Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Erik Voorhees: ShapeShift – Decentralizing a Fox

Episode Date: September 14, 2021

Erik Voorhees, CEO & Founder of ShapeShift, joins us for his 4th appearance on the show. ShapeShift recently announced they are decentralizing the company and its products, which would see the company transition from a centralized entity and platform to a DAO. With the largest airdrop in history they distributed FOX tokens to over a million customers and DeFi community members, who will eventually fully control the exchange.In this episode we hear the reasoning behind this shift, cross-chain Interoperability, the FOX token, and the future of the Shapeshift platform as a DAO.Topics covered in this episode:The journey of ShapeShift since Erik's last appearance on the showWhat led ShapeShift to becoming decentralized and the process so farShapeShift as a product - its features and how it will be accessedThe future structure of Shapeshift as a DAOCross-chain Interoperability and the Cosmos ecosystemThe goal of the FOX tokenThe future of the ShapeShift ecosystemEpisode links:Episode 300 - ShapeShift – There’s a New Fox in TownShapeShiftShapeShift to Decentralize Entire Company; Largest Airdrop in HistoryShifts Governance to the CommunityFOX token airdropShapeShift on TwitterErik on TwitterSeb's new podcast – The Zen Crypto ShowSponsors:ParaSwap: ParaSwap aggregates all major DEXs and makes sure you beat the market price at every single swap and with the lowest slippage - paraswap.io/epicenterChorus One: Chorus One runs validators on cutting edge Proof of Stake networks such as Cosmos, Solana, Celo, Polkadot and Oasis. - https://epicenter.rocks/chorusoneThis episode is hosted by Brian Fabian Crain & Sebastien Couture. Show notes and listening options: epicenter.tv/409

Welcome to Epicenter, the podcast where we're to recruit, founders, builders, and thought leaders. I'm Sebastian Quircio, and I'm here with my co-host, Brian Fabian Crane. Today, we're speaking with Eric Voorhees, who's the founder and CEO of ShapeShift. He's been on the podcast. This is his fourth time on the show. But before we talk to Eric, I'd like to tell you about our sponsors for this week. So Paraswop allows you to beat market prices every single block. It's fast, it's highly liquid.

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So you can start participating in networks, contributing to network security and earning rewards by staking with course one. Course one is your staking provider securing billions in assets and over 10,000 customers on 25 networks, including Solana, Cosmos, and Ethereum. If you're interested in running your own branded nodes, they manage white label, node as a service, offering as a service with relying on Courses I's highly available and proving infrastructure that enables you to be. participate directly in decentralized networks. Corus Run also just help launch Lido for Solana. Salana's liquid staking solution that allows you to stake and participate in defy at the same time. So head over to Chorus One and start your staking journey. Eric Voorhees, thanks for joining us today. We were just talking earlier about how long we've all been here in the space. And certainly, you know, we were in touch with Shafshift that

epicenter, like even before ShapeShift was a company, you guys were still stealth. How's it feel to be still here like 10 years later? It feels great, although Fiat is still around. So our mission is not complete. Perhaps it'll take another 10 years and I'm ready for that. But yeah, I mean, it's just exciting to see how far this industry has come. And I look forward to the next 10 years very eagerly. Yeah, I feel like, I feel like millennials are like the boomers of the crypto industry now. Right. Yeah. I mean, anyone, anyone over 30 is like a grandpa. Yeah, exactly. So, so, like, from, from, like, your early ideas of how you wanted this to turn out into, like, how it has actually unfolded, you know, what are maybe some of the biggest, I know, surprises or the biggest thing

you, like, still wish for that haven't happened yet? That hasn't happened yet. I mean, one of the certainly early dreams and predictions of the early bitcoinsers was that people would be using cryptocurrency Bitcoin for payments, right? And this was like what people's attention went to in the first couple of years, trying to get merchants to adopt it and people to accept it. And that's had so little success so far, not zero success, but so little. And I think generally the time when people receive Bitcoin as payment will be sort of the end of the process, not the beginning. So that's something that we all got quite wrong. But so much other interesting stuff beyond payments has happened that it's well worth it. Yeah. That's a, I mean, that's actually a very

interesting observation, right? I mean, obviously right back then it was even Bitcoin, right? The electronic cash and there was so much the focus and it was big pay and all these payment integration. but it's interesting, like, so your point that, like, so you think that will be the, the final stage, or is there something beyond that? I think it's in the, it's in the latter part of all the adoption, right? It's when, it's when, I don't know, maybe a majority of people in the world are comfortable using cryptocurrency. Then I think it starts becoming fairly common to pay with it. But so far, that certainly has not happened. We had you on, I think, on episode 300, which is probably about two, just,

over two years ago. At that point, you had just launched Shapeshift v2. This was around the time that Shapeshift had started doing KYC. What's been the trajectory since then, like, what's been the journey of Shapeshift since the last time we've had you on? Yeah, well, quite a bit. So that was, you know, kind of around our darkest hour when we had just implemented KYC in the platform. And, all of our customers hated it, we hated it, and it was just a, you know, late 2018, most of 2019 was pretty rough. So that story ended, or I would say was resolved in 2021 as we started integrating decentralized exchanges. And by doing that, by integrating decentralized exchanges and simply getting out of the business of trading with customers entirely,

we were able to remove ourselves from the regulated activities. and so no longer is there KYC on ShapeShift and that's been the case since April of this year. Yeah, yeah. I remember you were sort of, this was one of your big selling points right in the beginning, right, like Shapeshift, no KYC. Because probably a lot of people don't remember

like Shapeshift, right? But at one point, the original Shapeshift product was like very widely used in the crypto ecosystem. Yeah. And it was like, yeah, it was nice because you could just send out of a Bitcoin there and you got Ethereum on your other address and you didn't have to create an exchange account. And it was like sort of not quite cross-based, but-

very civilized. Yeah. You just arrive at a website. You say what you want to do and you do it. And that's really all you need. All the nonsense around the regulatory compliance completely destroyed that value proposition. And, you know, we ended up losing 99% of our users to other competitors, of which there were many at the time.

few of whom were as concerned with the regulatory situation as we were by mid-2018. So yeah, that was a difficult time. And the technology of dexes wasn't ready at that time for us to use them. So there were a number of Ethereum-based dexes that were still order books. And they never achieved sufficient liquidity. The UX was never quite good enough. But once the AMM model came out, you know, I think, I think Bancore invented it, but Uniswap certainly popularized it.

That completely changed it. And the first time I used Uniswap, you know, I was like, wow, these guys, these guys brought back the magic of what Shapeshift done a few years ago. How are they doing this? What is this? What is this mechanism? And just realizing how far advanced that had gotten and that we could just integrate that technology into the Shapeshift platform was great, very liberating.

So, I mean, you, you started off as a, as a non-custodial exchange, right, where you could just kind of swap one asset for another. We used to call it the Google Translate of cryptocurrency so you could like basically just kind of switch one for the other, convert one for the other. And then, you know, and then that evolved into more of, more of, I'd say, like, you know, centralized service where there was like this KYC, even though, like, assets were, you know, non-custodied. So you put this whole company and this team around it. You know, what, explain how you reach the decision now to like go in the full other direction and decentralized shape, like how did you first, you know, think of doing this and like, how did you reach that decision? Yeah. So as you mentioned at first, we were a non-custodial exchange where all you could do

was trade one asset for another. And also around 2018. we released the new platform, which was more like a wallet that integrated exchange into it. So it was still non-custodial, and you could use multiple wallets, particularly hardware wallets like ledger or key or treasor. And it would allow you to interact with those assets in a self-custody way through your website and then to do the trades. And the trades were the part that still got stuck in the regulation. And it wasn't until earlier this year, 2021, that we just ripped that entire system out of the platform and hooked up the dexes. First, Ethereum-based dexes and then Thorchain in April. And by that time, we could get out of that business entirely. So since April, ShapeShift does

not do any trades with customers any longer and has no KOC anymore because we're not providing a regulated activity. So a couple months after that, after April, we announced that we are decentralizing the entire company. And that was certainly a process, you know, like, 12, 18 months ago, we were not planning to do that. But as we started realizing the power of these decentralized protocols, as we saw the open immutability of a lot of these defy systems, we realized that that's the coolest stuff going on right now. That's like the ethos of crypto is best captured in the defy projects.

And to the degree that we were a centralized company with jurisdictions and with shareholders and with closed source code and all that, we would be constantly out of alignment with the coolest stuff that was happening in crypto. So we decided to decentralize, dissolve the entire corporate structure down to zero and open source, shape shift, and let it be governed by the community of Fox token holders

instead of governed ultimately by a group of shareholders. So that's what we announced in July, and it'll be a long process. So we're in the middle of that. but the ShapeShift Dow exists today and is starting to thrive. And half of my job right now is just dismantling the ShapeShift Corporation. I mean, it seems like knowing you and your positions on the legal structures that exist and like having to do KYC and all this sort of thing, it seems like you were destined to do something like this. How much of this do you think has to do with just the timing, which,

you founded ShapeShift, like if you had to start over again, you know, would you be building a Dow from the get-go or would you start a company? Like, you know, how do you see this? I think this is a really good indication of how far this technology and industry has gone, because if I went back seven and a half years ago to when Shapeshift was founded, with all the knowledge I have now, there's no way I could do what we're doing now. Like the tools didn't exist. There was no way to do trades across chains. You know, Thor chain was years away. Amm's didn't exist at all. So, and the tooling that we're using as a Dow like snapshot and boardroom and just sort of all the all the social norms that are starting to be built around how DAOs can work, none of that

existed. And so we have been trying to adapt as the industry adapts. And it's, you know, as part of the most inspiring things in crypto is just seeing like how quickly this moves. And systems that other people are building, other entrepreneurs are building is actually helping us and hopefully our software helps other people. That's that's really cool. I don't think banks, you know, have that advantage, right? Like they're all these closed gardens that are, you know, not helping each other, not innovating in any way. And then you get crypto, which is just this open, composable system. And the speed and diversity with which it is innovating is, you know, unreal. So one thing I'm curious about. So obviously exchange is,

is one of the most sensitive things from a like regulatory perspective, right? Where they're very much like, oh, if you're like trading something, right? There's a lot of attention on that. And so, of course, it makes sense. And it's, you know, very regulated, very hard, right? To build a business that's like, you know, either you're fully centralized or, you know, as a centralized company. So I'm curious about, do you think that dolls have gotten like so much better at

in terms of like producing things as a collective that they'll you know outcompete not just in a place like that where regulation ties down centralized company so much but like across the board yeah you know i'm not someone that thinks dows are like a panacea they don't solve every problem and they certainly create a bunch of new ones not every company can or should become a dow and dows are super experimental and new, and there's not any huge success stories of a Dow over enough years to call it conclusive yet. However, beyond just normal financial regulations, the friction that you have inside of a company is everywhere. And it comes a lot from things like, like here's an example, if we need an engineer to help us with something and we find this amazing engineer in another

country as centralized shape shift, we now have to do a legal review of the HR laws in that country. So that's going to take a while. That's going to cost thousands of dollars. Often what happens is that the HR laws in those countries are prohibitive and make it super hard either to hire or to fire someone. And if it's super hard to fire someone, that makes it, you know, less desirable to hire them in the first place because then you can't get out of that situation if it turns bad. So you just get all this friction related to these stupid.

rules when all you want to do is pay someone to work for you and when that person wants to work for you and get paid. And it should really be that simple. That's like the civilized way for humans to interact with each other. Two adults want to do something. One wants money. The other wants a service. Make the transaction. And as long as there's no fraud, the government should stay out of it. And if you're a centralized company, you just can't do that. So as a Dow, if ShapeShift wants to pay any developer in any part of the world, it just does that. you know, that's one little micro example of how a Dow can operate with far less friction than a centralized company. So what's the process of decentralizing a company?

You know, what are the steps involved in breaking apart a corporate structure and building it into a Dow? Yeah, we're trying to figure that out as we go. There's not really any blueprints for this. First, shape shift the company is a Swiss agent. G Corp with several subsidiaries in different jurisdictions. We're not converting that company into a Dow. So that's not really what's happening because that doesn't make sense and there's no mechanism by which you do that.

We're simply dismantling the company and it's going away. There will be no ShapeShift AG Corporation when this process is done. There will be no bank accounts. There will be no employees. There will be no business contracts. Like that entity is unwinding. At the same time, in parallel, we're cultivating a DAO of community members. So this is oriented around the discord, the forum, the snapshot governance mechanisms, and the Fox token.

So those two things are being done in parallel, the dismantling of corporate structure and the creation of the Dow structure. And each, you know, any company that tries to do this, the steps they need to take are going to be a little bit different. But generally, it's those two halves that we're working on right now. One thing, maybe this is jumping ahead, but one thing, like, how do you see ShapeShift as a product evolve in the future? Because, I mean, you see it like Shapeshift.com, right? Where you, I mean, there's like some, like a website. How do you decentralize that? Yeah.

So, Shapeshift, the product is really what matters, right? Like, everything about a company that is important is just about building. a product that customers like using and that improves their lives. So as a Dow, that's what we get to focus now 99% on instead of, you know, 40 or 50%. And the product is kind of simple, but it's quite a big ambition. It's essentially an open source multi-chain self-custody crypto interface that the whole world can use. And that vision, I think, is really important. There doesn't currently exist such a thing. And so that's what we're building. And where that product goes and, you know, that's like, the grand vision, but the specific tactics that are used and the specific things we do,

that all comes from the community where people think it's important to focus and spend money on. Yeah, but I mean, there's still like IP, there's, you know, brand names and things like that, you know, like I'm sure you wouldn't be happy if I started like a competing Dow tomorrow called shape shift, right? Like, you know, there's got to be some sort of structure that, you know, keeps that stuff, right? Fair, yeah. So we are also making a foundation. And this foundation is essentially meant to be like a stopgap interim centralized organization to handle everything that we can't decentralize yet. So a lot of things we know how to decentralize today and are working on it. Some things we think can be decentralized, but we can't get to it yet. And then some things we

don't know how to decentralize. For those latter two categories, by default, they just go to the foundation. So that includes things like the IP for now. That includes the AWS account that's hosting the servers, things like that. But we believe a lot of that stuff. can get decentralized with time. And the foundation's mission is to help facilitate that decentralization and ultimately unwind and dissolve itself as well. So we don't ultimately care much about IP at all. We're not trying to make money from it.

You know, if someone tries to steal the name and mislead people about who is shape shift, I think that's something more easily handled on a social layer. Like you can prove what's what with public private keys situations. And I think anyone who tries to, anyone who tries to do that will run into the network effects of the token itself, right? Like the Fox token has a market cap. It has thousands and thousands of users. You can't just like replicate that, even if you copy our logo. So I think there are market-based mechanisms by which that stuff gets mitigated.

And ultimately, we don't, we don't much care to protect the IP. We're not trying to do that. We're opening our IP. We're opening our code. What if I got the logo under my keyboard here? You'll hear from our lawyers soon. And then this application that I'm using, this is going to be like something I download

and it runs on my desktop computer, or would it also be through like an iOS app store? Centralized ShapeShift right now has a web app and a mobile app. Open source ShapeShift is going to start with a web app and probably will end up with both a desktop app and mobile app. that will be kind of determined by their community. But yeah, all three of those mediums have pluses and minuses. I'm kind of most looking forward to a downloadable one just because the performance is always best.

But yeah, all three will work and we'll use a framework that where the same functionality basically can be replicated in all three. I mean, it's hard to be a Dow and have an Apple developer account, I think. Yeah. I mean, back to that earlier point. We don't know how to solve that question yet. Yeah, yeah. until Apple allows Dows to have Apple develop for accounts.

I think there's going to be always some points of friction. But you're right. I mean, like these things are going to evolve over time. And like if the foundation's goal is just to kind of, like sort of go through that process of decentralizing assets as solutions, uh,

become available, then yeah, yeah, that's probably like a good way to go about it. The foundation will take over the, the Apple account for now. Yeah, I think it makes sense,

right? Especially I think if you have like a desktop version, it's kind of like, definitely seems like managing. right because you could host it on different places too right and it doesn't but i mean i it is a question i've been wondering about in the end like what is an alternative to the google app store and the play store like some kind of crypto friendly open decentralized you know mobile operating system because it feels like it would be so useful yeah i mean and that's certainly out of scope for what we're trying to solve but i think that's a that's a service products that the

the world is going to increasingly demand. We're going to need a crypto phone. Someone needs to build the crypto phone. Yeah, I think part of our thesis here is that a lot of decentralized systems will get better and better. They certainly have been. You know, they've gone from almost zero value 10 years ago to, you know, most of the cutting edge computer science right now is going into these blockchains and all this.

So we just, we see that continuing and we will ride that wave as it, as it built. So what happens to the employees and, I mean, there was like 70 people working at ShapeShift, right? Yeah. Yeah. So by the end of the year, there will be zero employees. And we have basically three waves where all the employees will be gone. The first one happened at the end of August. Second one is at the end of October.

And then the third is at the end of December. And by then, you know, even myself will be fired. And I will not be CEO of Shapeshift anymore. and the employees will then go on to do whatever they want, right? They all have a lot of Fox tokens that unlocked them over the next three years. So they all have a strong economic interest in the success of this continuing. Some of them, you know, want to go find a W-2 paycheck at a normal job, and that's fine. Some of them are super excited about the Dow structure, and, you know, it's like the best thing that sheep's just ever done.

So they're going to be participating in, you know, small and big ways to the Dow. And ultimately they all have freedom now. And they all can be entrepreneurs and they can participate in the DAO in whatever way they wish. And for some people, that's not a good structure. And for other people, they'll thrive in it. Cool. That's amazing. How many of those employees do you think are going to want to follow the, I mean,

do you have an idea of how many of those employees are going to want to follow with the Dow structure? Yeah. I think, I think like at least three-fourths of them really want to. to proceed with the Dow in some way. But it has to make sense, right? And they have to have an important role that the Dow wants to pay for. So there will be some who there just isn't a good role in the Dow situation. And that's just kind of the hard truth of it.

Others will do, you know, like part time or casual work once in a while. Might not be their day job. And others, this is just going to be their full-time focus, just like it was day-to-day at shape shift. I would guess probably like at least a third of the staff will be heavily. heavily involved in decentralized shape shift and maybe more than half. Yeah, and I remember one of the, we did an interview with CZ some years ago. And, you know, he talked about, I think, role there of these Binance angels, you know,

because they had basically also all these people who had a lot of tokens from this token sale on and then had so much money that they just, like, didn't need to earn anymore. And they were sort of like contributing to Binance, right? even without that so I think you know I guess if the tokens as well enough maybe they don't even have to be paid by the dollar yeah there will certainly be some of that I mean that's you know I'm in that category right so like I'm not going to be paid by the Dow I have a lot of Fox tokens and I will be very heavily involved in the Dow contributing in lots of ways both in ideas and in capital but I'm not the chief executive and I won't ultimately make the decisions so I you know I'm I'm looking forward to

that as well. I think it'll let me be a lot more, a lot more flexible. I don't have to answer to anyone. I can just do whatever I want regarding the Tao. And even to me, you know, that's very freeing. So I, I'm more excited about the future of ShapeShift than I've been in a long time. And I hope that as we build out this model of being a Tao, it can help inspire others in the same direction. So how do you like, you know, in reality, how do you expect your day-to-day role to look like, like what are going to be doing after it goes full Dow? What are your plans? So yeah, right now I'm like torn between these two worlds, one where I'm trying to dismantle corporate shape shift and do that responsibly and carefully and the other where I'm trying to

participate in the Dow, but I'm also trying to make sure that I'm not leading it too much because it's important that it starts to self-organize and it's done an amazing job with that already. So I have to walk a careful line there. After December, when I am not CEO of ShapeShift anymore, I will be more involved in the Dow and I'll try to figure out what's needed. I will probably find pet projects which I think the product needs and I will be putting up bounties to work on those. And I will vote on the various proposals that are going through and offering my feedback and guidance to anyone that wants it. So I plan to be an influential member of the community, but hopefully there will be many. Interesting. Well, I imagine that's going to be very liberating, you know,

after the sort of form of responsibility. Or I don't know, maybe just to what extent you will feel that same kind of like, you know, responsibility obligation then to the doll. But at least legally speaking, you don't have it anymore, right? Yeah, I mean, for several years now, I have had to censor myself significantly in what I want to say publicly, what I can say publicly, what I want to advocate for. Part of that comes from just being prudent from a regulatory perspective. But the other part is that I have all these shareholders and all these employees that rely on shape shift being present and successful. And so it's very difficult to know, like, to what degree I want to be to live up to my. ideals and say the things that I want to say, some of which are very controversial and all of which

are very much against the orthodoxy of modern society, you know, versus being responsible for the people that have put their trust in me. And both of those things are really important. They are sometimes conflicting principles. In the Tao structure, I can do whatever I want. And I still need to be a little bit careful, right, because my name and my brand is attached to ShapeShift and it will be for a long time. but shape shift is is bigger than me already and we'll you know i'll be a smaller and smaller part of it okay so the day after the the company is dissolved you have to come back on so you can just like take the gloves off and say what you really want to say it probably won't be that black and eric uncensored move we will move a little bit more in that direction and and then when you

when you think of the future off the doll like what are your sort of hopes for how this ShapeShift dollar phase will play out? Yeah, so when I look at the crypto industry, I see so much fascinating work, so many fascinating products. It's too much to keep up with, and it's overwhelming. And my vision as a product for ShapeShift is that it is the place in which all these projects can be integrated. And so people have one interface in which they can interact with digital assets. It has to be self-custody. It has to integrate with multiple wallets and it has to be cross-chain and it has to be open source and it has to be governed and owned by the community. So all of that now is is possible with

the new ShapeShift. And, you know, if we look forward a few years, my hope is that Shapeshift is serving, you know, 100 million people around the world with an open, immutable, neutral interface in which they can interact with financial assets. That's, that's my dream for it. And I think that's really something that I'm going to be excited to work for, you know, over many years. Yeah, it's just like that that is like a product, right, that, yeah, does feel very needed, right? Because today you're kind of scattered, right? Maybe there's like, you know, MetaMask and Kephyr and then, you know, other wallets or let your life or there's just a lot of different user interfaces for different chains.

But so this would be sort of the one wallet, would it have a particular focus, for example, on trading? Or you think it would be a sink, you know, it would kind of cover like the entire spectrum of what you want the wallet to do? It obviously can't do everything, right? Like it has to focus. But if it's open enough, then people that want to integrate with it can pull it in the directions that they see interesting. And so it will end up resembling what the market really desires over time. And that's the goal there. I mean, the table stakes are, you know, easy wallet functionality, send, receive, trade.

I'd say, you know, lend and stake. You know, like there are a few verticals that are kind of table stakes, I would say, for a good integrated wallet. And then beyond that, you know, there could be all sorts of long tail applications built into the platform. And the teams that build those can just put it into. the open source software themselves. It doesn't have to go through a bottleneck of shape shift engineering any longer.

And yeah. Did you also see a sort of like app store? Sort of. Anyone can build in an app into the shape shift platform. And so we we will see if the market wants, you know, kind of everything available, which would be noisy or just a very curated type of experience. I don't know which direction it should go. The community will take.

it there. Right. But I guess eventually you'd imagine that like, okay, you'd want different people to like use different kind of interfaces, different features, different applications, you know, because there's already so much different stuff that people are doing. Yeah. And I think ultimately people will end up building different skins and interfaces for it, some of which cater to particular segments, right, like an advanced trading interface that gives you a lot of tools meant for that. And another, might be a super simple like you're a brand new crypto nob interface that abstracts most of the complicated stuff away. I don't know which of those directions it should go. And it can go in both now and people can just build onto this thing what they want. It's kind of an experiment in

spontaneous order. And now that it's open and there's an economic incentive of all the people that hold the Fox token, it can go in that direction. So you talked a little bit about cross-chain compatibility earlier. And I wanted to ask you about that. And what are your hopes for ShapeShift to become like a major, well, a way for people to be able to trade access cross-chain? And what are some of the challenges you see there, whether technical or, you know, community type challenges?

Yeah. Cross-chain is really hard because these blockchains are, they're all fussy in their own ways. They have different structures and architecture. And if you focus on one, you can get really good at that, right? And a lot of the biggest and best Ethereum community apps, they just focused on Ethereum. They work really well in that regard and they're awesome. But they only work in Ethereum, right?

And they don't even include like the largest asset in the world, you know, Bitcoin. They don't include some of these other chains that I think are really important. So we have always been multi-chain and that has that has been. hard. It's been really hard and it's made us go more slowly, but I think it's critical. We did not know how to do cross-chain trading without an intermediary before Thorchain. So pre-Thorchain, which launched in April, there was no way to do at-scale native layer one asset trades from like ETH to Bitcoin. You'd have to do it with like wrapping and then going only in the ETH ecosystem. That's okay and that's valuable, but there really needs to be a way to trade.

native assets across chains. And so when Thorchain launched, that was like the last piece of the puzzle. So ShapeShift was the first, you know, known company to integrate Thorchain back in April when it launched. And it's had lots of struggles over the summer. It got hacked like multiple times and shut down again. And so they've been fixing it. I'm still very bullish on it.

And when it comes back, you know, we will absolutely support it again. And it's a critical piece of infrastructure. So I'm glad people are building it. tackling that really hard challenge. Have you heard this, I'm sure you've seen this proposal to integrate osmosis with shape shift. How do you feel about the cosmos ecosystem as a way to facilitate cross-chain transactions? Yeah, so I'm a huge fan of Cosmos. It's been one of the projects, I think, which is underrated and underappreciated, and they've just been shugging away building some of the best technology with a really good community in the ecosystem without nearly as much hype as some of the

other projects. It's a little hard to understand it because you have like the Cosmos hub, which is its own chain. And then you have this universe of other Cosmos SDK slash tendermint chains, all of which builds an application specific blockchain using the using some of the patterns of Cosmos. And they've generally been disconnected from each other. So if you're using one, like you can't it's not cross compatible with the others. IBC inter-blockchained communication solved that earlier this year, but now these different blockchains still have to integrate with each other. So it's a long process of this integration of these disparate chains.

So the cosmos ecosystem from the perspective of interoperability is great, but there's a big asterisk. All of the interoperability between Cosmos chains happens between only the Cosmos SDK chains. There's no operability between native Bitcoin or native Eith and the Cosmos Hub, at least not yet. So I don't know if that can be solved through Cosmos technology or not, but it certainly is solved through Thorchain. And interestingly, Thorchain was built on the Cosmos SDK. So it itself is becoming integrated into these other Cosmos chains. And I see a really interesting kind of, you know, point of like a collection point.

around which all these chains are starting to merge and talk to each other. I think by next year, the interoperability, a lot of these things, is going to be quite advanced and really profound. Yeah, I think there was a fantastic sort of calls on the overview. And I think for me also, like, actually, osmosis has been really amazing as sort of like, okay, here's this use. Because in the end, right, okay, it can't quite do what Thorchain can do at this point, right? because it's, you know, it's realized on IBC doesn't have these kind of bridges yet.

But just in terms of a user, as an IBC user experience, it's like very nice. And you can see that, oh, this works like pretty well, right? So if you compare it with like an Ethereum music experience where you have like Metamask and approve something, it's, it's, you know, it's better. Yeah, osmosis was fantastic. I mean, some of the best UX I've seen in the crypto app. And it was the first time that I had used IBC. So osmosis had integrated three or four other cosmos-based zones, including the cosmos hub itself. So I, you know, went through the motion of depositing some native cosmos atoms into osmosis through IBC.

And it was essentially as easy as depositing crypto into a centralized exchange, roughly about that easy. And if I didn't know what IBC was, I wouldn't have thought anything of it. I wouldn't have realized that these were different chains. that it just moved my atom from one to the other quite seamlessly. But knowing IBC and experiencing that, I was like, yeah, this is a little taste of what's to come. And, you know, as, especially like as the Terra ecosystem starts to integrate through IBC with, with the other Cosmosstones, this stuff's just going to get. It's so exciting. I mean, I can't keep up with all of it.

So for now, at the moment, though, so ShapeShift currently in its Dex form, is going to be primarily, you know, focused on Ethereum assets and Bitcoin through Thorchain? Yeah, so I'll give you a complicated answer because things are complicated right now. Centralized ShapeShift, you know, if you go to Shapeshift.com or use our mobile app right now, all of that is still closed source and all that is centralized. All trading done through those apps are done through Dexes. Shapeshift is not a Dex. We route all trades through other dexes.

So we're using the Masha API for anything ETH and ERC20 related that connects to like 10 different AMMs on Ethereum. And then we're using Thor chain for anything involving, you know, Bitcoin, Lycoin, Bitcoin Cash and the other chains that get added to that finance chain. We also now have the open source shape shift, which has just been opened and isn't hosted yet, but that code is out there. Currently, that's Ethereum only, and it will have Bitcoin integrated into it soon. I expect that within three to six months, that open source version of ShapeShift will outpace the closed version of Shapeshift. And so the chains that are getting integrated into that is really whatever the community wants. And it'll probably follow roughly where the market caps go of these different ecosystems.

So how do you think Shapeshift will compete with other Dexes and AMMs in the ecosystem that already have quite a bit of network effects around. Yeah. So again, we're not an AMM. We're not a Dex and we're not trying to compete with Dex's. We integrate Dex's. And so the more and the more liquid they are, the better for us. Even today, someone gets a much better deal going to ShapeShift than if they went to Uniswop directly because you're getting the exact same rates.

Shapeshift adds no spread and adds no fees of any kind. But ShapeShift gives you some Fox tokens on top of it. So if you're going to do a trade on. on Ethereum through an AMM, unless you're using layer 2s, which we don't support yet, then going through ShapeShift, even if we route your order through UnisWalk, you're going to get a better deal through Shapesh. So, yeah, we're not trying to compete with those more the better. Okay.

So then it'll look more like a decentralized Dex aggregator or AMM aggregator than a Dex itself. Yeah, it's really like a decentralized protocol aggregator, right? So exchange is one function that you can do within ShapeShift. But as we add lending markets and staking markets and all the normal wallet functionality, it's about more than just exchange, but that's certainly a core component. And so you then have this Dow on Ethereum, right, where you have votes. And I guess, you know, that's one thing, right? Like you can use the Fox token, maybe vote on different features to add.

But there's another thing which is, okay, there's like a code base. And is there, you know, how do you deal with that thing and, you know, GitHub maintainers or I guess this radical, though? That would be a better question for our engineers. But yeah, generally the open source project anyone can contribute to, there's a limited number of people that can merge the PRs. That group will grow, you know, as the group that's there now starts to trust more and more people. but those people don't have to ultimately be from ShapeShift the company and they are now building onto open ShapeShift. They're not making pull requests to the closed source shapeshifts.

So the security parameters are a lot different. And we can be a lot more open and experimental. So let's talk about the Fox token a little bit. You've had a token for some time now. What is going to be the goal of the Fox token moving forward? And yeah, how's it being distributed as shape shift moves into a Dow form? Great question. So back in 2017, when everyone in the grandmother was doing a token sale, we were very

conflicted because we saw the power of tokens and how cool they are and like that they were a real innovation and were very important. And at the same time, you get like a million different scams and people selling these tokens and then never building anything. And it was a big, big mess. So we wanted to have a token ever since then, but we wanted to be very careful about how we went about it. And we ended up releasing our token in 2019. ShapeShift has never sold this token.

We just created it and we held on to about 99.9% of it since 2019. We had been giving it out to users for various promotions, you know, like when you're doing trades or if you sign up with us. But the vast majority was just held by us up until this year when we decided, okay, we're now ready to know what we do this token. So this was a critical part of the decentralization. I don't know that a Dow can exist without a token because all the economics and the governance have to accrue to something that is distributed. So for us, that is the Fox token.

And we did the world's largest air drop. We air dropped to about 1.1 million addresses, all the past users of ShapeShift, anyone that had a key key, the entire Thorachian community, and a bunch of people that held tokens in a of the D5 protocols that we had been inspired by, you know, including Uniswap and Gitcoin and a number of others. So we just dished out, it was about a third of all the tokens, 300-something million tokens out to the world. And then we put about a quarter of all the tokens in the treasury. So at that point, more than half of all the tokens became, you know, public. They went out to the public or they went into the treasury controlled by the people that own the tokens. About a third of the tokens

went to all the insiders. So we gave them to employees, we gave them to shareholders. All of those batches unlock over three years. So those people all have an alignment with the long-term success of the project. And then the balance there is going to the foundation. And so the foundation will have some tokens to do with what it wants. Okay. I need to check my keep key then. Yeah. I mean, anyone should check the shapeshift eardrop page because you may have address that you didn't realize are valid. And any address gets at least 200 Fox tokens and sometimes more. So that's 100 bucks right now.

Some people are getting like a few thousand dollars worth of tokens. So yeah, take 30 seconds and check a few addresses. It's always nice. So I'd like to maybe, you know, Brian, unless you have more questions about, you know, ShapeShift and the Fox token, I'd like to maybe take a step back a little bit and talk about the ecosystem and sort of your views about where that's, you know, things are going if that's okay. Yeah, let's do it.

So I've been thinking a lot about this lately and as I've started to become interested in, you know, new layer ones like, you know, obviously like been interested in Cosmos for a while, becoming interested in Solana and things like that. And, you know, there's this old saying in business that, um, there's no such thing as a first mover advantage. And, you know, we've certainly seen this in like, you know, Web 2 companies like MySpace no longer exist anymore and nothing tells us that Facebook will continue to exist in the next five years. And I wonder, you know, with regards to Bitcoin and Ethereum, do you think that they may also suffer from this plagued first mover position and that other blockchains at some point will become much more prevalent in terms of use and, you know, attracting investors and developers and things like that? Yeah, great question.

I don't think it's a binary question of whether first-mover advantage exists or not. I mean, there is a first-mover advantage. It's a question of to what degree it's useful. So Bitcoin had a huge advantage by being first. And similarly, Ethereum had a huge advantage in being the first, you know, EVM smart contract platform. Those give it a great head start. But they're certainly not, they don't make it immune to competition. So ultimately, I see a world with, you know, millions and billions of different assets and maybe several dozen, maybe 100 chains, not thousands of chains, you know, something like 5 to 100 chains.

It seems like where this will end up because these blockchains are complicated engineering machines and they make tradeoffs. And some of these tradeoffs are really good for certain use cases and they make it poor for others. so I don't see a world in which one chain does everything best for everyone. That seems unrealistic. The example between Bitcoin and Ethereum is a good one because Bitcoin now has this slow, conservative culture. Don't change things too much, if at all, don't break things. Maintain fidelity to this one very narrow focus on being money. Good sound money.

And Ethereum is a little more white. wild, right? More innovative, more fast moving, it changes fundamental structures like 1559 that just went live this summer. That's a big change and it just kind of happened. And more will happen. The move to proof of stake is a massive change. And so you get these two systems, one which is slower and conservative and one which is faster and much more willing to try new things. Both of those are really valuable, right? Slow and conservative is very very. valuable for money. Fast and innovative is very valuable for a smart contract platform that's trying to let people build new apps in Defi. So I just, I see value in both of these things. And I know

there will be other chains that make different sets of tradeoffs. You know, certainly Solana is fast as hell. You know, probably the fastest popular chain in existence. That's a, that's a really important attribute, but it is not the only attribute. And they have had to make design tradeoffs to achieve that. So a world with with a number of different chains optimizing for different features, I think that's a healthy world. I think that's part of the decentralization that we should all want. I don't think anyone should desire a world where there's only one blockchain. I mean, that is that is a monolith, that is centralization of a form. So I love the preponderance of this and I just love the like hypercapitalistic open market competition that we're all getting to witness.

Oh, sorry. Okay. Well, I think so one theme a little bit, I would say, in your, you know, in your journey in this crypto land, right, is that you were always very political and, you know, always cared a lot about, you know, ideas around your liberty and freedom and very strong opinions there. And now, you know, crypto is progressing. Of course, the world is also changing in other ways. You know, there's like corona that has had a big impact. and, you know, countries evolving in different ways. How do you see this playing out?

Like, because in some ways, there's some sort of, like, things clashing against each other there. Yeah, well, I got interested in Bitcoin. Yeah. Fundamentally, because I thought it was important for the world to separate money and state. Like, that was the original name of my blog back in the day, money and state. Money is so important and is so critical to people's lives, it is so central to it, to so much that they do, it cannot be controlled by a monopoly coercive provider. That is just not a good way to build a society.

So this has always for me been about building an industry that pulls money and finance out of the control of a monopoly provider and into an open market. That's it. So, yeah, it is political. And that tension you mentioned is going to get crazier and crazier because, because you have these inventions starting with Bitcoin and now this whole world of different blockchains, which are immutable. They can't be turned off. They can't be stopped by any single person or even a group, right? Like they just will. It's like a boulder that's been thrown down

the hill and no one can stop it. And then you have governments and regulators, many of whom exist solely to monitor and control money, which now can't be monitored or controlled in the way that they want. So what happens when you get systems which can't be monitored or controlled, and then regulators which only exist to monitor and control? Both of those things are now running wild in the world and they are clashing in a huge way. And it's going to be very awkward, difficult, problematic, antagonistic for years. Which side wins? Because these are mutually exclusive phenomena, right? A money that can't be governed or people that want to govern money that have all the guns and all the power. Which system wins? My bet is on open, decentralized technology that makes the world wealthier and freer. I think over time that tends to win. And I think coercion and violence and monopoly control tends to lose. But it could get, it could be a very problematic conflict. And we're seeing it all over the place. Yeah, I think awkward accurately describes accurately describes the feeling that I get when when talking with anyone who's involved with regulation.

So, you know, in case you don't know, like I helped co-found the French Crypto Lobbing Association. So we're a member organization and we lobby the government. And we're now like moving into the EU. And, you know, there's this dance that happens in these conversations where, you know, we're sort of like all stepping around the reality that, you know, crypto is here to disrupt what you're doing. And like nobody in crypto wants to say it. And they certainly don't want to admit that it's a threat.

But, you know, I think some of the people that have been reluctant to join as members of this organization are the ones that are on the side going like, screw these guys. We're trying to disrupt them. Like you should be honest and upfront about it. But of course, you know, when you're having political, you know, conversations that were you're trying to get ahead, you can't really do that. But I think that's what I've, this is what I've learned in the last two years is that, like, there's this elephant in a room and the elephant in the room is like, you're going to lose your job.

Yeah, I want to, I want to comment on that. So the purpose of crypto is not to cause regulators to lose their job and is not to disrupt regulators. That's not the reason for being. Well, it's to describe concentration of power. It's to move the concentration of power over money from a closed group out to the periphery of all humanity. It's to move that locus of power out to a decentralized base from a centralized core. That's a very positive message.

I mean, it's essentially the empowerment of all people on Earth. So like how can you be against that? You can be against that if you want the power instead, right? if you want it to be collective and focused in your organization, then of course you're going to be opposed to that. But I do think it's important for people in this industry to try to focus on the positive goals here. And as much as I would love to see every regulator lose their jobs because I have a grudge against them and I see them like, you know, ruining lives all over the place with the best of intentions, that isn't the message really that we should be trying to spread. It should be about open, immutable, fair, transparent, objective. finance and money for all people on earth.

I mean, I think if you kind of compare those two worlds, like the thing that gives me a lot of confidence also that the crypto world is the thing that's going to prevail is just if you look at like the speed at which things change, right? You have like crypto, which is just at an insanely fast rate and it's getting faster and faster and faster and faster. And, you know, there's a lot of, like, fundamental reasons for that. I think decentralization is, like, a huge part of it, right? That, like, you remove so much friction.

And then you have, on the other hand, whatever, a nation state, right, that has to make decisions in this, like, super flawed way and very slow. And, I mean, if you, it's just, you know, absurd, like, you know, whether it's Trump or Biden, the kind of people who end up, like, I also having a real. a role that's basically like impossible to do a good job in. Yeah. From the moment Bitcoin started, regulators and the government has been falling further and further behind for a long time because they ignored it and they laughed at it and

I thought it was stupid. I think that phase is over. They realize that it's real and serious. But for every step they make, crypto takes 10 steps and it takes 10 steps in like five different directions. It's not just that crypto is moving faster. it's that it's becoming more diverse, right? This isn't just Bitcoin anymore about like narrow money.

You have this entire defy world. You have all these NFTs now. You have these distributed consensus mechanisms doing all manner of things. And how in the world does a government keep up with even one of those branches, let alone the whole tree? So, yeah, I don't see how that changes. You know, the most progressive within the government maybe understand Ethereum a little bit. You know, that's like 2016.

level understanding here. And we're five years past that. You know, so try to tell them about like pulling out liquidity pool tokens and staking it in a yield farm. I mean, a year ago, that was kind of foreign to me. And I'm in this stuff 24-7. So, yeah, I love that it can move so quickly. I think that is one of its strongest advantages.

And ultimately, it's doing all this peacefully. It's doing it without coercion. It's doing it without violence. It's just the open market trying to innovate and people can opt in and use it if they want. I think that's a beautiful thing. Yeah, I've certainly lost faith in a lot of our government institutions since dealing with them on an increasing basis. You know, whether elected or not elected, but I guess that's the topic for another episode. You know, before we wrap up here, you know, you've been in this industry for a long time.

You know, you started at Bidinstant and then, you know, you did Sosci Dice and now ShapeShift. And, you know, looking back on this, what are you the most proud of having? accomplished since you've been in the space and, you know, how do you sort of, you know, summarize like what you think your accomplishment and what you've brought to the space has been? Yeah. I mean, one weird answer is that back in 2012, so I got into Bitcoin in 2011, there was a bubble in early 2011 and then it petered out after May of 2011 and Bitcoin started declining down to like $2. And very few people were interested in it and most of the people that were

lost interest and left. And that looked like that was the Beanie Baby's bubble and it was over, right? It looked dead. And so for over a year, it was like in that miserable state. And when I started Satoshi Dice, I certainly didn't think it would be this big and I certainly didn't, I can't take a lot of credit for it because a lot of it was just kind of accidental success. but if you look at the transaction chart of Bitcoin, April of 2012 is when Satoshi Dice launched. And you basically see this flatlining transaction quantity until April of 2012 when it just spikes. And ever after that, it just is going up and up and up and up. And maybe that's a coincidence, maybe.

But I like to think that maybe like Satoshi Dice sparked a realization among people of a way to use blockchains that just compounded itself. And so that's part of, that might be my answer of what I'm most proud of, because if I could do anything in those early days when no one cared about it, like giving it a little kick of life that then caught on and a million other people took it from there, you know, I'd be very proud of that. It's hard to know to what degree it was Satoshi Dice or not. Other than that, I think I have tried to consistently convey the principles on which

this stuff is based. And it's such a noisy industry with so many people chasing a quick buck and so many scammers and just like so much noise and nonsense. It's trying to remind people for a decade that this is about liberty and this is about empowering all people with sovereignty over their own money. I've tried to stick to that principle no matter what. And so hopefully that has been helpful. And I see my role as just helping to cultivate that culture and continuing to speak it. Yeah, no, you have definitely done that. And I think you've also articulated that well. And I think you've definitely been in like an inspiration industry in that way.

Well, I mean, in this next phase of shape, shift, right? Well, DAO means there will be ways, more ways for people to like, you know, get involved and be a part of it and contribute. And what are for people who are interested in that? How should it go about it? And like, what's your, and if you have any kind of advice or message for people? venturing into this world? We are learning DAOs as we go. So I don't want to pretend I'm an expert.

Like I'm a noob to DAWS. But the more I learn about them and the think about their potential consequences, the more enthusiastic I get. They're kind of like taking the principle of decentralization that Bitcoin did for money and applying it on a social level, which is super profound. Anyone that wants to get involved in the ShapeShift Dow, which is already gotten a lot of activity and which has been pretty exciting to see, can go to the sheepshift Discord.

I mean, go to sheepshift.com. There's links to the bottom to our Discord. That's the best place to start. And you can participate at whatever level, including just being a lurker and watching how it's all going. We record all of the Discord meetings that we do on a weekly basis. And so a lot of this stuff will just kind of be public and maybe can be helpful for other DAOs that are trying to get going.

I fundamentally think that DAWS are a like the next chess piece move in terms of regulation. I do not believe that most regulation can apply when it's a Dow structure. And that doesn't mean that all regulation doesn't apply. And it certainly doesn't mean that the regulators can't change things in the future. But for now, I think there is this, this open door of decentralized groups. And I'm going to run through that door and see how many people can go through it as well. So I find it fascinating. And I've been inspired by other people that have taught me how these DAOs work. You know, because on their surface, they seem a little kumbaya. And when you start realizing how they can work and you start seeing the tools that have been built for them, they're getting legitimate and kind of profound.

Yeah. Well, Eric, thanks so much for joining us today. I think that it's really amazing to go through that. It's also so great that we've been able to sort of accompany you through all these different stages. And I'm super excited to see what this next stage of UO's. journey and shape shift journey will be yeah well i i want to thank you guys for being so long a source of signal in all the noise you know this has been one of the podcasts that i listen to regularly and has been so consistent for years uh so thank you guys for the continued work you mentioned like

episode 300 i was on last time so i don't know what episode you guys are at at this point but it's that's impressive 4009 that's yeah that's a lot of a lot of work and a lot of time and And so I just, I appreciate you and anyone in this industry that has helped bringing the signal through the noise. So thank you. Thank you so much, Eric. Thanks for coming on. And I've got a quick little announcement before we wrap up here. So I've been working with the team over at Zengo.

They're a crypto wallet. And they've been on the podcast before. And we've launched a new podcast series together called The Zen Crypto Show. And this podcast isn't meant for any of you who listen to this podcast. podcast because it's because you know all of you are you know crypto nerds and understand crypto very well this is meant for you know your friend who's like texting on WhatsApp and like asking you, you know, what's this crypto thing should be buying into it? It's meant for your mom. It's meant for, you know, like people who are really early into crypto and just want to learn more about it. In fact, you know,

the episodes are very short. They're 10 minutes long and each episode covers, you know, one topic. So like we did one episode explaining Bitcoin and before we released this episode like it was vetted by my mom. So like, you know, if she was able to understand it, then anybody can. So we've got episodes about Ethereum, basic concepts, like what is money? What is, what are NFTs? You know, what are cryptocurrencies and sort of bite-sized content? So if there's anybody in your life who, you know, wants to learn about crypto, the Zen Crypto show is probably one of the best podcasts, I think, to get started. So you can find it on Apple, Podcasts, Spotify, and anywhere else. And you look for Zen Go or? Zen Crypto show. The Zen Crypto Show. And it's a

And that's one word or several? Several words, yeah. The Zen Crypto Show. Okay, okay. So I hope you guys will like it. I had an electrician at my house yesterday asking about Bitcoin and total noob. So that's probably exactly the kind of person I should send this to. Yeah, yeah, next time you can tell them Zen Crypto Show.

This is who it's for, man. That's the answer. Cool, awesome. Yeah, that sounds like a great, great thing. All right. then thanks so much everyone. Thanks guys. Thank you for joining us on this week's episode.

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