Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Erik Voorhees: ShapeShift – There's a New Fox in Town

Episode Date: August 13, 2019

We’re joined by Erik Voorhees, Founder & CEO of Shapeshift. His third appearance on the podcast is timed nicely as July marked ShapeShift’s fifth anniversary. From its early days as the “Google Translate for cryptocurrencies”, it has grown into an organization of 75 people, and Erik talks about the learning curves he has endured on his journey. Our conversation also coincides with the launch of ShapeShift’s brand new V2 platform, which includes a self-custodial asset management dashboard, hardware wallet support, and many other new features. One notable change is that ShapeShift now requires users to create an account and perform KYC, something which very much pains Erik. We also discuss Bitcoin, Libra, and the future of money, topics which are always fascinating to approach from Erik’s Libertarian viewpoint. Topics covered in this episode: ShapeShift celebrating its 5th anniversary the lessons learned since launch What is ShapeShift 2.0 and the problems addressed by this product ShapeShift's new features and what people can expect to come in the future Why users now have to register and perform KYC What is the FOX token and what is it's utility ShapeShift's business model and target segment Why the company chose to shut down Prism Erik's views on the Bitcoin and Ethereum ecosystems today Speculations about Libra and the future of money Episode links: ShapeShift ShapeShift on GitHub Building a Bridge to Financial Sovereignty (ShapeShift 2.0 announcement) Erik's tweetstorm on Libra KeepKey Release Notes ShapeShift Twitter Erik Voorhees Twitter Sponsors: Trail of Bits: Trust the team at the forefront of blockchain security research - https://trailofbits.com Azure: Deploy enterprise-ready consortium blockchain networks that scale in just a few clicks - http://aka.ms/epicenter StarkWare Sessions: September 16th in Tel Aviv – 20% off with the code EPICENTER - https://epicenter.rocks/starkware This episode is hosted by Sebastien Couture & Friederike Ernst. Show notes and listening options: epicenter.tv/300

This is Epicenter, Episode 300 with guest Eric Voorhees. This episode of Epicenter is brought to you by Trail of Bits. Don't leave your project's security audience to just any firm. Trust a team with decades of experience at the forefront of blockchain security research. Go to trailofbits.com to learn more. And by Microsoft Azure. Do you have an idea for a blockchain app but are worried about the time and cost it will take to develop? The new Azure blockchain dev kit is a free download that brings together the tools you need to get your first app running in less than 30 minutes.

Learn more at aka.m.m.s. And by Starkware sessions happening in Tel Aviv on September 16. Broaden your knowledge of zero knowledge proofs with highly technical sessions from some of the industry's leading experts. Register at epicenter.rocks slash Starkware and receive 20% off the regular ticket price with the code epicenter. Hi, welcome to Epicenter. My name is Sibbisank Wuchio. Today is episode 300, and one can attach whatever significance they like to an episode with a few zeros on it. But if anything, I think we can use these milestones to stop and take a step back and look at our trajectory through a more mindful lens.

It's astonishing that we've been doing Epicenter for five and a half years now. It started as an experiment in late 2013, early 2014. And I don't think that neither of us, Brian or I, thought that it would become one of the most recognized and certainly one of the longest running podcasts in this space. We've recorded 300 episodes with guests who come on the show to share their stories, their ideas, and their vision for where the space is going. and through that we've just learned so much and our audience also has learned so much with us. It's been really a journey with the audience, also learning as the space is evolving,

and that's been just incredible. I want to take a minute to acknowledge our team and the incredible talent that makes Epicenter possible. Mayher, Sunny, and Frederica, they have a passion for learning and a desire to spread knowledge with the community. And these are really some of the founding principles that Brian and I found at the show on in 2014. I mean, we started the show because we wanted to learn about the space,

and we thought that sharing that knowledge with the space was a great way to learn. And Mayor Sonny and Fredeka, they share this vision. There's also a production team, which we rarely get a chance to mention on the show. But they also play a huge role in making the show possible and putting out the episodes every week. So Vedron, our audio engineer, who's been with us since the very beginning. Shinage, our cover designer, he makes those great low-poly images that a lot of you praise us for. Pida, our production manager, who makes sure that everything's running smoothly from scheduling all the way to putting out the episodes every week. Anna, our accountant, who makes sure that all our books are in order and the company is running smoothly.

and AMP, our marketing intern who is on social media, sharing the episodes every week and creating content on Medium. The podcast wouldn't really not be what it is today without them and without their dedication. It's incredible that tens of thousands of you listen to the show every week, and many of you have been for several years. Just last week, I was in Berlin, and as always, when I'm hanging out at full note, I met some new listeners. I met one guy who told me that we were a major part of his early education when he first started getting interested in blockchain. And we hear these stories all the time from people. Whenever we're in a place where there's a concentration of blockchain people,

we meet listeners and we hear their stories. And it's just so incredibly gratifying because we never set out to really make a change in people's lives, but it's sort of a secondary effect that we really didn't anticipate. So we meet people who tell us that they found their first job because of what they learned on Epicenter or through the connections they made from listening to Epicenter. Brian was telling you the guy he met recently who told them that he made a lot of money from the investments that he made from listening to Epicenter. So that's always great to hear. Every time I meet a listener internally, I kind of bow with humility from hearing their stories. So thank you for listening.

Thank you for being with us and for continuing to be with us throughout the years. I've learned so much from doing this podcast. I've met so many incredible people, traveled all around the world. And I think it's a trip, man, that my job is to run a podcast company with amazing co-hosts, with an amazing team in a fascinating industry. And we're going to keep doing it. As long as there's a blockchain space and as long as we're interested in it, And as long as there's a good business model to run around it, we'll keep doing the podcast.

So we hope to see you here for episode 400, 500, 600, and so on. On the heels of that, I've got an announcement about an important change that's coming to Epicenter. Starting today, Epicenter will continue as an audio-only podcast. And the video version that we've been putting out to YouTube for the last several years will cease to exist. We'll still post episodes to YouTube, so you can continue to listen to the episodes there, only you won't see our faces anymore. This is a decision that we've taken a lot of time and care to consider, and I want to share some of the reasons why we decide to do this. The main reason we're doing this is to remove a lot of the overhead that producing video puts on the production process. It might not seem like a lot when you're watching the show, but producing video is time and

and resource intensive. It puts a strain on scheduling, primarily because it imposes our hosts and our guests to use certain types of equipment, to record the show from a setting that is appropriate for video recording, to have proper lighting, etc. There's also the production overhead and time required to create those videos and push them to YouTube. And finally, producing video ads is incredibly time-consuming. So when we looked at all that and then dug deeper into the actual analytics on YouTube

and compared those to the engagement rates that we see with audio, we thought that it didn't make sense to continue. So I really hope that for the few of you who really watch the show on YouTube and expect the video on YouTube,

that you'll continue to follow the podcast. As I said, we'll continue to post the audio to YouTube. You just won't see your faces anymore. And you can also follow us on all the other great platforms where you publish, whether it's iTunes, Spotify, Stitcher, or any other podcast app, you can find us there, and we hope you'll continue to follow the podcast.

If you want to learn more about this and the reasons behind this change, I put a post up on Medium.medium.com slash Epicenter Podcast. You can go there and read more about this change and why are we doing this. Our last announcement before today's guest, DAPCon is coming next week. It is on August 21st and 23rd at the Technical University. in Berlin. You can still get tickets and get 20% off with the discount code, Epicenter.com 2019 at dotcon.io. On the 22nd at 10am in the main chain, the main room, we'll be recording the second edition of Epicenter Live, Sunny, Frederica, and myself.

I'll be moderating a panel on user experience in UX on the 21st. I know Sunny is also moderating a panel on governance and Frederica is also on a panel. You can get more details at DAPCon.io. And actually, I just found out about this. There's actually a DAPCon podcast. So you can go to DapCon.io slash podcast to hear those episodes. And then on the Thursday 22nd, we'll be doing a drinks meetup at a bar next to the university. You can go to epicenter.com slash Berlin meetup to register and get more information as it comes out. So come have a drink with us. It would be fun. Our guest today is Eric Voorhees. Many of you recognize Eric as the founder and CEO of ShapeShift, and we had Eric on the podcast a number of times

in the past. Credaic and I interviewed Eric, and we spoke about a number of things. Our main focus for this discussion was Shapeshift's brand new product release, which some are calling Shapeshift 2.0. It includes a number of interesting new features, including a portfolio management platform that allows you to manage all your assets in one place. They also have hardware with wallet support and are built on an entirely new infrastructure. One important distinction with this new product is the fact that users are now obligated to create an account and perform KYC. If you've been following Shapeshire for a while, you know that its hallmark has always

been its simplicity, the ability to send tokens to an address and receive an exchange for other tokens on another address without having to create an account. Well, this has changed recently, and we talked to Eric about this change and why they decided to start doing KYC. As always, it's great to get people like Eric to open up about where they think the ecosystem is heading. And so we talked about whether or not he thinks Bitcoin is still fulfilling its initial vision. We talked about Ethereum as well. And we also got into the future of money a little bit. And one can't bring up the topic these days without mentioning Libra. And so we talked about Libra and got his thoughts on where he thinks that currency could take us and what it represents

for the future of money. We did disagree a little bit on that topic where Eric's very U.S. libertarian views did clash with my somewhat more European liberal views, but it was all in good fun and it's always great to get Eric's insights from that perspective. So without further delay, here is our interview with Eric Voorhees. Hi, so we're here with Eric Voorhees. Eric is the CEO of ShapeShift, and a third time coming to the podcast has been on,

I was just checking before the show, and actually it's been two years. The last time was in July of 2017. So hi, Eric, thanks for coming back on the show. Yeah, thanks for having me on. And so we're going to talk about a lot of stuff today, including Shapeshift's brand new platform, but also, as always, I think it's interesting to get your thoughts

and sort of your views on where the ecosystem is at the moment. moment and how things are progressing since you've been in this in this space for quite a while. And so I'd love to get your thoughts on that stuff as well. Yeah. First, let's let's talk about Shapesh. So you guys celebrate your fifth anniversary this month. Congratulations. Yeah, yesterday.

Yesterday. Okay. So as we're recording this, ShapeShift is just over five years old. Let's talk a little bit about the journey. How did you get here? And how do you feel about the last five years generally? Yeah. Well, when we started, I didn't set about to create a company that would have 75 employees and be doing something important five years later.

It was just really a simple tool that I felt needed to be built. And so, you know, in the same way that Satoshi Dice back in the day got started as a side project, shape shift started as a side project, something that just seemed useful and interesting to build. And so we built it. And then, yeah, it was July 29th of 2014 that the first transaction occurred. And ever since then, it's just been growing organically. And we've gone through all ups and downs of multiple crypto cycles and through many different products. And, you know, we've now attached ourselves to the crazy rocket ship of the crypto industry. And somewhere along the way, it became a real business.

And so now I run every day as my job. And looking back, what is it that has surprised you the most about how the company has evolved or how the product has evolved since that first transaction on July 29th? I think what was the big eye-opening thing for me was really that once you get past 10 or 15 or 20 employees, the company is really about building an organization of people. and I kind of naively thought of it as product first. Like I see products, I build products, I like products. But to do that at scale requires the actual building of an organization of people, not a product built on technology. And so that transition, I think for me, was very difficult,

and one that I've been learning and trying to grow into. And I've never done this before at this scale. And so just a lot of stressful learning of how to do these kind of things. And we have all the chaos of the crypto industry and also all the chaos of a normal startup kind of tied into one beast. So it's been extremely fulfilling, but a huge challenge. Any interesting anecdotes to share here about this journey of learning lessons? Yeah.

Like when you start a new project, you surround yourself with people who are your friends or who are people that you know and you can sort of implicitly trust them because you know them well. And then as you grow, you have this sense that like the people around you are always going to be trustworthy and good. And they're not. You get to a certain size and you will inevitably bring into your organization people that are not good. And this, you know, this can range from just someone who's incompetent to someone who is, who is a thief, which we dealt with that, you know, in 2016 when we had our internal guy steal a bunch of money from us. And that, you know, that's been a challenge to realize that a lot of people, it sucks to have to put your guard up like that.

But after you get to a certain point in a business, it happens kind of naturally. I understand. You just launched Shapeshift 2.0. What is it? And what excites you most about this release? I've kind of avoided calling it Shapeshift 2.0 because that's so cliche. But really, that is a good description of it. It is a brand new version of our product.

And the good way to describe it is that the shape shift 1.0 was a tool to convert one cryptocurrency into another and to make that fast and easy for people and to do so in a non-custodial way. The new shape shift allows that same thing. So people can still use the new shape shift to convert one crypto into another. But it also brings that kind of self-custody principle to the rest of someone's crypto management. So it is a wallet. It is a fiat on and off ramp. You can buy and sell Bitcoin from your bank.

You can store all your various cryptos safely. It integrates with hardware wallets, so you can keep them safely stored offline, but still use a normal web browser to interact with your portfolio. And so basically it's meant to be a self-custody alternative to something like Coinbase, a really simple and good U.X that normal people can use to interact with crypto technologies, but done without us having control of users' keys. So that's kind of the theme that I've always wanted this company to build on was one in which people are sovereign over their own wealth.

And I think if the crypto revolution happens and it just ends up with a bunch of custodians, new custodians, the coinbases instead of PayPal's and banks before it, then not really much has changed at all. And so we're trying to take a more difficult to present, but one that I think is more valuable over the long term, which is to build a highly performance great UX crypto platform in a way that people maintain control of their keys. So that's the idea.

So we'll talk about the features of this new shape shift. Let's not call it shape, which is one of those just call it the new shape shift, I guess. You know, one of the things I think that people will notice and have been noticing for sometimes because this has been the case for, as far as I know, at least a year, I think, is that in the beginning, you would go to ShapeShift, you would put an address and you would send money to the address that was provided by Shepshift. And that was it. In a few minutes, you had your current, you know, the currency was exchanged. Now you have to register and you have to do KYC. In fact, I registered for the new ShapeShift today and did the KYC. And the process is great.

And it's like really easy. It took five minutes. And I was approved in like no time. talk about this shift from a service which when ShapeShift used to be a sponsor of the show we used to say it was as easy as putting on your slippers

and now you need to tie the shoes as well which is a little bit harder why did you go from a product where you didn't have to register to a product where we have to register and do KYC and all this yeah it's a great question

it's obviously not because we wanted to so let's start by saying that ShapeShift was built really to protect customers and in the beginning that meant to me two really important tenants. One was not having any custody at all and allowing the user to hold their own keys. And the second was not having personal information

of the user and allowing people to keep that to themselves. I don't want to know who someone is. I don't need to know who someone is in order to process a transaction for them. And they don't want me to have that information either. So that should be the end of it. And when you take people's information, you are inevitably endangering them because now you're warehousing information that can be hacked and lost. And companies large and small, governments large and small, have problems with these kind of hacks where, you know, millions of records get lost and stolen.

It's a huge problem. And so I never wanted to deal with that. And when we started ShapeShift, it was comfortably enough in the gray area that it wasn't clear whether certain financial regulators would require us to do that. there were arguments sort of on all sides of that question and we we just figured we would continue forward and keep analyzing it as we grew. And basically, you know, in the 2017 bubble, shape shift grew massively and we, you know, we got to the size where we decided to invest, you know, literally millions of dollars in further legal work to analyze every contour of these complicated financial regulations.

And basically from that, what came out of it was that we felt it was too risky to continue that model without taking KOC from users. This was really like the most existential struggle I've ever dealt with in my life. It was probably six months of agony and stress trying to figure out what were the rules exactly, what were the risks, how were they different in various places? If we needed to collect information, what would it need to be? and among all users are just certain ones, and every aspect of this question we examined,

and ultimately came to the decision that we had to collect KYC information on all users that were trading one crypto for another. This was dismal news for me, a dismal realization and conclusion to come to, because we knew that it would be bad for our customers. We knew it would be bad for us as a business, but we felt that we had to do it

so that we wouldn't get thrown in a cage and the whole company shut down, and that wouldn't be good for customers. customers or employees or anyone, and then the story would be over. So that was kind of the existential problem we faced, and it was rough. Ultimately, I decided we should play the long game, and if I'm going to fight for financial privacy, I need to be able to do it from a company that is big and powerful and strong and has that voice, rather than trying to do it, you know, shut down and thrown in a cage somewhere. Whether that strategy is the right one or not, we will see, you know,

check back in with us in five years or ten years, see what we're doing and see what we're advocating. But that principle of encouraging and enabling people to be private in their finances, I think is an important one. And the fact that we can't allow that on our platform anymore is really unfortunate. And we understand why customers don't like that. We don't like it either. For now, we have to do it. So can you look beyond the regulation that you're complying with? Do you see any good in doing KYC or is it to you just, is it literally just a nuisance? It's not a nuisance. It's worse than a nuisance. I think it's unethical. I think it's unethical to force people to give up their personal information when they don't want to.

So I have a moral problem with it. And does good come of it? Maybe. I mean, yeah, once in a while by companies spying on everyone, they can sometimes catch a bad guy a little more easily. But to do at you basically endanger, you know, all the innocent people. And you can go down a very Orwellian road of trying to catch bad guys and always then interfering and impeding on the freedoms of good people. This is kind of the lesson of tyranny broadly in history. So I don't support that. I think most people are good. I think people have a default right to privacy and I think they should be left alone. If there is suspicion of a crime, then trying to get information about that person, is one thing, but forcing you to get information about those people when there's not even

suspicion of a crime, I think is highly unethical. Yeah, this is a position that I wholeheartedly agree with and have been, I become more and more aware of, obviously, like since being in the crypto space. And I finally highly, highly frustrating as well that, you know, it seems to be that in society is moving in this direction more generally. I mean, we had Jerry Brito on a few weeks ago, who wrote this paper defending, defending cash and the need for cash. Great piece. And they're doing great work in this field.

And, you know, his position is trying to educate lawmakers and law enforcement officers who, you know, he feels are mostly patriots and would defend the right to privacy and sort of freedom, I guess, sort of in the American context, it makes a lot of sense. But also, you know, outside the American context, we're recording this from Germany at the moment. where most places, at least here in Berlin, you can only pay in cash. But I think that even though there's this nice idea that people should be free and have right the privacy, that is not the direction in which the world is going. Definitely not. We look at international regulation, financial regulation is not going in this direction. Payment systems are not going into this

direction. Do you feel that the future is a little bleak? Are you lost hope? for a future in which people continue to have some form of financial financial freedom and more specifically privacy in their transactions? Yeah, I think the world without cryptocurrencies would be very bleak and getting worse and worse. I mean, certainly all governments around the world are unanimously in favor of greater surveillance and control of their people. That's kind of a truism. And in a world where all money is controlled by central banks and the banking system, which extends from it, really the world's financial system is simply a branch or a tentacle of the government itself. And I think that's pretty frightening and dystopian and getting worse.

And then along comes this crazy crypto phenomenon, which does two things. One, it provides technology that allows privacy. So there are certain cryptos that are encrypted. and even something like Bitcoin, while it's not perfectly private, brings privacy in ways that credit cards certainly do not have. But more than that, it also provides complete sovereignty over your assets, meaning control over them. So when you can self-custody your own assets, you are not dependent on anyone else to be able to send or receive that. And regardless of whether you can do that privately, those are kind of separate questions, but you always have the power to

send Bitcoin, you always have the power to receive Bitcoin. And that's incredibly inspiring and hopeful. So I think the future of humanity is a good one. But as the world struggles with this question of moving from a fiat and bank-based financial system to a blockchain and crypto-based financial system, which I think is inevitable, there's going to be a lot of struggle along the way because that really changes how the world works. And a lot of people are not going to be very happy about that. So there's an easy way to go about this in terms of shapeshift. I mean, easy in a theoretical sense, not in a practical sense.

So shapeshift is halfway decentralized in the way that the settlement layer is decentralized, but the architecture on top isn't. How was this design decision made? Do you think if you had gone all the way towards decentralization, even for the architecture on top, you could have foregone the KYC that you find, so repugnant? Yeah, great question. Yeah, so decentralization exists on a gradient.

It's not a binary thing where you're either decentralized or not. There are degrees of decentralization. Shapeshift is more decentralized than something like Coinbase, but it's less decentralized than a true Dex, obviously. And even among dexes, you have degrees of decentralization. So, yeah, in the theoretically most decentralized design of a Dex, where the individual contributors themselves are decentralized, there's no corporate entity,

there's no central party whatsoever, yeah, I mean, that software doesn't comply with anything because it can't. So that's cool. And I'm very glad that there are projects like that out there that are working toward that end. And then on the full opposite side of the spectrum

are centralized companies that, especially once they grow past a certain scale, have to be very careful about complying with laws because ultimately they can get shut down and thrown in cages. And there exists kind of middle ground between those things where it's a question of how much risk people want to take. Over the last year, we saw one or two or three dexes implement KYC and accounts on themselves, which people didn't think would happen because the graders of the dexes were known.

Some of them are actual corporate entities themselves. So even though the technology and the exchange was decentralized, it was operated by a central company. So these are all questions that I think every entity in the crypto ecosystem struggles with. And frankly, I'm just glad that there are different models for people to try. That's one of the strengths of the crypto industry is that people can try every model from the Coinbase model all the way to the most decentralized thing, like a Bitcoin itself and everything in between. And that's what makes this so strong is that there's no single model, no single weakness because it's diverse.

Let's talk about security. You know, DAPs are pretty unique because unlike other types of software, they can hold astronomical amounts of value. That's why getting systems audited, creating robust security processes, and fostering a culture of security in your organization is so important. And to do this, you should only trust experts with real security expertise. There are a lot of security firms in the blockchain space, but few have the experience and track record of Trale of Bits. And they've been in business since 2012, long before things like the Dow Hack were even imaginable. Trail of Bits works with your team to audit every aspect of your project. And smart contract code is just the beginning.

They'll help you implement best practices around things like DevOps, key storage, and user-facing applications. And once your software has been rigorously tested and reviewed by Trail of Bits, they'll provide the tools you need to make sure that your code remains safe over every new command. They can even put a software security expert at your team's disposal who'll give you advice and answer your questions when you need them. It's like having your own security engineer on staff, but don't take my word for it. Go to their publications repo on GitHub to read their papers, presentations, and security reviews. It's no wonder teams like parody, status, new cipher, and organizations like Facebook and DARPA trust Trail of Bits for their security audits. To learn more, go to trailfbits.com, and if you decide to reach out, make sure you let them know

you heard about them on epicenter. We'd like to thank Trillopits for their support. Do you have plans in the future to further decentralize the underlying layers in the stack? I mean, one thing that I think is an interesting thought experiment is to say that ShapeShift would integrate with something like Uniswob or compound or some of these decentralized liquidity pools that are fairly, fairly easy to, I suppose, I mean, from a technical perspective, fairly easy to integrate with. Is this something that you feel will be valuable to your users or could be offered as a secondary product where maybe KYC would be not as relevant or useful?

Yeah, it's certainly something that we're considering. In the new ShapeShift platform, KOC is actually not required for everything. You can use it without KYC, but to trade through our market making, you need a KYC to count. We need to do some further legal. review on if and to what extent allowing users to directly interact with Dex's through the platform would have KYC requirements. That is unclear at this point. It might be a question of risk tolerance. So yeah, it's absolutely worth considering. It's going to be a constant struggle for the coming years. And it's going to be hard for any company to allow people to be totally anonymous. And so you're going to get this trade-off between companies that can build

software that's very useful and easy and convenient and can help grow and bring more people into the industry, but that may not themselves be able to be the ones who advance privacy. That might need to be done more on the protocol level. Okay. So let's talk about the product a little bit because we haven't really touched on that so far. Can you talk about what's new in this new version of Ship-Shift and what people can expect when they've created the account and pass this KYC? Yeah. So again, you don't need to do that in order to use it. You only need to use do KYC if you want to be trading. Obviously, a lot of people want to trade, so they need to do the KYC then. But a good way to think about it for people who haven't tried it before is right now it supports two

different key storage mechanisms, either a KeepKee or a Treasor. Later on, we'll add others like Ledger. We'll add a software-only version. We'll add a mobile version. So we'll keep adding more ways for users to hold their own keys. But we wanted to start with hardware, both because that's the best practice, I think, for people who want to get something that's very easy to use and also very safe. And also, it just seemed like a more stable foundation for us to build the first version of this platform. So right now, if you have a keep key or a treasurer, you can use the ShapeShift platform.

And it basically becomes a much better interface for your hardware wallet holding. So you can see your entire portfolio together. You can watch the real-time data of the various coins. You can send and receive the various cryptos. You can trade them, any crypto for any other crypto directly. So thousands of pairs in that sense. You can buy and sell Bitcoin with fiat if you're in the US right now from a bank account. And we'll add options for Europeans and other regions later on.

So really, you know, kind of think about what a coinbase does. trying to be a one-stop shop for all basic crypto, but to do it in a way that allows you to retain custody over your assets. That was really the key for us. And then one important distinction is that there are a lot of wallets out there that are multi-asset, but generally they are like only Ethereum and Ethereum tokens. So there are tons of those kind of wallets. The crypto platform works across most of the major blockchains

and will continue adding more into the future. So that's kind of the current version, V1 of this platform. And then over time, we'll add new coins. We'll add things like staking, obviously. We'll add different key storage mechanisms. We'll add other ways to interact with the decentralized financial systems, lending markets and money markets as those develop.

And so really this is meant to be like a B to C way for people to interact with the crypto world and to store their assets safely and retain self-custody over them. There's also a token, the Fox token. What is that used for? Yes, so this has been like a two-year project at this point, and we've had to be extremely careful about the Fox token for all the obvious regulatory reasons. So we've been taking baby steps with that, but we continue to move it forward. Right now that token exists. It's an actual ERC20 token, but it's not released yet and it's not integrated into the platform yet.

That will happen later this year. And basically what the Fox token does is anyone who holds them will get best. rates on the trades that they have. So you can think of it sort of like a loyalty program or a reward system where simply by possessing those tokens, you get better and better rates on the trades. That'll kind of be the V1 of the Fox token. And people can earn that token on the trades they're doing. And then basically it's just a good way if you're actually doing trades to get better

and better rates by holding that token. You don't have to burn it or spend it to get those rates. Okay, cool. The way I see this, if you just think of this new platform as like a place where one can manage his or her portfolio and set aside the trading aspect for a moment, it's like a great self-custodial multi-currency wallet where one can manage their portfolio, see how the portfolio is doing. And to me, it feels like kind of an improvement on what like a ledger live could be. Like the Ledger Live product is great, but I feel like it's lacking a lot of the portfolio management features that I'd like to see in it. And this is where I see this new ShapeShift product positioning itself.

And then in addition to that, then you have all the trading aspect also, which is like really nice to have like within your wallet. Yeah. So I'm really looking forward to the ledger integration because I use a ledger. Yeah. And being able to use it with my ledger. But for now, so it works with Treasurer and Keepke. Treasure and Keepke, yeah.

And over time, the experience on the Keep Key will probably be the best one because we have full UX control over every layer of that stack from the hardware because we own Keepke to the wallet and interface, which is the platform, to the exchange. So we run all of that and so we can make the UX between those things very, very good. I think we're the only company that sort of has kind of those three layers all under one house. So over time, you'll see that experience with the Kipki getting better and better, better. But we're obviously going to support, you know, all the major key storage mechanisms that customers want. And are there any criteria that you use to evaluate which tokens get listed?

Yeah. I mean, I know there's some considerations. I know that like in the last version of ShapeShift, there was a bunch of tokens that were delisted for. various reasons. Can you walk us through some of this reasoning? Yeah, I mean, they're delisted for one reason and one reason only, which is because we felt that they were too close to the line from a securities perspective. I have my own history with the SEC, and I've been watching them very closely about how they've interacted with the crypto world. So ever since the start of ShapeShift, we've been very careful about which assets we would add. And as the SEC has issued

guidance, we continually revise our own policies on this. Ultimately, it's a bad situation because all we have are a bunch of tea leaves and we have to try to interpret things. There is zero clear guidance from the SEC on which tokens they deem securities in which they do not. They believe that it's clear, but it is not. They have not released any list of the tokens that they think are securities and the tokens that are not. So we continue in this gray area and we simply look at the various candidate tokens on a number of metrics. We have a very thorough process for this. and any token that we think is too close to that line, we won't add.

And in the case of the tokens we delisted, that happened after there was guidance from the SEC that made us change our assessment of those things. So it's something we constantly watch. Now, that is for the tokens that are available for trading. Tokens that are just held in a wallet, we can list anything because it has nothing to do with the SEC or securities rules at that point. Not listing securities is a prevalent problem for all crypto exchanges. Do you collaborate with other crypto exchanges on which tokens you're going to delist

or on the legal groundwork that goes into this? We don't. We have an internal process that we use ourselves. We don't talk about it with other exchanges. Cool, thanks. So what's the business model of Shapeshift? Yeah, it's cool. Quite simple. I mean, we're a market maker for the trading. So unlike most exchanges where, you know, buyers and sellers are putting up business and asks and then wherever those prices meet, a trade happens and the exchange takes a commission from those two parties that traded together. We're a market maker. So we are always the counterparty. So when someone sell Bitcoin for like coin, they're selling the Bitcoin to us as shape shift and we're selling them the like coin to them. And so in the pricing that we,

offer to people, we build in a spread there. So we make roughly half a percent on the trades that go through us. And that's the business model. Interestingly, while we've never really competed on price before as the shape shift from the past, we're releasing new pricing engine in several weeks that ultimately will be able to beat most exchanges much of the time, especially for larger orders, because we are a market maker and we're not limited to any specific order book. So that's, something that our platform users will be able to enjoy down the road a little bit. But at that point, we're trying to pull people out of these centralized exchanges because they're so dangerous for all the obvious reasons that people in crypto understand.

But they leave their assets at these exchanges because it's convenient and ultimately because they get decent pricing on the trades. If we can make it as convenient to self-custody and if we can even get relatively competitive on the pricing, we think not only can we grow our business to be a huge size, but we also will do a big service to the industry by pulling custody away from centralized places and allowing that to remain decentralized in the keys of actual users. So because you're not bound to order books, because you can pool the liquidity of the different order books together,

will that in order ring trades, or how do you create better liquidity? So, yeah, we watch the order books of five different exchanges right now, and over time, you know, we'll add more. and let's say someone is trying to sell $20,000 of Bitcoin into Dogecoin. On any specific exchange, there's going to be an order book that might, you know, the price may move by X percent on an order that size. But if you spread that order out across all the exchanges, the price would move less than that.

And so because we can theoretically do that by being the market maker ourselves, we can give better pricing to users than they would get on any particular exchange and they never have to worry about the custody. When do you quote the customer the price? Is it before you've actually done the price or is it after? And is there an element of risk analysis involved for you guys? Yes, there is. So ShapeShift has always had two order types.

One's called Quick and one's called Precise. Basically with a quick, we show the user a price that's updating all the time. And whenever they actually do the trade, they'll get the price that's offered at the time of that trade. The other way is that they can lock in a price for a window of time. And so in that case, they might be getting a slightly worse rate, but at least they know what the price is, you know, exactly. On both of those, we as ShapeShift bear some risk and we certainly lose money on some trades some of the time. So we build that into our modeling. And, you know, the better we get at that, you know, the lower we can tighten the spreads.

And that's sort of part of the business is that, is doing that intelligently. Have people tried to exploit that? Oh yeah. Basically, if you know how the algorithm is built, you can always try to game it, right? For sure, yeah. And it's always a game of whack-a-mole. And there have been people who have successfully traded through us and made a bunch of money and we lost the money and we see what they do and we learn from it.

And so, yeah, you know, markets can be thought of as everyone trying to game everyone else. And in that sense, you just have to be careful and prudent in what you're offering to people. This episode of Epicenter is brought to you by Microsoft and the Azure Blockchain Workbench. Getting your blockchain from the whiteboard to production can be a big undertaking. And something as simple as connecting your blockchain to IoT devices or existing ERP systems is a project in itself. Well, the folks at Microsoft had you covered. You already know about the Azure Blockchain Workbench and how easy it makes bootstrapping

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read, transform, and act on the data. To learn more and to build your first application in less than 30 minutes, visit aka.ms slash epicenter. And be sure to follow them on Twitter at MSFT blockchain. We'd like to thank Microsoft and Azure for their supportive epicenter. Can you give us a sense of the volume today on ShapeShift? Today's volume, like ever since we implemented KYC last fall, volumes have been pretty dismal.

And so we've been in this phase of rebuilding the new shape shift and then kind of rebuilding a whole new business on that new platform. So today I think we do an average of like $200,000 a day in trades, which for a year or two ago is really low. And that was like the thing that we knew would be really painful when we implemented KYC is because we essentially gutted the entire customer base that we'd been building for several years. All the wallet partners that used us dropped us because they didn't want their customers to have to deal with KYC. So yeah, that's been that's been difficult and we just have to rebuild a new company with a new model. With a half a percent margin that that's obviously not enough

to support a company. How are you planning on getting that up in the near future? How is this going to improve? Yeah, by bringing customers into the platform and with enough customers comes enough trade volume and with enough trade volume, we get back to profitability. So it's really just a question of trade volumes. And to do that, we need to build a product that people like using, that they feel safe using, and that is distinct from, you know, obviously the other competitors in the market. Do you see yourself trying to attract larger players or institutional investors?

Maybe we're the only company in the world right now that's not trying to go after institutional investors. I'm sure a lot of companies will make a lot of money with that. But our expertise is in B2C, in actually catering to end users of crypto. And I think our role will be to help the world of actual end users transition from a fiat and bank system into a blockchain crypto system. And so we're building a product that will be useful for normal people.

You know, everyone is just getting into crypto to people who have a lot of crypto but themselves are individuals. So we're not going after businesses, really. We're definitely not going after institutions. And I think there would be kind of a culture, mismatch if we as ShapeShift went after Wall Street institutions, that would be, it just wouldn't fit. So it's not us. We'll leave that field to other companies. I can't see you going down that path. But, you know, since the volume has gone down quite dramatically,

and as you mentioned, that has the effect of your revenues, are there other business models that you're pursuing, even in the sort of B2C market? Nothing that we're trying to replace. place our core business model with. I mean, ultimately, we make money as a market maker for people that are trading between digital assets. And so that fundamental premise hasn't changed. We've just had to change the product that we offer that service through. So yeah, it's going to take time to rebuild a customer base and get those volumes back up. But we're a business. And so that's what we do. One last thing that we wanted to ask is, so the last time you were on two years ago was to talk about Prism, which was a portfolio management.

Portfolio management platform. You shut that product down recently, or in the last... About a year ago. About a year ago. Yeah, in October of last year. Yeah. Talk about why you shut that down and what was the experience there? Prism was super cool, but it was basically a way, it was built on Ethereum and it was one of,

if not the first commercially available smart contract financial applications built on Ethereum. And basically what it did is allow people to put up collateral. in Ethereum and then create a portfolio, essentially a derivative portfolio of various assets. It was all held in a smart contract, so it was trustless. And then the performance of the portfolio, you know, you'd make money or lose money over time. And then when you close the portfolio, you either get back less or more collateral than you put in based on the performance of that. It was very cool because it was essentially an easy way to get exposure to digital assets without having to set up a whole bunch of different key storage. It had one significant problem sort of that didn't exist when we first fathomed it.

Because it was all on chain, the Ethereum gas costs became prohibitive so that it only made sense to create fairly large portfolios, which was a little different than its target market. That, you know, over time, we could have solved and there were some ways around it. And I think Ethereum has to figure that challenge out in other ways already. but also we have been working on this new shape shift platform for about a year and a half and it became clear to us that the overlap between the two products was too great and so it didn't make sense to be building both of them and so even though we didn't mention this at the time that we closed prism

part of the reason that we closed it was that a lot of its features will end up being built into the new shape shift platform and we felt we needed to focus on that so yeah it was it was certainly sad to sunset that product a year ago it was a it was a very interesting kind of pioneering project to build financial derivatives in a trustless way we thought there was some real real value and interest there but we just had to make a difficult decision to not continue that at this time no super interesting let's switch here's a little bit and talk about the ecosystem a little bit more so you've been in this ecosystem a very long time you spend a lot of time in bitcoin and uh sometime in ethereum how do you see both of them

from the outside, from the perspective of the others. And how do you see this in the face of Challenger change in protocols, so Cosmos, Definity, Parkadot, and so on? Well, so when I got into crypto, it was May of 2011. Bitcoin was really the only thing there. And the entire crypto community was the Bitcoin community. They were synonymous. As this technology grew and as people started building different kinds of blockchain,

and experimenting with different ways of using this technology, different use cases, different types of assets. The community has obviously fragmented and split into many different pieces. I see myself as part of the entire cryptocurrency ecosystem, not just the Bitcoin ecosystem and not just the Ethereum ecosystem, but really a holistic approach to realize that this is an entirely new set of technologies and asset classes. I think they are mutually beneficial to each other.

I think Ethereum's strength helps Bitcoin and vice versa. And it's been really tragic for me to see that there are a lot of people that don't feel that way, that they're very tribalist. And this is particularly apparent within the Bitcoin community. There are a lot of Bitcoiners who have utter hatred for every other crypto project out there. I think it's really sad and unfortunate. and a lot of them spend their time on Twitter, you know, kind of shitting on every other project and finding problems with every other project

because they want to just protect Bitcoin or it's very tribalist. It's the same kind of thing you see among, you know, fans of sports teams. It's the same kind of thing you see among political parties or religions. It's kind of a phenomenon of humans that they will fall into this tribalism sometimes and it's been sad to see that in the crypto world. But, you know, maybe that was inevitable as you, You move from a community that was, you know, 10 or 20,000 people around the world to one that is now 10 or 20 million.

So looking at both the tribalism in Bitcoin and Ethereum and, I mean, even like there's tribalism even between, like within those communities, not only among like between themselves. Do you think there's a way out of this? What would be the great unifier that would like, you know, cause some of the tribalism to go away? I mean, one potential unifier is when there is a common enemy. And so that would generally be fiat currencies and banks and governments. Fiat currencies and banks and governments have not taken a hardline antagonistic approach to crypto. So it's not a clear and present danger and a clear enemy. I think if like the G20 nations started trying to outright ban cryptocurrency,

some of the tribalism might go away because then at that point the tribe is all of crypto versus, you know, the fiat world. But that's not a guarantee that that would solve it either. I don't know. I mean, maybe it doesn't get solved. Maybe it just kind of withers away 10 or 20 or 30 years from now when this technology isn't new anymore and people see what Bitcoin's place is and they see what Ethereum's place is and they see how these things interact and the use cases that they all fill. I think some of it results from Bitcoiners being unable to realize that there are more use cases than just money. They seem stuck in this idea that like cryptocurrency digital blockchain assets can only be used as money and because Bitcoin is the most popular and because they believe it's

the most secure and the most decentralized, et cetera, that it should be the only one and that any other competing money will ultimately fail just based on the laws of economics. I would tend to agree with that in some ways if the only use case was money. But even in that case, there is value in the experimentation on other blockchains. It is not clear that Bitcoin's blockchain and its structure is the optimal way to do money. The world deserves a period of experimentation of 10 or 20 or 30 years to vet that out. But more importantly, money is only one of the use cases of digital assets. And I think digital assets, there will be millions of them. I think there will be one to a hundred major blockchains, something like that. There's not going to be a million popular blockchains,

because that doesn't make sense. But there's definitely going to be millions of different digital assets on these major blockchains. And they optimize for different things. You know, Ethereum has features that Bitcoin can't do today. And Bitcoin has structural reasons why it is more secure and safe than Ethereum right now. Both of those are useful. And I think the market is better off by having both of them.

At the same time, you have new coins like, you know, the EOSs and the cosmoses of the world that are operating on a proof-of-stake model. And those have advantages. They're extremely fast, very high throughput. That doesn't mean that they should replace Bitcoin or that they would be a better form of money. But they are certainly better in some use cases than Bitcoin is and certainly better in some use cases than Ethereum is. And I think that's okay. I think it's a healthier industry when you have multiple technologies providing multiple products for people.

And so, you know, I just see all that as good stuff. At the same time, there's a lot of total crap projects that are either scams or totally pointless. So this doesn't mean that every crypto project does. deserves recognition or respect, but I think a lot of them do. And so I don't know how the tribalism ends, but it's been it's been kind of disappointing. We often talk more about Ethereum than Bitcoin. This is why I'm asking for Bitcoin this time. What's your vision for Bitcoin at this point? And where do you think it's going? And has this changed over the last couple of years? So my fundamental view of Bitcoin has not changed ever since I got involved many years ago.

And that is that I believe it has a good chance of ultimately replacing by out-competing fiat currencies around the world and becoming a new monetary standard for the whole world. I think that was its initial promise. And I think it is with each day that goes by, it gets closer and closer to that. I am one of the people that believes that fiat currencies will go away. I think that over time when people realize they can have money that cannot be created out of thin air or they can have money that can be created out of thin air by politicians. Over time, they will choose the former,

but it's going to take a long time and at least a generational shift, if not too. So one thing that has changed, though, with Bitcoin is also early on, it was seen as a really good payment system, like a very easy, quick way to pay people around the world that was fast and cheap. It's still quite fast, obviously. It's the same speed it used to be. And for international transfers or for anything that is, you know, call it high value, which means, you know, a few hundred dollars or more,

it's still a great payment system. But obviously, as it gets bigger and bigger, the fees are going to get worse and worse, and it's going to be useful for fewer and fewer payment use cases. Maybe that's okay. Or maybe things like Lightning Network will really take off and handle those smaller transactions, and that would be okay too.

But that's something that's definitely different from when I first got involved to see kind of something that used to be, you know, send money for essentially nothing to now, you know, it doesn't make sense to send a $10 Bitcoin transaction ever. And at the worst case, you know, back in the last bubble, the average fee on Bitcoin transactions was $50.

We had customers sending us $100 trade, you know, of Lycoyne into Bitcoin, and they would end up with $50 on the other side and think that we scammed them. And, you know, someone who's new and is like, why in the world did you take $50 of my transaction? That was an uncomfortable conversation to have with thousands of different people. So that's certainly not ideal for payments, but payments is just one of many things that crypto can be used for. And if Bitcoin does not become the widespread payment network that people thought at first, that might be okay too. My view is that if Bitcoin is money and is meant to be money, that the ecosystem should really be working hard to make it money. And I think like a lightning network is a good step in this direction.

but do you see anything that the Bitcoin ecosystem specifically could be doing better to move closer to this goal of being a replacement for Fiat? I think you have to separate the money from the payment system. Obviously, a money that has easy payment systems attached to it is better than one that doesn't. But it's not clear that if Bitcoin is going to be money, it needs to be able to have. have cheap $5 transactions. Maybe it does not. That's unclear.

It is also very possible that a different crypto starts emerging that simply because it is faster and cheaper, it ultimately takes more economic activity and it becomes money. And it's totally possible that Bitcoin fails because it did not optimize for speed and transaction throughput. I don't know. I don't know where that will come out. But again, that's why all this experimentation is really important. StarCware is organizing the Starkware Sessions Conference during the Tel Aviv blockchain week in September,

and you should definitely consider going. In case you don't know about Starkware, they're productizing zero-knowledge proofs to solve two of the blockchain ecosystem's most pressing issues, scalability and privacy. And Starkware is co-founded by Eli Ben Sassouin, who was previously on the show. The conference will cover some of the most cutting-eds research and applications in the field of zero-knowledge proofs. And you can expect only the brightest minds in the space to discuss things like self-custodial trading, Starks for Lerlour 1, Stark-friendly hash functions, and other cool things you can do with Stark Proofs. Many of the speakers are Epicenter alumni, including Ethereum researchers, Vitalik Buterin,

Alexei Akunov, and Justin Drake. Martin Copelman of Gnosis will also be speaking, as well as Arthur Brightman of Tezos. So if you're interested in broadening your understanding of these cutting-edge technologies, there's no better place to do it than Starkware sessions. Join the conference in Tel Aviv on September 16th, or come a day early for the Stark 1-01 Workshop, where you'll build a Stark Prover from scratch. Tickets are on sale now and you can find the registration page at epicenter.rocks slash Starkware. That's S-T-A-R-K-W-A-R-E. The first 50 people to use the code Epicenter will get 20% off the regular ticket price. We'd like to thank Starkware Sessions for their support of Epicenter. What are your thoughts on Libra? So you had a tweet storm in which you welcomed

Libra. My first tweet storm. Yeah, I know. I saw. Can you explain your reasoning behind So why do you think is good for the ecosystem? So I've been interested in this mysterious Facebook cryptocurrency, you know, kind of ever since the news about it started leaking kind of mid late last year. I assumed that it would be kind of some watered down centralized coin that was not very interesting, really just like a dollar pegged, centralized, you know, quote-unquote digital currency. That's what I assumed would happen.

But when the actual details of Libra were revealed, I was quite enthusiastic about it. Certainly, it is not a censorship-resistant, self-sovereign cryptocurrency like Bitcoin, but it's also something that is much more interesting, much more decentralized, and much less tied to government policy than Fiat. So they did two kind of really important design decisions. One was that it is actually built on a blockchain, sort of an open source permissionless ledger that people can be building on. That was a big design decision that was important. And then two is it's backed by not a one-to-one peg with the dollar, which would have been their easy way to do it.

It's actually backed by a basket of fiat and bonds. And what that means is that it is sort of above or greater than any specific national currency. And because Facebook has 2 billion users, it's really the first credible near-term competitor to something like the US dollar. I found that to be extremely exciting. I think a world based on large companies issuing their own currencies would be much better than one where governments are issuing their own currencies. And something even better than that is a purely decentralized cryptocurrency like Bitcoin.

But I see Libra as a really good stepping stone between those two worlds. and then I was pleased to see, but maybe pleased is the wrong word, entertained to see how quickly the governments of the world came out against Libra. They were very uncomfortable about what Libra was doing. And this was largely because they saw it as a threat to their monopoly over money creation. And now we have hearings in the major branches of government in the U.S. and elsewhere. where they're actually talking publicly about the qualities of money, the attributes of money, and whether central banks should create money

or private markets should create money, these kind of discussions never happened 10 years ago. They haven't even really happened within the Bitcoin world because the politicians haven't taken Bitcoin seriously as an existential threat to dollars. I'm glad they're not taking it as that threat, even though it absolutely is that threat. But when Facebook comes out and does it,

they see that immediately as a existential threat, to dollars and another fiat. And that's just fascinating. I mean, at this point, Facebook has become the lightning rod to which all the ire of these various politicians is going to be drawn. I don't know that Libra will ever actually launch because I think the government's going to be so upset with them that they can't actually get it out the door. That demonstrates, yet again, why decentralization is so valuable. And ultimately, I think that's good for Bitcoin. And I think if Libra launches, it's good for Bitcoin because it pulls people further out of the fiat world and into a more digital currency world.

So I'm excited about the whole thing. I applaud Facebook for making some design decisions that would be obviously controversial and really push the envelope. I think whenever I see bravery from a company that large, I think that's very respectable. So yeah, we'll see how this goes. I think I agree with you on the interesting design aspects of Libra.

I think that we probably weren't expecting that to emerge out of this project. And it has been entertaining as well to see regulators and lawmakers and politicians throw their arms up at this project. And it's sort of like, you know, we're scoring points. Like cryptocurrency, the cryptocurrency ecosystem is scoring some good points in this fight. On the other hand, perfect critic of Facebook for its numerous privacy transgressions over the years. and we're learning more details now about some of the things that are to come and like sort of

it's messaging app suites etc. I think it's absolutely inevitable that if Libra ever launches that Facebook would use the data to fulfill his mission, which is to sell advertising to its advertisers and exploit people's financial data. What do your thoughts on that? Like where do you sit in between these sort of? This is great because it goes against government and national currencies. And on the other hand, the risk to users in privacy.

I'm not one of most people who thinks Facebook is evil because they use people's data. I think people that use Facebook as customers and they want a free service and then expect the company to just build them a free service without taking their data and selling it are naive and frankly unfair. I think any private business that you can opt out from, you can opt out from. So if you don't like what Facebook does with privacy, don't use it. If you don't like what Libra does with privacy, don't use it. And that's the marketplace at work. I would much rather have a world where Facebook has the predominant currency and takes information from it to sell you advertising

versus a world in which the Federal Reserve issues the main currency and they're able to debase it and print it at the whim of politicians, which impoverishes the entire world slowly over time. I think that's a huge improvement over the status quo. Better than both of those, of course, would be a world in which a properly decentralized cryptocurrency like Bitcoin exists and is the dominant money. But it really kind of depends on what you're comparing it to. So in effect, Libra is a currency that's issued by a non-state actor that is nevertheless

extremely powerful in the legacy world. So something that can't be said of Bitcoins and the like. So even if you just look at the total market cap of Bitcoin and Ethereum, that is completely dwarfed by Facebook and all the other companies that are attached to Libra now. Do you think this is going to change how we think about state and non-state actors? And do you think this is going to blur the line? Because in effect, so far, money issuance has been a monopoly for nation states. I mean, discounting Bitcoin. But I mean, basically in the grand scheme of things, Bitcoin and Ethereum, they're really small phenomena.

So they're not going to throw off entire governments yet. But do you think in hindsight we'll see this as a pivotal moment? Yes, I think it's definitely a pivotal moment. I think there's generally an impression that governments have always managed money. And thus the fact that Bitcoin is this new thing or Libra is this new thing is something. entirely different from history. The reality is that governments have only really been issuing money at the base layer for a few decades. I mean, basically since 1971, when the dollar went off the gold standard, we've had a purely fiat system. Prior to that, it was really a gold and commodity money

system, an imperfect one, but one that was still at the foundational layer built on gold. So this isn't something entirely new at all. It's really a return, or let's say, it's really the world leaving the context of governments being responsible for money and going back to something that is outside of the control of any politician or any government. Now, obviously, something like Bitcoin is far more powerful than gold because it can move around the world so easily, and it works in a digital economy. Gold doesn't really work that way unless you centralize it and issue electronic notes for that, which has its own problems. So there's definitely like newness to this whole phenomenon, but I think a world where government wasn't behind money would actually be back to normal.

It would not be something new. Interesting. I think that there's a contextual aspect that comes to play here that needs to be considered as well, is that the world of 100 or 200 years ago and the economy of 100, 200 years ago was far less complex than what we have today. in terms of activity, market activity, population, supply chains, etc. Do you feel that it makes sense in today's massively complex economy to go back to a fully unregulated money system, as was the case maybe like 200 years ago? Yeah, I think the more complex a system, the less able to properly handle it, a centralized structure becomes.

So in a simpler system, centralization can work really well. As you add complexity, centralization causes all sorts of problems. A great example of this is politics and governance. The biggest problems in politics are the ones in which you have the most people involved. So a town council never commits like genocide or crazy global issues. and most people feel reasonably okay about their town council. When you get up to a city or a state level, there's more controversy and more problems,

but still nothing like what you get at national governments. Especially when it comes to markets, which are incredibly complicated, and there are no people on earth who are smart enough to really understand them. That humility is completely lost within politicians. They all believe that if you get a few economists in the room, you can understand something as complex as the global economy. I think because something is that complex, it has to have a decentralized structure.

And when you have central banking, where they are literally controlling the price of money, they're essentially planning the price of money for the entire world, that is the same kind of central planning that took down Soviet Russia, the same kind of central planning that's taken down Venezuela. That kind of thing is really dangerous. And so I think the world would be much better off. To the degree it is complex, it is much better off with a decentralized system, in which no central party is trying to have all the information because it certainly cannot

have it even if it wants to. I mean, I'd like to touch on something you said there, which I think it's relevant here. And obviously, I agree that central planning to the extent that, you know, we saw in Soviet Russia or that we see in Venezuela is an extreme that at some point does collapse. And, you know, we can see what's going on in Venezuela right now. And we've seen this in the last 50 years in many places. But you said something about people not being smart enough to understand what's going on in their own market. And I'd like to tie that back to Facebook and the sort of unchecked aggressions and transgressions on people's privacy and the fact that, sure, people can use Facebook if they like or they can stop using it.

But I think that in the aggregate, people don't really understand or appreciate the risks of such an unchecked power that is governed only by markets, such as Facebook. And we've seen that in the last couple of years with what happened in the U.S. elections. And I think that is just the tip of the iceberg because in reality, I think there wasn't really that much AI or machine learning behind that. you know, do you think that companies like Facebook should be, and this is sort of off topic, but do you think that companies like Facebook should be allowed to, you know, just do as they please and grow to near like too big to fail size and not be regulated at all? I mean, my general moral philosophy is that anything peaceful should be permitted. And I can always walk away from Facebook.

I cannot walk away from the U.S. federal government. I am taxed and stolen from by them regardless of what I want to do. I just see them as completely different threats in their character. I mean, I don't see Facebook as a problem because people can stop. They can opt out of that. If I could turn off my support of the federal government, that would be incredible, you know, but I can't. I'm trapped and I'm the federal government. And not only that, but Facebook does not have a military that goes around

the world killing hundreds of thousands of people. So yeah, is it bad that they use your data to sell to advertisers? Sure, I guess that that's bad and people should certainly be more cognizant that that's happening. I agree with that. But they're not killing people. Facebook isn't killing people. The U.S. federal government is literally killing hundreds of thousands of people. To even put them in the same boat, I think is unfair. And I would much rather have large, peaceful corporations like Facebook that are market-based and regulated by markets running money systems versus the large governments that literally kill people and have the legal protection of theft and murder. I think that is the great injustice of the world. And so the more that

the control over money moves out of that world and into the private marketplace, the better. Well, I would say that once Facebook has its own money and control over money, it can definitely at that point start going around and killing people. Then my opinion will change. I mean, if you, but private companies don't do that. But Facebook, you know, doesn't, it's not an elected body of people. Totally disagree. So you have more control in your election of Facebook than you do in the election of,

of U.S. politicians. If you don't like Facebook, you can sell their shares. Well, I'm not American. Well, right. But users, users of Facebook, they can sell their shares, they can close their account. that is democracy, that is opting out of something, and that is much more powerful than the charade of political votes that elects the stupidest people among the population to lead them. I mean, I don't understand how anyone can possibly advocate for a system like democracy

when it leads to people like Hillary Clinton and Donald Trump being the two greatest candidates that the country is able to choose from. I mean, that's just totally preposterous. That whole system is, I think, worthy of being shut down. immediately. Totally agree. I completely agree with that premise. So what do you think about the future of money, Eric? So basically, in principle, blockchains enable tokenization. So basically, assets become easily transferable. Do you think we will actually still need fiat money or even company issued money in the future? No, we don't need fiat money now. Fiat money is a scam. It's the greatest

scam ever perpetrated on mankind. The sooner people abandon it and move to private market-based money, the better. Bitcoin obviously kicked off a phenomenon that I think is unstoppable at this point. It is a phenomenon of this decentralized, trustless technology, which is really well-suited for something like money that needs to be global and which no one should have the power to control. I think it's inevitable at this point, and I don't know if it takes five years or 50 years for this all to play out. But I think, you know, two generations for now, people will look back and see how obvious it was that a group calling themselves the Federal Reserve should not have been trying to control the price of money for God's sakes. Like that, that'll be something that's laughed at by people in the

future as something preposterous, just like bleeding people to rid them of the plague was preposterous and we see that now. So this will take some time to change, but I think a seismic shift in how money works has occurred. And we're all just, while we might be participating in this. We're all just kind of along for the ride at this point. I think this kind of leads us to our last question. So looking back at the last five years that ShapeShift has existed, is there anything that you would have done differently in hindsight? Yeah. I mean, there's always a million mistakes that any entrepreneur makes, and I'm certainly of that. Probably our biggest strategic mistake was simply building too many different products at the same time.

we've seen so many opportunities in crypto that we kind of pursued too many of them too early on instead of focusing just on our core business. So that was a lesson I've learned, and we've corrected that now by building this platform that is the entire company. All of our energy now goes into this platform. So that's something that I've learned and something I would change. Regarding the whole KYC question, I think that was the right decision for us to take. it's been immensely painful in the short and medium term,

but I think it was the only way for us to keep building a company over the long term. So I will have to assess whether that was really the right decision, five or ten years for now. But right now it's, I think, too early to say. Great. I would love to be able to talk more and debate more. I agree with you on some levels. But I also think that like Soviet, Russia, Venezuela,

and all the transgressions there and the extremes there, this sort of extreme libertarian viewpoint also has has its flaws. Certainly not perfect. Certainly not perfect. But we'll have to leave it there because we're running out of time here. But thank you so much for coming on the show again, Eric, and look forward to having you back on again in the future. Yeah, great discussion.

Really enjoyed it. And for anyone that wants to check out the new ShapeShift, it's at Shapeshift.com. And we look forward to working with you. So thanks a lot. Thanks, Eric. Thank you, Eric. Thank you for joining us on this week's episode. We release new episodes every week.

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