Gary McFarlane, cryptocurrency analyst at interactive investor, interviews crypto entrepreneur and investor and ShapeShift founder/CEO Erik Voorhees. Turns out he’s a skeptic when it comes to Libra but thinks something will get out the door, is disappointed by bitcoin maximalism myopia, bullish on BTC price and laser-focused on fixing self-custody with the company’s new platform.
The innovative exchange’s chief is on a mission to bring rock-solid “self-custody” solutions to the independently minded crypto masses and is targeting Coinbase as ShapeShift’s main competitor.
The non-custodial digital asset exchange is a supporter of the Foundation for Interwallet Operability protocol that’s hoping to become established as the usability layer standard for crypto. Not surprisingly then, Voorhees has plenty to say about custody.
For those who are not familiar with the venue, ShapeShift made its name by offering instant transactions without requiring users to create an account. Plug in your hardware wallet and a way you go. The ‘no account’ part changed last year with the introduction of a so-called membership model in which “basic personal information” is now required of customers.
However, in the light of the global Financial Action Task Force-inspired regulations coming down the pipe, the ShapeShift tweak was probably a necessary and timely move by management, although unpopular with customers. Voorhees said last month that implementing KYC had ”gutted” the exchange’s customer base and badly hurt trading volumes.
In perhaps a sign of the times as the US market becomes even more central, in another takeaway Voorhees reveals that the number of US customers in its user base had risen “over time” to 50% from 35%.
Voorhees also speaks out against bitcoin maximalism and in favour of altcoin “diversity”, welcoming “experimentation”; he thinks there are five to 10 altcoin contenders for gaining traction.
Erik had a lot more to share. Read the full exclusive interview below.
ShapeShift wants to take on the custody kings? Why should crypto users and investors care?
If the crypto revolution simply brings everyone’s wealth back into the control of centralized parties, then it wasn’t much of a revolution.
Crypto is about financial sovereignty, first and foremost, and while there will always be a place for custodial services, we intend to build the best self-custody option for the masses.
Libra has shaken things up even if it doesn’t launch as originally envisaged. What are the implications of Facebook’s crypto entry for Big Tech and in turn the crypto landscape? Will governments ever allow competition to sovereign money to take hold?
Libra hit the scene like a comet from outer space. Everyone knew they were working on something, but when the details finally emerged it was clear they were creating a supra-national currency, rather than just a 1:1 USD pegged asset. This was brave of them, and got them tons of antagonism from the governments. Government is not happy to have competition in currency, and whether it’s coming from Bitcoin or Libra (and likely both), the world is going to be better for it.
I’m skeptical that Facebook will be able to launch Libra in its current form, and fear they will capitulate, water it down, and release a 1:1 USD pegged asset with little innovation behind it. But we will see!
On Twitter you recently said “embrace the diversity” when criticising those referred to as bitcoin maximalists. Altcoins are still in crypto winter by the look of it – when will the spring come and are there any projects that stand out from the crowd?
I find it really sad and ironic that Bitcoin Maximalists, who are allegedly in favor of decentralization, advocate for a world with only one monolithic blockchain. That is the opposite of decentralization. A world of many blockchains, many digital assets, and many varying use cases, is a more diverse and dynamic foundation on which to build the future of finance, rather than a monoculture project.
I remain extremely bullish on Bitcoin and it’s obviously the most important blockchain by far, but a world in which the only crypto is Bitcoin is a poorer world. I’d rather avoid endorsing other specific projects, but there are at least 5-10 other than Bitcoin which are worth attention. 95-99% of the alts may be totally stupid, but it only takes one valuable project beyond Bitcoin to defeat the Maximalist argument.
ShapeShift doesn’t do custody, the owner of the crypto asset is solely responsible. But isn’t the perceived complexity of using a hardware wallet one of the many things that has to be addressed as part of the wider usability drive to spur adoption?
Hardware wallets are not for everyone, but they remain the best combination of relative ease of use and significant safety.
Our goal with the new ShapeShift platform was to provide a software interface for hardware wallets that was indeed superior to anything else out there, and which would improve UX for the average person. But, ultimately, we can’t and shouldn’t expect hardware to be the solution to all people all the time. Later version of our platform will support non-hardware key storage options, but always the principle of self-custody will be maintained.
When is Ledger support coming to ShapeShift?
Can you say a little about the composition of your customer base and its geographical spread?
We are about 50% US customers, and then a long tail of dozens of other countries. Interestingly, we used to be only about 35% US, but it has steadily gained share over time.
Who do you see as the main competitors to ShapeShift outside of the “custodial” exchanges? DEXs, other atomic swap-based systems such as Changelly?
It’s important to distinguish between competitors of the classic ShapeShift.io exchange, or the new ShapeShift.com platform. Changelly and DEX’s were competitors of the old, but don’t offer what the new platform provides, which is a more holistic self-custody crypto experience.
Strategically, we are generally positioning ourselves now as a self-custody alternative to Coinbase; an impressive and highly important crypto company and worthy competitor.
Can bitcoin afford to rest on its “digital gold” laurels and forget about innovating to deliver the “electronic cash” of Satoshi’s whitepaper. Can scaling ever be adequately addressed and does it matter?
This is unclear. Bitcoin has demonstrated that it doesn’t really need to be at all popular for retail payments in order to be valuable thus far. However, it is still early in the process, and over 10 or 20 years it’s entirely possible that a different coin could still outcompete Bitcoin as the most valuable digital asset.
I think the odds of that are less than 50%, but it’d be foolish to assume Bitcoin has a guaranteed 1st place just because it always has in the past. I’m of the opinion that any specific blockchain cannot be optimized for all use-cases, because design tradeoffs occur. For this reason, multiple (and perhaps many) blockchains will exist long term and will dominate different applications. Money is extremely important, but it is not the only good that crypto assets are effective for.
Tokenization and stablecoins are growing in importance. Is this part of the necessary development process on a 10-year view say or a blind alley that blunts the progress towards mass adoption of a truly distributed and non-censorable value transfer protocol?
I think stablecoins are valuable and important, both the centralized fiat proxy kind (like Tether or USDC), and the algorithmic kind (like DAI). Not every asset must or should be “100% decentralized.” Decentralization is a gradient, and optimizing for decentralization (as Bitcoin has done) comes at the expense of other attributes. A crypto ecosystem of many assets is healthier and more productive, so I love all the experimentation happening (even if much or most of it fails long term).
What would you say have been the key factors driving the bitcoin price higher since the trough of the bear market last year?
Bitcoin has thus far operated on fairly clear and relatively predictable market cycles. As it grows to take over the world, this phenomenon will continue for a while. Asking why the price has risen this year is a little like asking why Autumn follows Summer.
How will Bakkt physically settled bitcoin futures impact the crypto space?
I actually have no idea! Generally the more developed the crypto ecosystem becomes, the better, and I’m curious to see this new instrument become available. We’ve come so far since I first got involved in 2011; it’s amazing to watch.
Where will the bitcoin price be by year end and do you expect a halving boost in 2020?
I think we’ll be over $20k by year end, and 2020 will be the next bubble cycle (regardless of halving). However, I make lots of price predictions because it’s fun, and I’m usually wrong. Crypto is a long term project, and always extremely speculative. Everyone should own some, and they should assume it’ll go to zero. When they’re comfortable with that, then they’re ready.