Cryptocurrency donors to Ukraine wanted to profit from contribution

You've probably come across at least one article heralding the tens of millions of dollars in charitable contributions to Ukraine's government thanks to the kindness of cryptocurrency holders and advocates.

However, an overview of the Ethereum blockchain data shows that the vast majority of transactions over the past five weeks – from when Ukraine started accepting crypto donations until the end of March – occurred during a span of less than two days, when donors believed they would receive an airdrop in return for their contribution.

An airdrop is basically a huge giveaway that usually entails handing out cryptocurrency tokens to users.

The number of daily Ethereum transactions made to Ukraine's wallet address from February 26 to March 31. Credit: Etherscan

In short, most cryptocurrency donors sent money to Ukraine because they believed they would be able to personally profit from their donation. How? Later selling a reward they'd receive in exchange for their donated crypto, treating their contribution more like an investment.

On Feb. 26, 2022, the official Ukraine government Twitter account surprised many online when it announcedit would begin accepting donations via cryptocurrency. The tweet included Ukraine's official Bitcoin and Ethereum wallet addresses where crypto holders could send donations. Ether (ETH), the currency that is traded on the Ethereum blockchain, is the one of the two largest cryptocurrencies, second only to Bitcoin.

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According to the public Ethereum blockchain data, more than 2,800 Ethereum transactions were sent to Ukraine's wallet address on that first day. On Feb. 27, just over 3,000 transactions were made.

One would expect an influx of transactions in these first days from the hype spreading among the cryptocurrency space and the media coverage that followed. However, by Feb. 28, Ethereum transactions sent to Ukraine were already dropping, with just over 1,200 transactions.

Then on March 2, 2022, Ukraine tweeted"airdrop confirmed." The window to get in on the airdrop would last until March 3. 

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Tweet may have been deleted

Airdrops could come in the form of a non-fungible token (NFT) or a fungible token, such as dropping free coins into users' wallets.

Because tokens are financial assets, airdrops are marketing stunts that reward people monetarily. Once an airdrop is received, holders can turn around and trade those tokens for fiat currency, such as U.S. dollars. And to get that reward you need to buy into a crypto project in some way. In this case by donating to the Ukraine government's official wallet address.

On the day the airdrop was announced, Ethereum transactions shot up from around 2,400 to more than 33,600. March 3 saw over 25,600 transactions made and it could have possibly been more. However, hours before the cut-off to donate in order to receive the airdrop, Vice Prime Minister of Ukraine and Minister of Digital Transformation of Ukraine, Mykhailo Fedorov, announced that the airdrop was canceled.

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Ether donations to Ukraine immediately plummeted. The day after the airdrop was canceled saw only around 840 transactions sent to Ukraine and continued to halve every subsequent day. Only around two to three dozen Ethereum transactions a day have been made to Ukraine over the past week.

So, why did Ukraine cancel the planned airdrop? Because officials within the Ukrainian government realized that many crypto donors were indeed trying to profit from their charitable contribution, which was intended to aid Ukraine as Russia invaded the war-torn country.

According to Ukraine's deputy minister of digital transformation on IT industry development Alex Bornyakov, "a lot of people" began sending incredibly small amounts of ether, clearly just to receive the airdrop.

There was no minimum donation set by Ukraine to receive the airdrop, so seemingly even very small donations could have received the kickback.

"People started to want to profit," said Ukraine’s deputy minister of digital transformation on IT industry development Alex Bornyakov in an interview with Motherboard. "Personally, I don't think it's ethical."

In the end, cryptocurrency promoters certainly came out ahead regardless of what happened with the airdrop. Media outlets rewarded the cryptocurrency industry with positive press coverage due to the millions in charitable contributions sent to Ukraine.

In reality, though, the intent behind most of those transactions were anything but charity.