“We felt we were doing God’s work,” explains cryptocurrency payments pioneer Erik Voorhees as he recalls trying to convert the infidels in the early days of Bitcoin.
The man whose gambling platform SatoshiDice was once responsible for half of all Bitcoin transactions is now an elderly statesman for crypto and CEO of the ShapeShift exchange.
He recalls that Bitcoin was written off as a joke at the Money 2020 conference in Las Vegas in 2012. At the time he was working for BitInstant, one of the first Bitcoin exchanges, and they had a booth right next to PayPal.
“I remember the PayPal folks nearby giggling at us. A few of them might have heard of Bitcoin. If they had heard of it at all, it was a total joke – a stupid online scam or something. It was a totally unproductive conference. “
History has not been kind to the snickers and scammers, many of whom have since converted. In 2020, eight years after the conference, PayPal finally joined the fight, allowing users to buy and sell crypto. It will soon be added as a payment method at 29 million merchants.
Voorhees shared the gospel of Satoshi at the conference with Charlie Shrem and Roger Ver. Shrem was the founder of BitInstant, viewed by some as a martyr after spending two years in jail for an exchange user reselling bitcoin on the Silk Road darknet marketplace. Ver was perhaps the greatest believer of all and was nicknamed “Bitcoin Jesus” for his charismatic promotion of the currency.
“In terms of proselytization, Roger was the absolute best. He was totally crazy about it, ”says Voorhees with a chuckle.
“Even for Charlie and me, who were very supportive of the general feeling, it was pretty overwhelming and just incessant.”
“Everyone who works for a startup has the feeling that they are changing the world, that they have this great mission, and certainly every company is trying to strengthen this,” he says, and is himself CEO. For Bitcoiner, however, Voorhees makes it clear: “It really is one thing to change the world and to change the world on a fundamental level. It’s about changing the financial institution itself – that’s a profoundly big task. “
Vorhees explains that he sees Bitcoin as nothing short of revolutionary:
“It’s not just a better UI for the money people had before. It’s a different type of money that changes government, culture, social and economic relationships on a very deep level. That’s why it’s been so long.” Took it to assert itself and to be recognized because it tries to move into such an entrenched institution. “
It’s 2012. @ErikVoorhees @rogerkver and I have decided to pool our money for the first # Money2020 event. We told them we wanted the best booth we can afford, but we had to be next to the @ PayPal booth so we could show the world OUR financial system!
Welcome, Paypal! pic.twitter.com/5BzvQDfvFb
– Charlie Shrem (@CharlieShrem) October 21, 2020
Voorhees, now 35, spent his childhood in the mountains of Colorado in the early 1990s before moving to the University of Puget Sound near Seattle in 2003. He studied international economics and business, but also doesn’t feel that he has learned anything.
“Although I took courses in the history of economic thought in the entire major in economics, I never learned anything about the Austrians,” he says, referring to the Austrian business school. Often ignored by mainstream Keynesian economists, Austrians are obsessed with things like hard money and decipher uncovered fiat currencies. That’s why they were adopted by gold bugs and the Bitcoin community, which is often referred to as “digital gold” after all.
A recent graduate in 2008, Voorhees went to Dubai for an adventure where “anyone with a college degree could get a job straight away because it grew so quickly”.
Working as a marketer for a real estate agency, he watched from a distance as the world he believed knew collapsed under the weight of the unfolding global financial crisis. Dubai didn’t feel its effects until six months later, he says, describing the intervening time as “that very strange time when Dubai experienced this massive economic boom and the rest of the western world fell apart”.
From this desert oasis spared the global drought, the economics graduate began to “really understand money, which I thought was a very basic level”. For Voorhees, the story of money is simple: “Money arises as the good that is most frequently exchanged for.” It used to be gold and is now fiat money, but it could just as easily be something else if more useful and efficient money would be accepted.
Upon this realization, Voorhees took on “a very strong aversion to the fiat currency and government control of money” because, as a supporter of a market economy, he believed that no government should control the price or distribution of goods. “Money was actually the most important good of all and therefore the most important thing not to be centrally planned. And yet it was even in supposedly capitalist economies, ”he says.
“A capitalist economy with a government-administered monetary system seemed completely opposite, but I had no answers or solutions other than a sort of return to the gold standard that seemed a bit anachronistic.”
Voorhees returned to Colorado after two years abroad and soon moved to New Hampshire to join the Free State Project, an organized political migration he describes as “a multi-decade initiative to relocate 20,000 radical libertarians to a small jurisdiction.” [New Hampshire] hopefully have an oversized impact on the political structure. “It was there that Voorhees met Bitcoin in 2011, accompanied by radical libertarian political activists.
“I was absolutely thrilled at that point and a year later I left New Hampshire and moved to New York to join Charlie Shrem at BitInstant.” There he took over the management of marketing as employee number three.
Around this time, Charlie Shrem, Roger Ver, and Erik Voorhees, each of whom became crypto lights on their own, pooled their funds to set up a Bitcoin booth at the Money 2020 conference in Las Vegas. “We had to be next to the PayPal booth so we could show the world OUR financial system,” said Shrem. Vorhees says that despite their best efforts, they didn’t switch anyone to Bitcoin at the conference.
Belief in false profits
Vorhees admits that he used to be a bitcoin maximalist who believed in the only true coin and rejected all fake currencies. “I used to be a maximalist. When I got to Bitcoin, of course, it was the only coin, ”he says.
“When other coins came out, I dismissed them, scoffed at them, and generally disliked them because I felt they were distracting me from the important project.”
Although he tried to focus on Satoshi’s vision, the new projects began to gnaw at him and he realized that many of them were “doing things that Bitcoin wouldn’t or couldn’t do”. Its conversion was in full swing in mid-2014.
“My whole way of thinking started to change. One of the most important things about Bitcoin is that it is decentralized. And it seemed opposite to me to have a decentralized digital economy in which there is only one chain – you know, a code base, a chain, a set of economic rules. It seemed very appropriate for you to get several different digital assets and that was actually part of the decentralization. Part of the virtue of bitcoin was that bitcoin isn’t the only thing out there. “
He tries to do this by adding the usual caveats – most tokens are junk, many are scams, a majority will fail. “It’s only a minority of them that is interesting, but a minority is much more than one.”
ETH people … are trying not to become Binancechain what the Bitcoin Maxis are to Ethereum 🙏
– Erik Voorhees (@ErikVoorhees) February 19, 2021
He still has empathy for his “myopic” maximalist colleagues whom he sees as victims of human nature’s tendency towards tribalism, which is expressed in many ways: “Certainly it is expressed in religion. And it has been expressed in crypto , and part of the people – their minds twisted into utter advocacy of a flag and utter mockery of everyone else. “
“[It’s] a group psychology phenomenon and I don’t know how that ends, but I think it’s really detrimental to the growth of decentralized digital finance in general. “
Play with Satoshi’s dice
Just a year after learning Bitcoin, Voorhees launched the Bitcoin-based gambling website SatoshiDice in 2012, which took the young crypto community by storm.
“On Reddit, this guy announced that he created this casino-like mechanism where there would be this dice roll. Based on the dice roll, a user would either have their coins returned or lose them.” I tried and it was instant magic in it […] So I started working with him. “
This was groundbreaking because “it was made possible for anyone in the world to place a bet by sending a Bitcoin transaction,” regardless of where they came from or how their local laws governed online gambling.
Additionally, the player didn’t have to trust SatoshiDice as “it was demonstrably fair,” which meant it worked like a transparent machine with all odds and insides open to everyone. Governments around the world have various commissions to regulate and audit gambling operations, but the role of SatoshiDice has potentially rendered such organizations obsolete, powerless, or both.
“SatoshiDice showed you how good the chances were. It was transparent about the odds, and you could prove that the rules were fair. “
The simple, trustworthy and permissionless nature of SatoshiDice brought great success to the platform. Within months of its launch, the game was responsible for half of all Bitcoin transactions.
SatoshiDice had an unofficial IPO on the MPEx exchange, a type of bitcoin exchange where unregistered Bitcoin companies offered shares and paid dividends denominated in BTC. These were the forerunners of the ICO boom a few years later and received similar attention from authorities for violating securities laws.
While the casino “makes a ton of money” it was also overwhelming as Voorhees felt that his job of “running the largest bitcoin casino in the world” distracted him from his larger calling, taking the good word of Satoshi preaching. Despite continued growth, he reluctantly sold the business in 2013 for BTC 126,315, which was then valued at $ 12 million. That would be a cool $ 6.25 billion today.
Fight the system
Voorhees was not quiet for long, as the SEC soon followed him for making an unobserved public offer for unregistered securities. Voorhees felt this was unfair as its investors had generated exponential returns. In the end, he settled on $ 50,000.
“It was nine months of total misery when we dealt with them. If I didn’t despise the government before, I certainly did after. It was such a bummer. “
A core value of his is that people should be free to trade with one another of their own free will and that no government agency has the right to step between them. In his worldview, “institutions and governments exist only to limit people’s power over money,” while “crypto gives people total economic power to conduct transactions the way they want and no one can stop them.” According to Voorhees, these two forces will inevitably collide.
Voorhees’ Shapeshift company allows users to trade cryptocurrencies without identity verification. Things weren’t always like this – according to Voorhees, in 2018 his company was subject to the same rules as traditional banks and therefore had to implement procedures to verify the identity of Know Your Customer (KYC) to make anonymous transactions impossible. “That was absolutely miserable. Our customers hated it. I hated it. “
By 2020, however, decentralized exchanges (DEX), which allow users to trade with a third party without depositing their money, gained traction, allowing Shapeshift to realign its business and align itself with its libertarian values. All KYC were abandoned and the platform became a gateway for users to trade with various DEXs. “I had learned from Satoshi Dice that a commercial relationship requires nothing more than a public key to send a transaction, and everything else could be based on it,” he says.
Voorhees says his opposition to KYC is not due to ideology, but rather to his desire to protect users from things like identity theft.
“Identity theft is a $ 30 billion to $ 40 billion problem a year in the US alone. It is more expensive than all forms of property theft combined. It’s this huge thing, and crypto comes and solves that problem. “
But how much is he committed to this principle? Would he consider it theft if a government were to access user data to tax a customer’s unreported financial transactions? “Yes, exactly. Taxes are absolutely theft,” he replies with blunt objectivity.
The WSJ is investigating
ShapeShift’s ethos has proven controversial among followers of the rules and regulations governing traditional finance. A Wall Street Journal investigation found that Shapeshift users laundered $ 9 million through the platform. However, a third-party analysis by blockchain intelligence agency CipherBlade revealed that the investigation was flawed as it was believed that funds were illegal even after going through four different hands, which resulted in the $ 9 million figure around the Factor four was inflated. It is clear that Voorhees, who is usually calm and serene, was deeply affected by this.
“This is where the Wall Street Journal comes after us calling us the money launderer when their own pompous number would make us far better [at combating money laundering] than any of the big banks they write about all the time. “
There is a noticeable tremor in his voice. The fight is personal.
We spend the last few minutes comparing attitudes towards money in different societies. In the Nordic countries, for example, all taxes are publicly known. Voorhees finds this worrying, adding that “many people with money feel guilty,” while he believes that creating wealth ethically is a good thing for society.
“I would like to see people get very rich, especially be proud of them, as long as they have done it ethically, and use those resources as they see fit. I think that’s how economies grow and I think there’s nothing wrong with that. “