Erik Voorhees on Maximalism, KYC & Shoddy Reporting
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Interview location: Denver
Interview date: Wednesday 20th March, 2019
With the growth of cryptocurrencies and Bitcoin, there has been a growing pressure from regulators for exchanges to implement KYC/AML policies. The privacy afforded to users through cryptocurrencies is under attack from fear of these blockchains being used for nefarious means.
Erik Voorhees has long been a supporter of the right to privacy and with Shapeshift users were able to trade digital assets anonymously. The business was put under pressure by regulators to implement KYC/AML policies, which when activated drew criticisms from users.
What could Erik do? Close down the business? What about his fiduciary duty to his investors and his duty to his employees?
In this interview, I talk to Erik about the pressures of implementing KYC/AML, the impact on the business and what this means for privacy. We also discuss the Wall Street Journal hit piece on Shapeshift, maximalism and market conditions.
00:03:07: Discussing Bitcoin maxilmalism
00:06:20: Erik’s past experience with maximalism
00:08:24: The beginnings of ShapeShift
00:11:27: The importance of listening to all sides of the debate
00:16:43: Dealing with questions surrounding Erik’s credibility and integrity
00:18:14: Why KYC has been implemented in ShapeShift
00:27:56: The impact KYC has had on ShapeShift’s business
00:33:01: Erik’s views on the Wall Street Journal hit piece on ShapeShift
00:39:12: What is the vision going forward for ShapeShift?
00:41:31: Views on the current crypto market
00:44:27: How important is Bitcoin to Erik, compared to other digital assets?
00:45:49: The most important technical features for Bitcoin in the future
00:47:12: Final comments and how to stay in touch
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Mentioned in the interview:
Wall Street Journal Hit Piece:
Original Article: How Dirty Money Disappears Into the Black Hole of Cryptocurrency
CypherBlade Response: How Truth Disappears Into the Black Hole of Shoddy Journalism
Amy Castor Review of CypherBlade: Blockchain analytics firm CipherBlade steps in to launder ShapeShift’s image
Other relevant WBD podcasts:
A big thanks to my WBD Maximalist Patrons for helping support the show: JP Petit, Logan Shultz, Steve Foster, Tony, Gordon Gould, David Burlington, Jesse Powell, Beam, Wiel Menger, Robert Romney, Jason DiLuzio and Yan Pritzker.
Peter McCormack: Thank you for having me here in Denver!
Erik Voorhees: Really, really glad to host you here. I’ve been a good fan of the show, ever since we did our first chat, which was a little over a year ago?
Peter McCormack: Yeah, about a year. Thank you for supporting it! I think a lot’s happened to you since the last show?
Erik Voorhees: Yes, absolutely.
Peter McCormack: We’re going to try and get through it all! But actually the one thing I wanted to start on with you was the last time we connected was when I put out a tweet and I said, “maximalism is common sense” and you responded. One of the reasons I wanted to talk to you about it, is that I’ve been at the wrath of maximalists this week, and I took myself as far as I could go with Bitcoin and maximalism and then when I got there, I don’t know, felt restricted?
Erik Voorhees: You think?
Peter McCormack: Yeah, I think so. Not restricted in the sense that I don’t have this huge, fundamental love and support for Bitcoin. But on a couple of occasions, I want to step out of the arena. Some people will say it’s a scam, but I was in Venice and had the opportunity of interviewing the guys from SpankChain and I’m very interested in their approach to providing services for sex workers. I wanted to go and find out about that industry and I got the wrath of the Bitcoiners because…
Erik Voorhees: Because it wasn’t Bitcoin?
Peter McCormack: It’s not Bitcoin and it’s Ethereum. I’m a scammer and I’m supporting scammers!
Erik Voorhees: It doesn’t feel good does it?
Peter McCormack: No, it doesn’t. There was another one also, I don’t know if you’ve seen everything about the Rizun interview I’m doing, the Peter Rizun interview?
Erik Voorhees: No. I’m sure that will cause all the wrath of the world to come on you!
Peter McCormack: Yeah, because I’m doing a whole bunch of stuff on Lightning and I wanted to get the most anti-Lightning person I could find and who isn’t say Roger Ver. I understand and sympathize with a lot of what the Bitcoiners have against Peter Rizun and there’s certainly a lot of flaws in things he’s talked about before. But at the same time, I think by spending an hour or so with him, there might be things in there that I find that are interesting questions.
Erik Voorhees: Well that’s really important because these debates should happen in discourse among people, where long points can be made and there can be feedback and discussion, rather than 280 character snipes against each other. Those kinds of discourses I think only further whatever the truth is. So I don’t know why anyone would be opposed to that.
Peter McCormack: I don’t, but I guess I have a lot of sympathy for the position of people who take a… Even using the term maximalist sometimes, some maximalists don’t like it. But I sympathize with what they’ve been through over the space of 10 years with lots of projects coming in and failures and scams.
I even just tweeted out before the show, before we recorded, just to say that I think despite everything from the hardline Bitcoiners and them going after my sponsors and a whole bunch of other things. Actually, I think they’re still really important because I feel like they keep people in check. So whilst I don’t enjoy it, I wouldn’t want them to not exist. Does that make sense?
Erik Voorhees: Yeah. The tragedy is that a lot of the maximalists are actually very smart and very important people. People who’ve had a huge amount of influence in the crypto industry in general. So the response is not to dismiss them, but it’s really, I think to challenge this notion that that only one Blockchain should exist.
Peter McCormack: There was a time when you may have believed that yourself though?
Erik Voorhees: Absolutely. Yeah. I was absolutely a maximalist. I use that term, I ascribed it to myself, probably up until about late 2013. It largely came from an understanding of monetary history and monetary theory. The idea that money is a means of exchange and a way to measure value. You don’t need a million ways to do that. Any altcoin or other chains to me seemed like a big distraction. Ultimately the world would coalesce around one form of money because that’s the most efficient.
What changed my mind was realizing that first and foremost, decentralization isn’t a thing if there’s only one Blockchain and that’s really I think a critical point. If you’re in favour of decentralization, you should be at least interested in there being more than one Blockchain, I would think. Two is that a lot of the Blockchains are not trying to be the form of money for the world. They’re not all trying to compete with Bitcoin as a form of money in that narrow scope. A lot of them are doing things entirely differently.
So with those two understandings, I think there’s plenty of space for many other types of projects, many other coins and other Blockchains. But still, at the same time, most of those other projects are stupid. Many of them are scams. Most of them aren’t worth paying attention to. But there’s a big difference between saying most of the alternatives are not worth your time and saying that nothing other than Bitcoin should exist.
Peter McCormack: When you felt your own shift, did you feel the wrath? Because obviously, I wasn’t around back then. When you first started expressing that.
Erik Voorhees: No. That’s a good question and I hadn’t really thought about that. When I first started ShapeShift, people were not…
Peter McCormack: Sorry to interrupt. Somebody told me this week, I don’t know if this true or not. Did you start ShapeShift anonymously, to begin with?
Erik Voorhees: Yes. I started under a pseudonym, Beorn. Beorn is a character from Lord of the Rings. It’s a bear/man that shape shifts between the two. The reason for doing that was sort of two-fold. One, I was starting to get fairly well known in crypto and I wanted to just see if I could get a project off the ground without using my name and reputation.
Two, this was right on the heels of all the SEC battles that I had been dealing with and I was just not really interested in being… I was kind of burned about being out front and centre as me and trying to push things that I thought were important forward and getting smacked around by the government for doing that. So I was in a mental state of wanting to be a little more timid there. So for those two reasons, yeah, I started out as just Beorn.
Came to realize it’s really hard to have a business call with people anonymously when you’re well known in the industry because people will start recognizing your voice and just becomes totally impractical if you’re ever going to have human contact! Anything other than texts with other people that you’re working with.
Peter McCormack: What was the process of revealing it was you?
Erik Voorhees: I don’t really remember. I think it was six or nine months that it was under the pseudonym and then at some point I just realized, I’m fine being public about it. It had already started getting some traction, so I could tell that I could get it off the ground without using my name and just more thinking and having the whole SEC battle a little more in the rear view mirror. I don’t remember if we made a big announcement about it or anything, but it just became something that wasn’t hidden anymore.
Peter McCormack: Do you remember the reactions?
Erik Voorhees: I don’t think there was much reaction at the time. So maybe we didn’t make a big fuss about it.
Peter McCormack: Okay. Sorry anyway, I interrupted you!
Erik Voorhees: So you were asking, when I sort of made the switch from being a maximalist to not being a maximalist, did I draw ire back then? Because I certainly draw plenty of it now! The answer I think is no. I think it’s because when ShapeShift got started, Ethereum didn’t exist yet. Bitcoin’s dominance was really unquestionable.
Clearly, Bitcoin was the thing and then out on the periphery were a few little experiments with a few little altcoins. That was sort of the mode into which ShapeShift emerged. Everything changed after Ethereum launched because after Ethereum launched, it was the first time… Ethereum has never been neck and neck competitor with Bitcoin, but it is an extremely credible project and it has become massive in its own right.
It was the rise of Ethereum that caused maximalists to really become highly antagonistic to anyone who was not also a maximalist. So it was post-Ethereum that people started getting angry at me, calling me a traitor to Bitcoin and saying that what I was doing with ShapeShift was, add whatever word you want, scam or a deceptive trick or whatever.
Peter McCormack: Would you agree though in the point that it’s still important to have these hardline Bitcoiners to keep things in check? Because the way I think about it is and what I put in my tweets is, for example, there’s been a few recent discussions around inflation. What’s it going to happen if the fee market doesn’t incentivize miners, does it risk the security of Bitcoin?
Almost every hardline Bitcoiner I’ve seen has said, “no, we can’t this. There is a 21m cap.” I actually agree with that, but at the same time, I think it’s healthy to have the debate and to have the discussion. I don’t see any issue with the discussion. It seems to come from more liberal areas, but it’s almost like the hardline Bitcoiners keep people in check to ensure that any controversial topic really has to be debated and in depth.
Erik Voorhees: I think the difference here is that I agree that it’s good that there are some really hardliners in Bitcoin and I consider myself one of them in lots of ways. But if you’re going to be a hardliner on something, you should be right. If you want to be a hardliner about the limit of Bitcoin being 21 million, that’s a good position because you’re right about that.
If you’re a hardliner that no other Blockchain should exist other than Bitcoin, that’s not valid because that’s not a legitimate position to take. Having those debates about why a 21 million cap is good, but only one Blockchain existing in the world is not. Those are all conversations that they can and should happen. So if you’re going to be a hardliner on something, you better be damn sure that it’s correct. That’s the point.
Peter McCormack: But then what makes you right there? Because some people would say, only one Blockchain is right and you’re wrong. I was with Peter Todd and he said, “yeah, a small amount of inflation isn’t a problem”. So what makes you right? It’s still subjective.
Erik Voorhees: Yeah, but those debates are what should happen and those debates should be among people who all realize that they’re actually on the same team. They’re all here building a crypto industry. If they want to have ferocious debates with each other on these specific points, then great, do it. But to cast out into exile anyone from the conversation who doesn’t believe a certain dogmatism about this maximalist, one chain monolith concept? That I think degrades debate, degrades the approach of truth and is not good for Bitcoin or for the crypto industry more broadly.
Peter McCormack: Another thing that happened over the week is there was very aggressive attitudes towards me. Twice people copied in my sponsor Kraken and said, “why are you sponsoring this joker?” and going after my income and also…
Erik Voorhees: Kraken’s a sponsor and they were questioning about why you have them as a sponsor?
Peter McCormack: Yeah. Which is ironic seeing as Kraken supports multiple coins. But at the same time, the point being that they went after the sponsor, some people were questioning my integrity…
Erik Voorhees: What? Why?
Peter McCormack: Because of the Peter Rizun interview, the point being is that I am giving a platform to a fraud…
Erik Voorhees: To a different point of view.
Peter McCormack: But a fraud, a liar and a proven discredited person. The point being is they went off to my sponsors, they were aggressive towards me, a lot of shaming and at the time I was really angry. But actually then I started to consider and thinking, can you be a hardline maximalist without even without coming aggressive and threatening the income because actually, that’s what keeps me in check. It’s not that somebody has a very firm point. It’s the fact that there’s a real threat to my integrity and my credibility and that’s what makes me consider a lot of my work now.
So I was happy to meet the SpankChain team but I really consider my sponsors carefully now. So I had one approached me recently that I turned down, I won’t name them because I looked at it and I thought, “do you know what, it’s not credible enough”. In any other environment, most people… You know if you are a TV channel, you accept any sponsor if they’re legal and they’re paying money. But whilst this was legal, I did think it would affect my credibility. I think what I’m getting at, is do you think you can be a maximalist without being aggressive and threatening?
Erik Voorhees: I’m sure there are some maximalists that hold the maximalist view but are also civilized in their discourse with others. Those people are definitely out there. The problem is that they’re not the one shouting around on Twitter. So the impression you get of a lot of the maximalists is one of sort of witch hunting after everyone, being very close-minded to anything. Those people get all the airtime because they’re the ones making the big fuss about it.
But that’s why it’s really important to be able to have these conversations, especially on a podcast where people can actually have a debate. So I mean, I’m always sceptical when people say someone shouldn’t be allowed to talk because if someone is a fool or a liar or a con. Giving them an opportunity to talk is also an opportunity for refutation of those points.
Saying that someone should never be allowed to talk, I think is a very lazy way of shutting down discourse and even if sometimes you shut down a discourse of people who shouldn’t be talking, you do more damage than good by having that kind of behaviour.
Peter McCormack: You’ve had it quite a bit as well. It can be quite stressful, right?
Erik Voorhees: You mean the ire and wrath of the maximalists?
Peter McCormack: I mean of anyone at some points when you’re the centre of attention and there’s questions around your credibility and integrity, I found it stressful. I don’t know, how about you? I mean, you’ve had it on far higher levels that I have.
Erik Voorhees: It is stressful and it’s the kind of thing that on the Internet, there’s a lot of things you can’t prove or disprove. So when people start attacking you, there are issues around which can’t be disproven. So you’re faced with an impossible choice. You can try to argue online with people about a topic that cannot be proven and if you start arguing, other people would just be like, “oh, well now there’s this controversy” and you’ll get more attention on the controversy, which isn’t necessarily a good strategy.
Or you can just kind of let it be quiet. Then other people will watch that and be like, “oh, well he didn’t refute that. So it must be true”. So you’re kind of damned if you do and damned if you don’t. But I think anyone who gets to any level of recognition deals with this question. When Bitcoin was small and there were a few thousand people and it was just Bitcoin, it was very easy for everyone in the community to agree with each other.
As it has grown, which is a huge sign of its success and as it has become more dynamic and diverse, it has fragmented. People in these different fragments are not all supportive of each other and some of that’s fine and some of it I think is really toxic.
Peter McCormack: Well, I’m conscious of time and there’s a whole bunch of other things I want to talk to you about. So last time we met I think you had an impending KYC issue?
Erik Voorhees: Yeah.
Peter McCormack: But we couldn’t talk about it at the time. Obviously, you took a lot of criticism at the time and I saw a bunch of people saying that you’ve gone against your original visions Erik, you should close down the business and stick your finger up to the government.
Erik Voorhees: Sold out on all my principles, yeah!
Peter McCormack: So I spoke to a lawyer and he said, “you actually have a fiduciary duty to keep the business going. You can’t just close a business because you have a fiduciary duty”. Is it to your employees and your investors?
Erik Voorhees: That’s probably true. I mean, yeah I certainly have a fiduciary duty whether or not I could close it down sort of unilaterally. That’s an interesting question. But I certainly did a lot of soul searching during that period and came to realize that closing the business down would have been a fun ego trip and I would have won some points among armchair observers who aren’t building things.
But to actually make a lasting influence and to actually have a lasting effect, just shutting things down was not, it did not cause long term value to be built in the industry. I can fight against the things that I care about best when I have a platform on which to do it. Shutting everything down does not accomplish that goal. So I’m trying to play a very long game and sometimes you have to lose a battle in order to keep playing.
Peter McCormack: How much can you now talk about the pressures that came from, which regulators, which government offices came to you and started putting the pressure on you? How much can you tell me about that?
Erik Voorhees: Not much. I hope that I can discuss some more in the future. I can’t talk about much of it now. I’ll say that we basically spent literally millions of dollars and a very long time, many months, navigating every nuance of international KYC regulation. The conclusion we came to was that there is still a lot of grey area in certain ways.
But that the existential risk to the company, to me personally, to others involved in the company was too high to continue on that path. In other words, there were always arguments that could still be used. The likelihood of those succeeding seemed to be too low given the stake of the company, the number of people who were here, the goals that we wanted to accomplish in the future. There was too much being wagered on a battle that we were not certain we could win. So we relented on that point.
Peter McCormack: I’m going to quote from the blog article about this. It’s a very interesting read actually. It reads very much like an Erik Voorhees quote, but “privacy is a foundational element of a civil and just society and it should be defended by all good people”. Can privacy and KYC/AML rules coexist?
Erik Voorhees: No. I mean this is why it’s such a devastating thing for us to do because I personally and us as a company respect the right of individuals to have financial privacy. Forcing KYC on people violates that right. So I don’t support that. The fact that we are doing it isn’t because we support that. It’s because we are essentially being forced to do that and that’s I think what a lot of people are not understanding.
They’re thinking that because we changed the policy, we changed our principles. We didn’t. It is wrong and I believe it is morally wrong to require people to surrender their personal information. I believed that a year ago, five years ago, and I believe it today.
Peter McCormack: Andreas responded to you and he said, “Lightning network, atomic swaps and decentralized exchanges are the only way to resist surveillance economics”. Is that a path you’ve considered going down?
Erik Voorhees: Well, when you say you, do you mean me personally or ShapeShift?
Peter McCormack: ShapeShift.
Erik Voorhees: Any path that a company goes down is not decentralized by definition. Even several of the decentralized exchanges have been imposing KYC as well. It is not as clean cut that a decentralized exchange can avoid these issues and a centralized exchange cannot. There’s a lot of nuance to it and it depends a lot on the structure of the entity, on the risk tolerance of the individuals involved, on the jurisdictions that are being considered, so it’s not an easy question.
But Andreas is someone I obviously respect vastly. I consider him a friend. He is certainly right that a degree of decentralization can avoid some of these things some of the time. That’s one of the reasons that decentralized finances are so exciting as a broad concept.
Peter McCormack: I only have one criticism from the time personally and I’m sure you won’t mind me saying?
Erik Voorhees: Go for it.
Peter McCormack: I found the announcement, that was the only thing, the way it was announced. I felt like you hid it behind member benefits. When I really wanted you to come out and say, as much as you could say, ?but we have to do this. We do not have the choice in doing this. This is how we’re going to implement KYC and why?. It came out as announcing ShapeShift membership. That was my only criticism of it because you just felt like it was hiding it. Does that make sense?
Erik Voorhees: It totally makes sense. It’s a fair criticism. Basically, we had been working on and building a voluntary membership account based system for a while. One that someone could use if they wanted to, but one that isn’t imposed on them if they didn’t. We’d gotten very excited about that and continue to work on that behind the scenes. Overlay that with our realization throughout early and mid-2018 that we’d have to impose KYC and the two things obviously then became related.
So we debated, do we announce one and then the other or do we do it together? What’s the right way to do that? There were pros and cons to all the ways of doing it and I don’t know if there was a right way to do it, but ultimately I think the message did get mixed up. I just don’t know if there was a way to do the message without it being mixed up.
Peter McCormack: What’s the impact been on business? Because you’ve obviously had struggles with a bear market. You announced some layoffs, which by the way, I really enjoyed the article. I’ve had to lay off people at my previous companies. It’s truly terrible. I don’t think anyone can understand what it’s like to stand in front of a room of people and I don’t know what your process was, but…
Erik Voorhees: It was that.
Peter McCormack: Let them know a third of you are going to go. Go through a process. People are upset, people are angry. It is truly terrible and you probably lost a lot of sleep, as I did. But how much of that was the result of lost business due to having to move to KYC? How much of it was down to bear market conditions?
Erik Voorhees: It was a lot of both. So obviously 2018 was a brutal year just by any crypto metric and that’s okay. I mean, it came on the heels of an incredible year in 2017 and it was expected. I expected things to decline by 80 or 90% just from the psychological bubble effect.
So that was certainly a piece of it, but the KYC was a huge piece of it as well and not necessarily for the reason people think. So when we had accounts required in KYC, it wasn’t just the people that arrived at the site, as individual customers, had to decide, am I okay with creating an account or not? Most of our volume came through partners, wallet partners, mobile wallets and other different types of software wallets where they had lots of their users and those users were able to do crypto conversions through our API. That was the majority of our business.
Those wallet partners didn’t want to then require their users to go through KYC. So if you take, 100,000 customers of wallet A, instead of asking how many of those customers are willing to go through the KYC process and continue using ShapeShift, if the wallet decided no, it was 100% loss of that group. So we lost… I mean basically, the entire customer base dropped very close to zero very quickly. We expected that. We thought it would be this huge implosion, just because it’s change and something that was ungated became gated.
A bunch of partners, the business model is changing, so they switched to something else. It was brutal. We lost the vast majority of all our volume and we did that. We went into it knowing that that would likely happen. So we had to make a decision of adding KYC to continue playing a long game in which everyone’s going to hate that decision internally and externally and lose all of our business in the short term, in order to continue playing over the long term. That was pretty brutal and so we continue to try to rebuild and recover from that.
Peter McCormack: I just want to bring up a quote. Sorry, I was looking for my phone. I’ve brought this up in a few interviews recently, it’s from the late Tim May. He said, “I can’t speak for what Satoshi intended, but I don’t think it involved Bitcoin exchanges that have draconian rules about KYC/AML, passports, freezes on accounts and laws about reporting suspicious activity to the local secret police. There is a real possibility that all the noise about governance regulation and Blockchain will effectively create a surveillance state. A dossier society”.
Erik Voorhees: Yeah, fair criticism. The way that I’ve always understood this and let’s use Coinbase is a good example here. There’s a lot of people in Bitcoin that absolutely hate Coinbase and they hate them sometimes for justified reasons and sometimes for unjustified reasons. But Coinbase is essentially like a crypto bank. It looks very much like PayPal and it’s had all the KYC and all that kind of stuff, lots of surveillance over its users since the beginning. It’s very understandable why people would be critical of that.
At the same time, because there are companies like that, with that model, it has allowed, let’s call it the status quo financial industry, the status quo government industry, to accept the rise of crypto. If it was true that no company in crypto had ever added KYC or ever did anything that regulators wanted, the backlash against this movement would have been far more drastic and far more severe.
So there’s a bit of a camel’s nose under the tent phenomenon going on, that I think a lot of people in crypto don’t appreciate, which is that a lot of those who are very early in this have seen that to make this work, it has to be like the frog in the water. You move slowly and I understand if someone with that strategy or it doesn’t fully comprehend that. But I think it’s important.
I think the bridge between the status quo that the normal world is used to and the crazy radical crypto world that we’re all in favour of and move toward. There has to be a transition phase and transition companies and a buffer zone between those two things so that that new alien species can actually survive in the host.
Peter McCormack: I’m conscious of time. There’s two other things I want to talk to you about. The Wall Street Journal Article. Obviously pissed you off a lot.
Erik Voorhees: Yes, it did.
Peter McCormack: Total hit piece!
Erik Voorhees: Yeah, all three of them now.
Peter McCormack: So I went through the Wall Street Journal’s Bitcoin archive and it’s pretty much always hit pieces, clickbait headlines. Can you talk to me about what happened, because you were essentially misled?
Erik Voorhees: Yeah. So basically we had a journalist referred to us by Paul Vigna at the Wall Street Journal, who had done a lot of Bitcoin articles. His own articles had gotten worse and worse, but he basically… I had trusted him. Early last year he put us in touch with one or two of the journalists that ended up writing a hit piece about us. We trusted them implicitly because they came on referral of Paul Vigna.
They told us they were doing a story about crypto companies generally and they wanted to learn more about it. They were going to travel out here to Denver and they wanted to talk to me about the industry. This happens all the time. Nothing about that seemed strange to me. I sat down with the guy for about an hour and a half or two hours. He asked all sorts of questions and then didn’t end up using anything that I conveyed to him. Instead he used this as an opportunity to try to find where our office was, learn about the KYC that we hadn’t done prior and basically get me to say a whole bunch of things, so that he could nitpick the or cherry pick the few items he wanted for his article and take things out of context.
It was brutally disingenuous and not only was his methodology disingenuous, just on how you should act with other people level, their whole methodology and dataset was complete crap. People that read the Wall Street Journal believe that paper because they have a certain reputation. So when they make a bunch of claims, the default of their readership is to believe those claims. However, Blockchains are transparent and immutable and actually, you can do a lot of investigation on other’s investigation.
So we have and I believe today there’ll be an article coming out from a Blockchain forensic company completely discrediting their story. We tried to do it as well, but obviously, people wouldn’t necessarily trust us because we’re the subject of the piece, but these are Blockchains we’re talking about. So all the allegations in that document are being unravelled, so there’ll be an article coming out about that today. I think that people might see by the time this goes live.
Peter McCormack: I got the feeling they’d written their article before they started it.
Erik Voorhees: They definitely had their intention before they started it. Yeah. I mean, the way they described everything was comical. They made sure to announce that we were in an 80’s era office building surrounded by marijuana dispensaries as if that has anything to do with running a crypto business or the reputation. I mean, everything in Denver is an 80’s era office building surrounded by dispensaries.
They were so clearly out to discredit me, to discredit ShapeShifts and to basically use ShapeShift to cast a negative light over the crypto industry broadly. It was really slimy and I’ve been burned a few times by journalists that put on a fake front. This was the worst one and the amount of clean-up and damage control we had to do after that was pretty epic. I mean hundreds of thousands of dollars lost in us trying to deal with lawyers, business relationships and PR firms trying to figure out how to respond correctly to this hit piece.
It’s been rough, but I wouldn’t expect anything else from the Wall Street Journal at this point. I mean, their readership is a banking industry who themselves are not fans of crypto and who love to read any story that disparages the crypto industry or people within it.
Peter McCormack: I’ve always hoped more from Paul Vigna, as a published author in the sector. Not expecting him to be a vocal voice for Bitcoin. But as a journalist to be fair. It appears to me because I’ve been through all his previous articles, I will have to confirm this when I put the interview out, but I’m pretty sure when I looked at it, he repeatedly writes articles attacking Bitcoin. But I found three neutral stories about Ripple, which I found very interesting. He has an opportunity to be a fair voice for Crypto and Bitcoin and appears to only attack.
Erik Voorhees: Yeah, that’s certainly interesting. I mean I would certainly have expected more from him as well. It was really disappointing. I mean the two junior authors that wrote the original hit piece, they’re probably trying to make a name for themselves, so they don’t really care if they put out garbage because they get a bunch of clicks for it. But Paul Vigna should have really known better and frankly he should have apologized for introducing those people to us and he should be conveying to the Wall Street Journal that they should not be putting out crap like that.
Peter McCormack: Yeah, I agree. I think we have a real lack of high-quality journalists within the space. I mean I’ve even struggled with some of Nathaniel Popper’s positions recently. I think I would probably say Laura Shin is probably our best and most fair crypto journalists right now. But I think we have a real lack.
Erik Voorhees: Yeah, it’s kind of a struggle. I mean, part of the issue is that anyone who really starts to learn about crypto falls down the rabbit hole and gets hooked. They then end up leaving the publications that they’re in, the reputable publications and starting their own thing or joining a crypto publication. So then outsiders have a hard time believing those people because they no longer work at Forbes or at the Wall Street Journal. So it’s a funny phenomenon that crypto is pulling so many people in that it’s causing this kind of effect to happen.
Peter McCormack: Okay. So moving on from this, I think it’d be great to find out how ShapeShift is doing now. What is the vision? So you talked about in your article when you had to lay off staff that you lost focus, you’ve obviously closed down Prism now. What is the focus now? What is the direction? What is the mission for ShapeShift?
Erik Voorhees: Great question. Everything we’re doing right now is related to the launch of our new platform, which is in private Beta. Anyone that wants to check it out and go to Beta.shapeshift.com. What we’re trying to build is essentially a complete crypto platform that is noncustodial, that can be in some ways an alternative to all of the things that Coinbase does well, but done in a non-custodial way.
So I don’t want to talk about too many more details before we formally launch and announce it, but it is significantly different than what ShapeShift is today. It still allows what ShapeShift is today in it. But it’s been the focus of the company for the last six months and everything that we’ve been building over the last few years is really pulled together to power this new platform.
Peter McCormack: So is it a decentralized exchange?
Erik Voorhees: It’s not decentralized because we are still a centralized company. But it’s noncustodial and we do not hold customer funds. That’s the key element.
Peter McCormack: So looking on your website beforehand, the three products ShapeShift, Coincap and KeepKey, it seems to me that the focus here is asset analysis, asset custody, but it’s all focused on the asset?
Erik Voorhees: Yeah, we want to be the place where anyone can acquire, trade, send, receive crypto in an easy way that normal people can understand and use without being custodial. No one has ever done that before. So that’s what we’re working on right now.
Peter McCormack: How’s it going with Keep Key?
Erik Voorhees: Keep Key is part of that. So basically all the technologies that we have acquired or built are used in this new platform to build something that couldn’t have been built without these pieces. So apologies that’s a little cryptic! People will understand it better when they see how it works.
Peter McCormack: What’s the date of release? I know it’s always two weeks.
Erik Voorhees: So it’s in private Beta. I think it will come out, probably toward the end of the first half of this year.
Peter McCormack: How are your feelings on the market? You will have experienced bull and bear markets in crypto because you’ve been here pretty much from the start?
Erik Voorhees: Yes, so this is my fourth bear market and I’ve lived through four crypto bubbles at this point.
Peter McCormack: How does it compare and contrast to previous ones?
Erik Voorhees: Each one gets bigger and more intense.
Peter McCormack: Because the numbers are bigger, even though the percentages might be smaller?
Erik Voorhees: The numbers are bigger, the effect is bigger. The first bubble I was in early, mid-2011 was bigger in terms of percentage gain, but the industry was small back then. People talked in terms of hundreds of thousands of dollars, not multi-billion dollars. This is a big industry at this point and so when this whole industry rises by a 100x in 2017 and then collapses back down by 90x or 90%, it has a big effect. I mean, you see it in the media, you see it in how people talk about it.
So each of these bubbles and waves gets bigger and more intense and just crazier! It’s a wild ride to be on for sure. But I think this is the bubble that I’m… Having gone through this bubble, it is the one that I’m least worried will be recovered from. Just because the industry has made so much progress. The technology is getting really good.
There are professional companies in the industry doing good work. There are so many talented engineers flooding into Blockchain and crypto generally and the amount of innovation that’s happening, I can’t keep up with, even though I live in this every day! So, that’s been awesome to see. I don’t know if markets will get crazy again in a month or in two years, but they will get crazy again. So we sit here and we build and we get ready for that.
Peter McCormack: So it feels like you’re a combination of confident and excited?
Erik Voorhees: Yeah, absolutely. I mean, you have to understand the perspective I come from. Back in 2011, we imagined someday maybe in our fantasies that the industry would be what it is today, that every major bank in the world would be talking about it. That it would be agitating governments all over the place. That Bitcoin would be worth, even a hundred dollars and that millions of dollars would be moving around the world, across borders with this technology. These are the dreams that we had and so they are now real.
The likelihood that Bitcoin would be successful back then was so tiny, compared to what it is today. We are not mainstream yet, but we are getting there and most people in the world, most people at least in the Western world, in modern society are familiar with Bitcoin. They’ve heard of it. It’s not the strange alien thing anymore. It’s making huge progress and I am confident and excited in it because it is so much more likely to take over the world today, than it was back when I got started.
Peter McCormack: How important is Bitcoin to you now, compared to other digital assets?
Erik Voorhees: So personally, I probably have 90% of my crypto net worth in Bitcoin. So I always laugh a little bit when people think that I’ve built ShapeShift and I shill shit coins because I profit from the shit coins. I profit when Bitcoin goes up vastly more than anything that could happen, on any altcoin. Just the degree to which I am exposed to Bitcoin is so much stronger. Bitcoin remains my favourite coin.
I think it remains by far the centre of the industry. It is the most conservative and safest cryptocurrency out there and I think it has a huge and massive future in it. At the same time, I think there are a lot of other amazing projects and I think they make Bitcoin better. I think Bitcoin is strengthened by its interaction with these other Blockchains, not harmed. I am so confident in Bitcoin.
I think that is what helps allow me to be interested in other cryptos as well because I don’t have this insecurity that they will replace Bitcoin. Even if they do, that’s fine, the spirit of what Bitcoin is about lives on in any crypto that that dominates and I think there will be a lot of very successful projects, not just one.
Peter McCormack: All right. My final question, Erik, what do you think are the most important things that need to happen, for both the industry on any level, but Bitcoin on a technical level?
Erik Voorhees: What do I think should happen to Bitcoin on a technical level?
Peter McCormack: So for example, is fungibility important to you? Is Lightning important to you? Are both important to you? But also for the industry, are ETFs important to you?
Erik Voorhees: All of those are important in my opinion and that’s why I like to see all the experimentation that’s happening. Bitcoin needs to be very conservative and it can’t try out every new idea and it can’t optimize for every variable. It can’t be, in other words, the most innovative and the most conservative at the same time. Those things operate at… They’re mutually exclusive. So I wouldn’t try to cram every feature, every desirable attribute onto Bitcoin.
The fact that other chains are able to explore some of these things is great. I don’t think that other chains should be dismissed just because they are less decentralized than Bitcoin. I think there should be chains that are more centralized and with higher throughput and there should be chains that are less centralized with less throughput. Having both of those in existence actually makes the whole crypto ecosystem stronger. In both cases, we’re still vastly better off than any bank.
Peter McCormack: Great. Okay. How do people keep an eye on what’s happening with ShapeShift?
Erik Voorhees: I would recommend everyone go to beta.shapeshift.com, sign up there for the new product when it comes out and I think you’ll be pleasantly surprised when you see it!
Peter McCormack: Okay, great. Thank you for having me here. Great to see you again.
Erik Voorhees: Thank you so much!