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War And Cryptocurrency

  • Kshitij's profile image
    Kshitij
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War And Cryptocurrency

On 26th Feb 2022 Ukraine tweeted.

And guess what happened after this. 

Now comes the most fascinated question. Why Ukraine started taking donations in Cryptocurrency? Definitely there can be various answers to it who knows what Ukraine is thinking. But one thing is for sure we can see the power of cryptocurrency here. 

If we talk about Fiat Currencies. Fiat currencies have a very bad reputation when it comes to war. The value of fiat currencies just goes down during war like situation. Which means inflation or even worse hyperinflation. 

Why? Let’s understand fiat currency a bit. 

Why Fiat currencies fail? 

  1. The foundation of Fiat currency is government. If government fails the foundations of fiat currency fails.
  2. During a war-like situation, the government increases its spending. Because they require a lot of weapons and food for their armies. Which results in printing a lot and lots of fiat currencies.  

And if you increase the supply of anything more than the desired amount. The value of that thing starts decreasing. It’s a simple economic principle. The value of decreases, and results in inflation or even hyperinflation. Here is a case study of Zimbabwe. https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe 

 And a similar kind of currency fluctuation can be seen for both Ukraine and Russia. [March – 1 week data]

Source – https://www.xe.com/currencycharts/?from=UAH&to=USD&view=1W 

Source – https://www.xe.com/currencycharts/?from=RUB&to=USD&view=1W 

And trust me this is not happening for the first time. This has happened in past also. And many fiat currencies got obsolete.  

Here the list of obsolete fiat currencies (A-Z)  – https://en.wikipedia.org/wiki/Category:Modern_obsolete_currencies 

Now let’s see how cryptocurrency can protect us from this mess that fiat currencies create. 

  1. Foundations are algorithms – Cryptocurrency foundation do not rely on any centralized authority like the government. Its foundations relies on algorithms and mathematics. Like a law, they always work. Just like gravity pulls everything down no matter what you do. In the same way we have these algorithms and mathematics working for cryptocurrency.
  2. Limited Supply – Cryptocurrencies have limited supply and you cannot print them whenever you want, just like fiat currencies. So, the value of a cryptocurrency is not dependent on any centralized authority but on supply and demand. 

So, just like Gold and Silver, they cannot be printed or manipulated by any government or central authority. And this makes cryptocurrency much more powerful than any fiat currency. 

So, Ukraine using cryptocurrency in a war-like situation could prove to be a masterstroke.  

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