Illia Polosukhin is the kind of transnational, tech-savvy entrepreneur who has helped build Ukraine’s reputation as a breeding ground for crypto talent. A native of Kharkiv, he attended Kharkiv Polytechnic Institute before moving to Silicon Valley to work as a software engineer with an expertise in artificial intelligence. Later, he helped create a blockchain that is now widely used in the crypto world.
All the while, Polosukhin has kept up ties to his home country, including Ukrainian developers who are using his blockchain, the NEAR Protocol, to build platforms like non-fungible token marketplaces and virtual games. Now, with Ukraine under siege and many in the country’s crypto community in flight, Polosukhin is pitching in on relief efforts, helping to raise money and awareness as part of a broad, grassroots movement in the industry.
“There’s actually a really big crypto community that has pretty much fully mobilized to support people right now in Ukraine,” Polosukhin, 31, said.
Illustration: Yusha
The Ukrainian government’s push to court this same crowd has resulted in more than US$50 million in crypto donations.
Ukraine, a tech hub known for its free-wheeling crypto community and rich supply of digital developers, has seen its industry upended as Russia’s invasion threatens every aspect of life. What just weeks ago was a vibrant start-up scene connected to a far-flung network of expatriate entrepreneurs is redirecting its brain power to focus on relief and resistance.
Crypto companies with operations in Ukraine are evacuating staff and organizing humanitarian relief efforts while also contending with employees who are fighting on the front lines. These firms have dipped into their own funds and tapped outside resources — including venture capital investors — for support in response to what has become an increasingly dire situation.
Polosukhin is currently in Portugal — another crypto center — and has set up a temporary hub where Ukrainian blockchain developers can live and work. It is a microcosm of a mass evacuation in which more than 2 million people, many of them women and children, have fled Ukraine into neighboring countries since Russia’s invasion.
So far, Polosukhin and his team have helped relocate more than 50 people from eastern Ukraine, he said.
With other crypto entrepreneurs, he helped start Unchain, which has raised more than US$3 million in crypto donations for evacuation efforts, food and medicine. Polosukhin said he has also received support from NEAR’s venture-capital investors. While he did not say which ones, these backers include Andreessen Horowitz, Circle Ventures and Jump Capital.
Other Ukrainian crypto entrepreneurs have also put together relief efforts based on digital currency donations. Sergey Vasylchuk, founder and CEO of crypto staking company Everstake, helped create Aid for Ukraine, a decentralized autonomous organization that accepts donations via the Solana blockchain’s SOL token. Everstake partnered with crypto exchange FTX and the Ukrainian Ministry of Digital Transformation on the initiative, which has raised more than US$1.4 million.
Vasylchuk is currently in Florida, but lives in Ukraine. There have been bombings near where he and his family live. Many of Everstake’s employees are based in Ukraine, and some have stayed behind even though Vasylchuk discussed evacuation plans with them ahead of the invasion. He said female employees are volunteering at hospitals, while some of the men, including Everstake’s head of security, are fighting on the front lines.
“I absolutely worry for them,” Vasylchuk said.
Ukraine’s emergence as a crypto hotspot was born out of the same history that sowed the seeds of the current conflict. The country experienced economic instability during the 1990s after securing independence from the Soviet Union, which generated interest in alternative financial systems like crypto. Ukraine took the fourth spot on a ranking last year of the countries with the highest crypto adoption, a report from blockchain-analytics firm Chainalysis showed.
Ukraine is home to BlockchainUA, a major European blockchain conference that has had more than 12,000 visitors since its launch in 2016, the conference’s Web site showed.
It also places a heavy emphasis on tech. Information technology (IT) was the nation’s largest exported service in 2020, totaling US$5 billion, according to organizations including Better Regulation Delivery Office, a Ukrainian think tank. Government initiatives such as the two-year-old Ministry of Digital Transformation have helped support the industry. However, the war has abruptly shifted priorities.
“I was in charge of increasing the IT business of Ukraine, turning it into the biggest IT hub in Europe,” Deputy Minister of Digital Transformation Alex Bornyakov said in an interview.
With the invasion, “we completely changed our tasks,” he said, focusing instead on supporting the nation’s digital infrastructure as it is being attacked to make sure the government’s work is not interrupted.
Gathering and using cryptocurrency donations is a part of its efforts as well, said Bornyakov, 40, who spoke from an undisclosed location in Ukraine where connectivity is spotty and air-raid sirens occasionally send him into a bomb shelter.
Among those being evacuated, there is a large gender disparity, said Maria Vovchok, ambassador for the Blockchain Association of Ukraine. She referenced a Feb. 24 decree from Ukrainian President Volodymyr Zelenskiy that prevents Ukrainian men aged 18 to 60 from leaving the country.
“A lot crossed the borders through western Ukraine and right now are in Poland or Moldova, or another country, but these are mostly women,” she said.
Many of those still in Ukraine are helping others under dangerous conditions as the invasion escalates. Pasha, a 22-year-old developer who was born in Russia and grew up in Ukraine, but still holds a Russian passport, was able to make it out of the country and is now in Spain.
However, before leaving Ukraine, he helped convert a warehouse into a shelter. He said he tried and failed to convince many family members to evacuate as he did.
“My mom and my grandpa and my grandma, they don’t want to leave,” said Pasha, who declined to provide his full name, because of fear for his safety and that of his family. “I cried to make them leave; they declined.”
Pasha had worked for an information technology company that provides outsourced crypto coding services, but many of his former colleagues are now being hired by SolidBlock, a digital asset marketplace that creates tokens backed by real estate. The company is based in the US, but its CEO and many of its employees are Ukrainian.
SolidBlock CEO Yael Tamar said she can pay evacuees they hire in crypto, if they choose. Other founders are more hesitant to harness digital currencies, especially when it comes to collecting aid.
Jason Grad, cofounder and CEO of Massive, a start-up that lets users pay for apps and services by contributing their unused computing power to operations like cryptomining, raised more than US$85,000 for food, water and medical supplies by soliciting donations through an Instagram post.
He said using fiat money was less of a hassle than crypto and has partnered with Goodworld, a fundraising software company, for donations. However, he is also working with The Giving Block for crypto contributions.
Grad traveled last week from Dubai, where he was at work at a conference, to a country bordering Ukraine to provide more direct aid. Although Grad, 34, is American, he spent time in Ukraine during the COVID-19 pandemic and learned more about the country from working with developers from there. His company has four Ukrainian employees, including two who were supposed to start the first week of this month.
Grad has helped evacuate one worker, moved two to safer locations within Ukraine and is working on getting the fourth out of a dangerous area. He said he has also helped with other evacuations, and that the work has been exhausting.
“It’s like a bad dream that I wish I’d wake up from,” he said.
Irra Ariella Khi, another entrepreneur, is also focused on fiat donations for now, even though her company, Zamna, uses blockchain in some of its identity verification products.
“When you look at the percentage of people who can access cryptocurrency versus what works on the ground, it’s just got to be low-tech,” Khi, 37, said.
Making matters worse, many places in Ukraine now have no electricity, heat or Web access, Khi said.
Based in London, Khi put together an aid initiative called Sunflower Relief. (In addition to Ukraine being the world’s largest exporter of sunflower seeds, the sunflower is the country’s national flower and has become a symbol of resistance against Russia.) Khi, who was born in Ukraine and moved to the UK at the age of 9, is working with an online community of Ukrainian developers to build a software platform that can handle the logistics of matching donated supplies with people in Ukraine who can deliver them to those in need. The group is focused on making sure donated supplies, such as baby wipes, diapers, batteries and medication, get to Ukraine and where they are most needed.
“All sorts of things that are non-military are not really getting as much attention and funding as funding the army,” she said.
Sunflower is also building a bank of volunteers in Ukraine who can produce firsthand accounts and videos of what is happening there and collaborate with journalists.
“This is a smartphone war,” Khi said.
“This is also an informational war because Russia is spreading so many videos that we know are just not reflective of the truth because we speak to our family and friends every day,” she said.
Although all of Zamna’s employees are based in London, many of them, including Khi, have family in Ukraine, and have been working to get them out.
“We can hear the bombs exploding on our Zoom calls,” she said.
Venture capitalists with investments in crypto are concerned about the conflict’s impact on start-ups, particularly those that have operations in Ukraine and Russia. Some have taken a hands-on approach by directly working with their portfolio companies that have been affected.
“There’s sort of a play-book that emerged quickly, like helping with relocation, financial assistance, employee assistance, counseling and delivering supplies if needed for relocation or for other housing-related issues,” said David Pakman, a managing partner at CoinFund.
Amy Wu, who leads FTX Ventures, said that a number of her portfolio companies and potential start-up investments are caught up in moving employees out of Ukraine and that some have put their fundraising talks on hold.
FTX Ventures, which launched in January as a US$2 billion fund and has not publicly announced any investments, is also in a unique position. As the venture arm of FTX, the fund has grappled with the White House’s push for crypto exchanges to cut off Russian accounts to prevent users from using crypto transactions to circumvent sanctions. Wu said her company would comply with regulations.
Maria Shen, a partner at Electric Capital, which just raised US$1 billion to invest in crypto start-ups, said that many of the firm’s portfolio companies were affected by the conflict because they have developers who come from Eastern Europe.
“In some cases, team members have had to step back because they are stuck in Ukraine, or friends and family are severely impacted and living in cities currently being bombed,” she said.
However, other venture-capital companies are concerned about the impact on the broader crypto market, into which venture capital poured US$32.5 billion last year, according to Pitchbook.
Race Capital shared with Bloomberg an internal memo the firm sent to all of its portfolio companies, not just those with exposure to Ukraine. The memo prepared founders for a potential slowdown in fundraising if the conflict continues, as well as the possibility of growing inflation and supply-chain constraints. It also advised them about having to potentially write “a breakup e-mail” if they do business with customers in Russia because of sanctions.
Alfred Chuang, a partner at Race Capital, said he had already been thinking about and discussing the impact of a potential conflict between Ukraine and Russia about five to six weeks before it happened.
He said his emphasis on preparation stems from his experiences as the former CEO of software company BEA Systems. He was in charge of the company on 9/11 and was caught completely off-guard when he had to inform the family of an employee that he had been on United Airlines Flight 93, one of the four planes attacked by hijackers.
“From that moment on, I always had a sense that these things can happen,” Chuang said. “You want to think ahead.”
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