ShapeShift Co-Founder and CEO Erik Voorhees has quite a reputation in the crypto world. As one of the original players in the space, he’s opinionated, outspoken, and no fan of the SEC.
A serial entrepreneur and disrupter who doesn’t mince his words, I spoke to Voorhees about days gone by, days to come, and why this bear market is a mere blip on the horizon of a global decentralized financial system.
As one of the first people to be involved in Bitcoin, I asked if he could shed a little light on those exploratory times and what the scene looked like in the days before “when Lambo” and “blockchain will solve [insert your problem here].”
“In the early days,” he says, “Bitcoin was 100 percent of what we all cared about. There was no blockchain movement. There were no other assets, except perhaps Namecoin.
The primary purpose everyone cared about was changing currency itself, and the focus was on getting merchant adoption.
Further, the community was much more monocultured. It was almost entirely English-speaking, technical, 20- to 35-year-old males. Today, the ecosystem is far broader and more diverse, in assets, purpose, and demographics. This is a tremendous sign that the ecosystem is growing.”
There Is Hope Despite the Bear Market
Hearing about growth is encouraging when you’re in the middle of what feels like crypto carnage and things keep leaping from bad to worse. Yet seasoned players like Voorhees aren’t scared of these bear markets— they’ve been through them before– and far worse than the current one. When I state that we’re in the grips of a very long one, he smiles and corrects me:
“Nine months isn’t a long bear market. After the 2013 bubble, there were three years before we hit new highs! These markets move in hype cycles, and as long as people pay attention to the technology and utility, rather than the price, they can get through bear markets be they long or short.”
He adds, “There will be many more bear and bull markets as crypto pulls in the world’s financial system and reforms it. One cannot change the world in a smooth, predictable curve.”
Erik Voorhees Has a Resume to Make Your Head Spin
I’ll skip the why and how of Voorhees’ venture into crypto. That question tends to provoke a glazed-over look on people’s eyes as they robotically bleat out a response they’re bored of hearing. Instead, I wonder what he saw in crypto that motivated him to start not one, or even two, but several crypto companies. And what were they?
“The first project I started was a VoIP web browser tool, enabling people to call anyone in the world with Bitcoin. It was aborted far before launch though, as the economics weren’t compelling. I then built FeedZeBirds, which was a Twitter advertising tool, and joined BitInstant as the third member of the team (in charge of marketing/brand development).
While at BitInstant, I started SatoshiDICE [are you counting?] as a side project, and it became the biggest Bitcoin casino game in the world, responsible for more than half of all Bitcoin transactions through 2013…
Due to a disagreement at BitInstant with the Winklevoss brothers (our investors), I left the company and moved to Panama to co-found Coinapult (a web-wallet and Bitcoin-to-email service) with Ira Miller.
A year later, I decided to leave Coinapult and started ShapeShift, which has been 95 percent of my time and work since early 2014. Throughout, I’ve been motivated simply by seeing business opportunity everywhere in crypto.”
You don’t say! That’s six crypto companies Erik Voorhees has either started or run. Is that some kind of record? Why so many?
“I believe that any successful crypto projects help crypto itself grow toward wider adoption, resiliency, and impact, and my ultimate goal is really to help the world transition from a fiat-based financial system to a crypto-based financial system; one which is open and borderless.
A Borderless Financial System
Why is it so important to the ShapeShift CEO to decentralize money and ensure it’s out of government or any central authority’s control? Why is he so immersed in the subject and what’s so wrong with the current system the way it is? His answer explains a lot.
“Money is a protocol, like language. Money is how people interact with each other for the purpose of exchange, while language is how people interact with each other for the purpose of communication. Both are extremely important, far too important to be in the hands of any central party.
Governments should not have the ability or right to censor and control language, nor declare what language is or how people use it. Similarly, they should not have the ability or right to censor and control money, nor declare what money is or how people use it.
That’s a philosophical or moral argument. There is also an economic one: markets function better when they are left alone (largely due to informational complexity), and money is the most important good in a marketplace, therefore the most economically destructive when put in the hands of a coercive monopoly.”
You have to admit, he makes an incredibly compelling argument. Many of us have had it fairly easy where money’s concerned. And by that, I don’t mean it falls into our laps or we don’t work hard for what we earn. But the majority of us haven’t seen our life savings wiped out by hyperinflation or our stock portfolio or pensions destroyed by market manipulation.
Not yet at least, and the hope is still shining like a beacon among crypto purists that we can stop these events from happening.
What About Regulation?
Should we talk about his favorite topic? I wonder. I don’t want to dig up his unpleasant sparring sessions with the SEC, and yet, he is one of their most vocal opponents, with reason. Voorhees was fined $50 million for the SatoshiDICE unauthorized securities sale and he’s recently reappeared on their radar in a probe opened up over Salt Lending.
So, we know he’s not in favor of regulation for many reasons. But after the countless hacks and scams, does he still believe that cryptocurrency should not be regulated at all or does such as thing as the right regulation exist?
“We don’t need regulation to prevent hacks and scams, those things are already illegal (hacking is theft, scams are fraud… both illegal in every country on Earth. No SEC necessary).”
So, the US (in Voorhees’ opinion) is quashing innovation, stamping on personal freedom and pretty much trying to dance the tango in clogs. Where then should blockchain companies go? Is Switzerland still the best place to launch a crypto startup?
“No, it doesn’t seem to be. The regulatory climate in Switzerland is not as good as some (including myself) believed it to be. Singapore and Malta are arguably the top jurisdictions.”
Considering ShapeShift is Swiss-based and Erik Voorhees is probably a decorated skier by now, it’s clear that Switzerland’s warm welcome to crypto is starting to ice over a little. The country is still in a locked-horns position with the banks over crypto, and failing to provide the clarity that so many hopefuls were seeking.
Speaking of Malta, then, I wonder what his opinions are on the country’s recent regulation. His answer is short and to the point.
“They’re being progressive and tolerant, and it will pay off for them over the next one-two decades.”
This is a space full of blurry lines. It’s not surprising to me that Voorhees is impressed by the Maltese effort. But considering that ShapeShift is a staunch opponent to KYC (something required by Maltese regulation), would the rock in the Mediterranean really make a better home?
And on that note, is he concerned at all that by not carrying out KYC, his company is enabling criminal activity? Apparently not. And apparently, I also missed the memo where ShapeShift incorporated the practice they were so against.
“As a society, we somehow tolerate people to communicate/email/call each other without reporting neither the content nor the sender/receiver to the government. When you write an email, you don’t need to KYC. Yet, you could be a terrorist planning a horrible massacre. Does that ‘enable criminal activity?’
Perhaps… it’s a question of how tyrannical we desire the authorities to be, in order to prevent some tiny minority of bad activity. Regardless, ShapeShift added KYC recently, not because we wanted to, but because we came to the conclusion it was too legally risky for us not to do so.”
Let’s Talk About New Ventures and Plans
Erik has recently joined the advisory board of the MARKET Protocol team. We all know that being an advisor is often little more than an expensive endorsement for minimal follow-through beyond a photo on a website. Yet, I sense that’s not how Voorhees rolls. If his name is associated with a project it’s because he believes in it. So, what’s behind this latest move?
“I’ve met their team,” he says, “and I can tell they know what they’re talking about. They come from a financial markets background, and they’re using crypto technology to apply traditional financial methods to new tools, and I think they’ll be making technology that is both magical and powerful. I got a really good feeling about them as people and entrepreneurs, so I was very honored to join as an advisor, and I’ve also invested personally.”
What will he be doing with them?
“Advising them… primarily on the crypto industry and UX side of things, as they have a far better understanding of financial/derivative products than I do,” he admits.
Voorhees has spoken several times about cryptocurrency getting closer to mass adoption, but I have to ask if applications like derivatives trading are really built for the mainstream? How do you explain decentralized derivatives trading platforms to the layperson?
“Derivatives trading is generally not for mainstream, but part of that is the huge barriers to entry that have been erected in the traditional financial world. Crypto dissolves some of these barriers, and while not everyone in the world needs to understand financial derivatives, some of them will likely find their way into mainstream use, perhaps without the users even knowing it (just as web users utilize cryptography every day and don’t realize it).”
Rotten Apples in the Barrel Must Go
He also accused the establishment of cronyism in an interview with Bloomberg.
But is that starting to happen in the cryptocurrency space? Is he ever concerned about it going down the same path as fiat currency? Is it inevitable?
“Cronyism occurs when people utilize political power for economic gain. We’ll never change the human instinct toward seeking this, but what we can change is to reduce the scope of political power (i.e. reduce the role of government in our lives). By reducing the role of government, the natural tendency toward cronyism is more contained and has a smaller effect and less damaging consequences.”
There’s a new version of ShapeShift coming soon, which you may or may not like, depending on your will to remain anonymous. Otherwise, if you want to catch the man in person, it sounds as if you may not find him in his Swiss base for much longer.