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Crypto Mogul Vitalik Buterin’s $1B Donation of ‘Petcoins’ to Charity Backfires

·5 min read
Photo Illustration by The Daily Beast / Photo Getty
Photo Illustration by The Daily Beast / Photo Getty

The world’s youngest crypto billionaire donated approximately $1.5 billion to a COVID relief fund and other charities—paid out almost entirely in a selection of meme cryptocurrencies named for different dog breeds that then tanked in value.

Vitalik Buterin, whose personal fortune first surpassed $1 billion early last week, donated several kinds of cryptocurrencies, three of which are dog-themed and created largely as jokes: Shiba Inu (SHIB), Akita Inu (AKITA), and Dogelon (ELON).

The gifts were collectively valued around $1.5 billion at the time they were made. But within hours of the transactions, the meme coins’ prices plunged—in no small part due to the billionaire’s massive transfers. In a neat illustration of crypto’s volatility, Buterin’s donations effectively depreciated themselves.

Meet the World’s Youngest Crypto Billionaire

Buterin, 27, is the founder of Ethereum, an open source blockchain whose native token, Ether (ETH), is the second-most valuable cryptocurrency and only legitimate rival of Bitcoin. The founder’s wealth is mostly vested in his creation, but over the past year, he has also been gifted so-called “petcoins” as part of a hokey marketing stunt.

The canine-related tokens are knockoffs of the meme currency Dogecoin (DOGE), which spiked to record-breaking highs over the past month, thanks in part to repeated promotion from Tesla CEO Elon Musk. Dogecoin, which has fallen in price since Musk’s appearance on Saturday Night Live, is now the sixth-most valuable cryptocurrency by market capitalization, according to Crypto Slate.

The copycat coins tried to capitalize on the Doge frenzy—in SHIB’s “woofpaper,” or whitepaper, the creators dubbed it the “Dogecoin killer”—with some success. SHIB, which boasted a market cap of $0 on May 7, spiked to nearly $14 billion on May 10, according to Coin Market Cap. In an apparent bid to publicize their coins, the creators of SHIB, AKITA, ELON, as well as some other petcoins like HuskyToken (HUSKY) and Bulldog (BDOG), gifted Buterin large quantities: in each case, 50 percent of the total coin supply. SHIB’s creators claimed this had “burned” the coins—or taken them out of circulation to create scarcity.

But Buterin retained control of the funds. Because he held such large quantities of the coins’ total supply, some thought that attempts to offload them could have a drastic impact on their value. Even before the donation, critics mused that an exchange could prove fatal to the petcoins’ creators. “To be perfectly clear,” crypto Twitter account @Waronrugs wrote back in January, “Vitalik can rug you.”

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On Wednesday, according to data collected by the blockchain tracker Etherscan, Buterin doled out massive quantities of petcoins to a smattering of nonprofits and foundations, including the India Crypto Covid Relief Fund, the Machine Intelligence Research Institute, the open source bounties platform Gitcoin, the charity evaluator GiveWell, and the Methuselah Foundation, a lifespan-extension research group focused, according to their website, on “making 90 the new 50 by 2030.”

Within hours, the petcoins’ prices sank. Dogelon Mars fell by nearly 95 percent, before recovering some of the loss. Buterin’s largest contribution, 50 trillion SHIB to the India Crypto Covid Relief Fund, had been worth just over $1 billion at the time of the transaction, according to Etherscan estimates. Within an hour, SHIB’s price had dropped by 30 percent.

In spite of the slump, Shiba Token’s creators released a statement of support for the gesture, insisting that Buterin was not “dumping” the token. Instead, they wrote on Twitter, he had “just brought invaluable legitimacy” to the token, illustrating that it was more than a memecoin. The India Crypto Covid Relief Fund added that it plans to execute a “thoughtful liquidation,” converting the donation in a slow, staggered manner, to ensure that the price does not sink further and eliminate its value.

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The India Crypto Covid Relief Fund was the primary beneficiary of Buterin’s donations. The fund was set up by Sandeep Nailwal, founder of the Ethereum-affiliate Polygon, to help direct donations to COVID-19 relief in India, where case numbers have spiked to heights rivaled only by the United States. Buterin had donated to the fund before; when Nailwal first set it up back in April, the Ethereum founder contributed about $600,000 in Ether and another cryptocurrency called Maker (MKR).

According to Etherscan records, Buterin also donated approximately $375 million in AKITA to Gitcoin, an Ethereum-based “bounties” platform that helps open source developers get paid for their work.

At the time of the transactions, the value of Buterin’s meme coin donations rivaled that of his personal Ether fortune. Early last week, he became the latest entry to the billionaire club, when Ether’s price surpassed $3,000, putting his holdings of some 335,000 ETH at a value of approximately $1.3 billion. Buterin’s donations on Wednesday largely did not come from that sum, but he did move it.

Shortly before his petcoin contributions, the founder transferred $1.3 billion in Ether from his public address—which he disclosed back in 2018—to a new contract separate address created just hours before. The exchange amounted to nearly all of his ETH holdings; by early afternoon, Buterin’s public address held just $10,000 in Ether. Some crypto strategists suggested to Forbes that the new address provides greater security and privacy, but the motivation for the transfer remains unclear.

Read more at The Daily Beast.

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