Security Notes: How Crypto Could Help Ukrainians

It is incumbent on all of us, witnessing in our living room the horrors of Ukraine, to ask ourselves: is there something we can do? For the digital-payment community, the answer is yes.

Bitcoin and its many variants are technologies that have been serving the purposes of investors, speculators, criminals, and people who don’t trust their government. Plain old payment has been a secondary concern. Let’s turn things around and make easy, secure payment primary. What millions of Ukrainian (and other) refugees need is money in their phones to buy bread, eggs, and other essentials, using the host country’s currency.

What is the bare minimum needed to put up a simple payment regimen for daily use?

For a payee to accept a string of bits as money, three things must come into being: (i) the payee must be assured that this string of bits—this digital coin—is redeemable at a local financial institution for its nominal value; (ii) the payor must have the right to offer this string as payment; and (iii) the community, once the string is accepted, must recognize the payee as the new owner of the digital coin. Plain and simple.

Once these three elements are in place, the local community will be able to pay one another phone-to-phone. This cash-like payment is a practical advantage over Bitcoin and over non-financial donations that would not be a medium of daily payment for hard-pressed refugees.

The flow of monetary donations from around the world would be funneled to recipients’ phones as a weekly installment. Struggling Ukrainians would be able to purchase groceries, offer and buy services, and establish a semblance of normalcy.

We borrow from Bitcoin the brilliant idea of a public ledger.  The payee would consult this ledger to verify that the payor is listed as the owner of the bit string offered as a digital coin. Upon receipt of the bit string, the payee would update the public ledger to indicate that now the payee is the owner of that digital coin, and has the right to use it as payment.

With redemption, confidence builds with practice. The first time a recipient gets digital money pushed to his phone, he may rush to the bank to redeem it. He will do so again the next two or three times. Then, he will relax and treat these bit strings as redeemable—and transactable. A payment regimen is born!

The cryptography is all “under the hood.” There are no private keys to manually handle, no complicated protocols. The downloaded phone app shields the user from security risks. The payor indicates a sum to pay and selects a recipient (phone number) and a mode for bit transfer, be it messaging, WhatsApp, email, or, in case of physical proximity, NFC, Bluetooth, or QR code. The focus on payment, as opposed to speculative storage, keeps the sums low, the risk minimal.

A U.S. bank would collect the donations and push the money to a list of local phone numbers put together by the Ukrainian government. A local bank would redeem these coins from the trading public and would be paid by the U.S. bank.

Relatives and friends of dispossessed Ukrainians would be able to purchase digital coins in the U.S. and pass them on to needy Ukrainians, connecting to their phone numbers. More than 1 million Ukrainians are hosted in Polish homes. Wouldn’t it be nice if they could help their hosts with their daily expenses with the donated digital coins?

There are several technological solutions (e.g., BitMint), but the challenge is entrepreneurial.

—Gideon Samid, gideon@bitmint.com