How Ukraine's Diia and DREAM Platforms Could Reshape National Finances with a 'Circular Economy' Model

The 'Circular Economy' Model for Ukraine

According to ХВИЛЯ: A new economic framework, termed the 'circular economy,' is being proposed for Ukraine. This model is built on four interconnected financial feedback loops: personal, family, community, and state. It aims to leverage the country's existing digital infrastructure, specifically the 'Diia' and 'DREAM' platforms, to launch specific technological proposals and pilot projects. The urgent need for such innovation is underscored by National Bank of Ukraine data showing that over half the population lacks savings sufficient for three months.

The 'Diia' app currently has 22 million users, while the 'DREAM' restoration platform lists 8,700 projects. The circular economy concept is structured around four core levels:

• Individual financial health,
• Family economic resilience,
• Community and quadratic funding,
• National welfare bonds.

A key component is quadratic funding, a method first proposed by Vitalik Buterin, Zoë Hitzig, and Glen Weyl in 2018. The Gitcoin platform has already distributed $67 million using this model. Furthermore, the city of Split in Croatia became the first EU municipality to apply quadratic funding for local projects, demonstrating its practical viability.

Planned Pilots and Associated Risks

In line with the concept, Ukraine plans to launch three pilot initiatives:

• A 'financial pulse' feature within 'Diia' (a pilot for 100,000 users),
• A quadratic funding project in one community,
• A single pilot welfare bond for a specific restoration project, such as a school.

Implementing this vision, however, comes with four primary risks:

• Data privacy,
• Goodhart's law (where a metric becomes a target and ceases to be a good measure),
• Digital inequality,
• Political vulnerability.

The rationale for pursuing a circular economy in Ukraine is threefold: technological (the existence of 'Diia'), timely (alignment with upcoming eIDAS 2.0 regulations), and existential (the need to effectively manage an estimated $524 billion for national reconstruction). For context, Poland's experience shows 66 cities now have participatory budgets mandating 0.5% of municipal funds, with Kraków funding 163 out of 1,100 proposed projects in 2024. Bhutan's Gross National Happiness index, in use since 2008, offers another reference point, with the share of citizens deemed 'happy' rising from 40.9% to 48.1% over 12 years.

Successful international models provide inspiration. Brazil's Pix payment system, built for just $2 million in public funds, now processes 63 billion transactions annually-a benefit equivalent to 15% of GDP per capita. The impending eIDAS 2.0 regulation, which requires EU nations to implement digital identity wallets by December 2026 and financial institutions to accept them by 2027, adds urgency for Ukraine to develop compatible systems. Thus, the circular economy could represent a significant step toward greater financial stability and development, addressing both immediate challenges and long-term population needs.

This economic model has the potential to substantially impact Ukraine's situation by integrating modern technology and innovative finance to improve public welfare. The pilot projects could mark the first step toward building a more resilient financial system attuned to the specific needs of citizens and their families.

Successful implementation will hinge on overcoming risks related to privacy and digital divides, as well as the ability to engage a broad range of participants in the financial transformation. The experiences of other nations, like Poland and Bhutan, could serve as valuable guides for Ukraine on this path.

In addition to the innovative circular economy model, Ukraine's digital transformation is further enhanced by the upcoming launch of a new tax service within the Diia app. This service aims to facilitate real-time payments and monitoring, which could significantly improve the efficiency of financial interactions for both individuals and businesses. As these initiatives unfold, they underscore the importance of leveraging technology to bolster economic resilience in the country.