces soon. We do not have any plans to issue any fungible tokens. To which Kobe responded, this is the best rug ever. So good Lord, is there a lot to unpack around this. So let's dig into some analysis around everything going on right now. First, I want to get something off my chest a little bit and talk about the contrarians running around. There are right now a number of media personalities, self-claimed contrarians, who are so focused on looking like they don't buy the media line

Starting point is 00:11:05 that they're basically parroting Kremlin talking points. Some of them are being amplified by bitcoins and other people in the crypto community. And look, I want people. to be skeptical and ask questions. This is a war and to take anything that you're seeing on face value is lunacy, right? But there's a difference between being skeptical and asking questions and needing for your personal brand to appear to be skeptical and asking questions. Skeptics are a category that we desperately need, but to see people who have set up their personal brand, not just as a skeptic, but in a way that they can't agree with any story or narrative, if it comes from any mainstream source, seems to me to be a prison of one's own making.

Starting point is 00:11:48 Now, I think there's a version of this that I'm seeing when it comes to the airdrop, which is exemplified by a tweet from Samson Mao, war is not an excuse to shitcoin. And this isn't a direct attack on Samson. He's doing really cool stuff, helping nation-state adoption of Bitcoin. But I do think that you can be against the Ukraineirdrop. You can think it's a stupid thing. or you can think it's going to incentivize the wrong behavior. I think all those things are completely fine positions. But to dismiss it as quote-unquote shit-coining, with some moral priors you formed completely outside of the context of this situation,

Starting point is 00:12:23 I just think it makes people look like calcified, brittle husks of a brain with no more elasticity and only ideology to feed you. Bitcoin or Dennis Porto, right, some of you are more vocally opposed to Ukraine having an air drop than to Ukraine. getting invaded. Hope you can join us in reality soon. Here, here, Dennis, here, here. Now that I've said that, let's get into the actual discussion of incentives, and I find this fascinating. One thing we definitely did see in the wake of the airdrop was a bunch of actors start to participate for the quote-unquote wrong reasons. I mentioned above how many addresses

Starting point is 00:12:59 were basically civil attacking, trying to donate the smallest possible amount from numerous addresses in order to maximize their chances of getting paid off in Ukraine coin or whatever it was going to be. There were others who didn't go that far who were still in the camp of, sure, let's speculate on the upside value of Ukraine coin, which one could argue pretty coherently is the wrong reason for getting involved. I would only point out a couple of things. First, these sort of incentive games, in other words, organizing economic systems and relationships in such a way that they get an intended behavior,

Starting point is 00:13:29 is 100% part of the social engineering of crypto economic systems. Like it or not, it's a big part of what these systems enable. DGen Spartan says, I think there's nothing wrong with playing the Ukraine donation event AirDrop. Crypto was literally made to incentivize behavior. I'd go a step farther and say that one can even make an argument that this was an example of Ukraine going even deeper into the native space of the crypto world. The first phase of this whole thing was just morphing a go-fund me to use crypto instead of fiat.

Starting point is 00:13:55 The second was using unique properties of crypto systems to increase their donations, and it worked. which gets me to the second point. In terms of moral judgments about right and wrong reasons to donate, I think it is completely reasonable. In fact, it should be expected. It's important for those in the West who are looking at this situation and deciding on whether to support these fundraisers or not

Starting point is 00:14:15 to ask ethical questions to weigh moral considerations. In other words, for any individual, yes, there may be right or wrong reasons to donate, and donating itself might be right or wrong. If I'm Ukraine, I don't give one spiffy shit about right or wrong. reasons. My back is against the wall, and in spite of these early military successes and surprising the world, I'm still in a fight for my existence. If an airdrop is going to double my donations, let's do the damn thing. Now again, in no way am I saying that you, as an autonomous individual, deciding whether to support this or not, has to agree with that logic. I'm also not going so far

Starting point is 00:14:52 as to say that they thought all the way through and decided to callously use this as a tool to increase their donations without ever having any intent to follow through in the air drop. I think in this chaotic timeline, it's much more likely that someone said, hey, we should do an irdrop. I bet more people will donate, and they said, let's go. And we started to understand the potential logistics and implications after, which gets us to the rug. Now, as I just mentioned, the uncharitable interpretation is that Ukraine never intended to do theirdrop and were just taking advantage of crypto folks. The more charitable interpretation is that they didn't understand the logistics evolved. They had no idea the likely behavior of network spamming small donations and had to pull out when they saw how much

Starting point is 00:15:29 work it was going to be. I personally am inclined to the second logic, not because I think that the uncharitable interpretation is out of the realm of possibility. I think it's clear that these guys will do whatever it takes to get an edge to keep their freedom. I think that the charitable interpretation just seems more likely. It's the explanation that best maps out onto how crypto neophytes moving quickly might handle this thing. Either way, I think it's also a good reminder that part of the game of crypto is no assurances and no take-backsees. No one signed a contract? They said, sent whatever they sent in good faith. And one can argue that this makes good faith more important and rugs more deleterious because that's all we have, but here we are. Now, one side point, since I ragged

Starting point is 00:16:10 on some of the folks, the self-appointed contrarians who were a priori dismissing anirdrop because they involved quote-unquote shit coins, let's even the scorn out a bit and highlight the utter despicability, patheticness, I don't even know the right word, of people like Justin's son throwing what can only be described a hissy fit when it appeared that trinked that Ron users wouldn't get the airdrop. I don't even have words to describe that whole exchange, and I hope to never see anything like it again. But I want to come and close on what I think is the biggest point about all of this. I started this discussion the other day, but I think it bears repeating and probably a lot more discussion in the days, weeks, months, and years to come.

Starting point is 00:16:51 I believe quite strongly that this is the first time in modern history that individual citizens have been able to en masse donate money to directly support a war effort in a country that they are not in, a country that is in fact very far away. There have been plenty of times that humanitarian aid has been diverted to war efforts. In fact, from the very beginning of people donating to humanitarian causes, as I discussed the other day, this capture and seizure for the war effort has been part of the challenge. There also is a precedent in citizens funding war in the form of war bonds. They've been used for hundreds of years. However, war bonds aren't always offered to all citizens, and in the past, past, it's always been a government offering them to its own citizens. This is something very

Starting point is 00:17:30 different, something monumental and potentially paradigm shifting. This is citizens of a country that's not at war, donating to the war effort of a country they're not in. It is also almost assuredly one of the biggest most successful fundraising efforts of all time. Black Lives Matter raised $90 million across all of 2020. Ice Bucket Challenge raised $115 million for ALS. Beyond that, there's not very much bigger than this. The Constitution Dow raised $47 million a few months ago. But when it comes to GoFundMe's biggest of all time, number one is America's Food Fund with $45.1 million.

Starting point is 00:18:05 Number two is We Build the Wall, $25 million, refunded, by the way. Number three, times up legal defense fund, $24.2 million. And number four was the official George Floyd Memorial Fund, $14.7 million. We're talking bigger than all of those. This one comes, however, with so many ethical and moral questions. Do people really realize that they're funding war, not just some humanitarian aid around war? Is that, in fact, more ethically sound, given that funding humanitarian aid can never, by definition, change the course of the situation that creates the need for humanitarian aid in the first place?

Starting point is 00:18:40 Is it ethical for people to express their feelings in a conflict situation with dollars? Should Ukraine be able to make this global solicitation? And if not, on whose authority would it rely, i.e., who is the larger power saying they can or can't? Is any of this relevant at all in the context of a conflict where some reports have Russia spending $20 billion a day? And does that even matter even if it is doomed money because it's an expression of solidarity that goes beyond words? This is just the tip of the iceberg. And to be clear, this isn't about crypto. It's about a new world that crypto enables. This new world will come with new questions, and it will also come with old questions that are made new by new contexts. All of this

Starting point is 00:19:22 complexity is exploding around us in a mind-warping cacophony. And that's why if I have any one piece of advice, it is do your best not to be trapped into layer one thinking. That's not, by the way, just a request that you don't blindly follow mainstream media and don't blindly accept messages from the PR departments of warring parties, although those things are obviously true. It's also that you're not suckered into the mental trick that a prior rejection of those things constitutes better thinking, because it doesn't. Trying to truly wrestle with these new moments means clearing space, truly, for different possibilities, and doing your best to work through them based on the evidence that you have, not the Twitter brand you've created.

Starting point is 00:20:06 I think one of the most powerful set of words ever uttered by a politician, or anyone, for that matter, came from Abraham Lincoln in his annual message to Congress in December of 1862. This is a month before he signed the Emancipation Proclamation. The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew. The dogmas of the quiet past are inadequate to the stormy present. Until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - Ukraine and the War Airdrop That Never Came

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