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Explained: How India's Crypto Covid Relief Fund works

Explained: How India's Crypto Covid Relief Fund works
Photo Credit: 123RF.com
17 May, 2021

A few days ago, Vitalik Buterin, the creator of popular cryptocurrency Ethereum, donated cryptocurrency worth over $1 billion to a fund set up to help India fight the deadly second wave of Covid-19. 

The contribution from the 27-year-old, one of the largest ever individual philanthropic efforts, was widely appreciated by the internet community.  

But there was a catch! 

The donation was made in 500 ETH and over 50 trillion SHIB (Shiba Inu), a meme coin. The donation was valued at around $1.014 billion in real currency on the day of the transfer but plunged in the following days, given that the meme coin is exceptionally volatile with its value changing by the hour.  

This raised immediate concerns that the actual money available from the fund, set up late last month by Polygon founder Sandeep Nailwal and solely dedicated to crypto donations, was much less than was being projected. 

At the time of writing this article, the net worth of total crypto donations in the volunteer-run fund was close to $800 million – far lower than what it said it had collected (over $1.03 bn).  

To help understand the working of Crypto Covid Relief Fund and the liquidation process planned for the meme coin and other cryptos, TechCircle spoke to a core member of the team driving the fundraising effort. 

The member, who requested anonymity, explained that the fund receives donations in various cryptos – from Bitcoin to Doge – in a multisignature (multisig) wallet with a publicly disclosed address.  

Then, from the wallet, these coins are transferred to the organization’s (an entity for the fund in UAE) account in US-based FV Bank, which offers a custody and exchange-to-fiat (USD) service for digital tokens. Post exchange, the money is transferred to registered FCRA-approved NGOs in India or state governments, which then deploy it towards relief efforts.  

So far, the fund has secured $2 million from the donated crypto, according to a transparency report published on its website. 

The member further explained that when they receive cryptos in big numbers, particularly those that can be speculative, they first try to convert a part of them into stablecoins, which are pegged to a currency like the US dollar or to a commodity like gold. This helps them hedge against fluctuations stemming from the market going down. 

For the massive donation from Buterin, the fund had announced plans to do a controlled and staggered liquidation with the coins being converted into stablecoins slowly over a period of time. They recently transferred 10% of the Shiba holding to Wintermute, a leading liquidity provider for digital assets.

Nailwal said on Twitter that they would see the performance for this initial portion and then decide further action for rest of the tokens, which remain in the wallet and subject to market fluctuations.

How the crypto fund is being deployed 

On the deployment of liquidated funds, the member said that a community of over 1,000 volunteers is working round-the-clock in collaboration with local bodies, nodal officers, crypto industry to decide where the funds have to go. Until May 12, the fund website shows, $1.43 million of the $2 million had been sent to ACT Grants, Masoom Charitable Trust, and three other NGOs for the procurement of 50,000+ oxygen concentrators, 1000+ oxygen cylinders, PSA plants, ICU ventilators, and PPE Kits, among other things. 

 

 

Beyond this, the volunteers, which include crypto experts, founders, employees from India and overseas, also collaborate on the Discord channels of the fund to take care of different initiatives, starting from directing people to resources like hospitals beds to handling of plasma-related SOS requests.

Volunteers also use Telegram and WhatsApp to identify NGO groups, people in distress and offer help through donations and resources, collated from public databases available on social media channels.  

With Buterin’s donation, this entire effort could see a big push in the coming months, provided the value doesn’t fall significantly – something that remains to be seen. 

The goal is to make a long-term sustainable impact on the overall healthcare system of India, the member said. They emphasized that the next phase of their effort would be focused on vaccinating people as well as touching parts of the society which have been affected due to the pandemic such as children who lost their parents or those who lost access to education.