Erik Voorhees – Cointelegraph Magazine

Erik Voorhees – Cointelegraph Magazine 1
Erik Voorhees – Cointelegraph Magazine 2

Erik Voorhees – Cointelegraph Magazine 3

Erik Voorhees – Cointelegraph Magazine 4

We felt like we were doing God’s work, says Eric Voorhees, a pioneer of cryptocurrency payments, who recalls how he tried to convert non-believers in the early days of Bitcoin.

The man whose SatoshiDice gaming platform was once responsible for half of all Bitcoin transactions is now a top government cryptologist and the CEO of the ShapeShift exchange.

He recalls that Bitcoin was considered a hoax 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 next to PayPal.

I remember the PayPal people giggling nearby. Some may have heard of Bitcoin. If they had heard of it at all, it was a complete hoax – a stupid internet scam or something. It was a totally unproductive conference.

History has not been kind to sinners and cheaters, many of whom have since repented. In 2020, eight years after the conference, Paypal finally made its appearance, allowing users to buy and sell encrypted products, and will soon be added as a payment method at 29 million merchants.

Voorhees spread the gospel of Satoshi during the conference with Charlie Shrem and Roger Wehr. Shrem is the founder of BitInstant, who is considered a martyr by some after serving two years in prison in a case involving the resale of bitcoin by a user of the Silk Road marketplace on darknet. Ver was perhaps the biggest believer of all, earning him the nickname Bitcoin Jesus for his charismatic promotion of currency.

When it came to conversion, Roger was the best. He was a real maniac, Voorhees said, laughing.

Even for Charlie and me, who were very much for this shared feeling, it was quite overwhelming and simply unrelenting.

Everyone who works in a startup feels like they’re changing the world, that they have a huge mission, and of course every company tries to reinforce that, he says, a CEO himself. But for Bitcoiners, Voorhees explains, it’s really about changing the world, on a fundamental level. It’s about changing the institution of money itself – that’s a very big task.

Vorhees explains that he sees Bitcoin as nothing less than a revolution:

It’s not just better unemployment insurance for the money people used to have. It’s a different kind of money that changes the government, that changes the culture, that changes social and economic relations at a very deep level. That’s why it took him so long to catch up, to get recognition, because he’s trying to get into such an established institution.

The year is 2012. @ErikVoorhees @rogerkver and I decided to pool our money for our first #Money2020 event. We told them we wanted the best possible stand, but that we needed to be next to @PayPal’s stand to be able to show the world OUR financial system!

Welcome, paypal!

– Charlie Shrem (@CharlieShrem) October 21, 2020

Table of Contents

Roots Library

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 economics and international affairs, but he doesn’t really feel like he’s studied either one.

Throughout my studies in economics, I took courses on the history of economic thought, but I never learned anything about the Austrians, he says, referring to the Austrian School of Economics. The Austrians, often ignored by Keynesian economists, are obsessed with things like hard currency and deciphering non-refundable money. That’s why they’ve been adopted by goldbugs and the Bitcoin community, who, after all, often call them digital gold.

Fresh out of college, Voorhees headed to Dubai in 2008 to embark on an adventure where anyone with a college degree could find a job right away because the company was growing so fast.

He worked as a salesman at a brokerage firm and watched from afar as the world he thought he knew began to shrink under the weight of the global financial crisis. Dubai did not feel the effects until six months later, he recalls, describing the intervening period as very strange, during which Dubai experienced a huge economic boom while the rest of the Western world collapsed.

It was from this desolate oasis, untouched by the global drought, that the business and economics graduate, I think, really began to understand money on a very fundamental level. For Voorhees, the story of the money is simple: Money appears as a commodity not infrequently shrouded in disorder. It used to be gold and now it’s already a lot of money, but it could be something else if silver was more useful and efficient.

Following this realization, Voorhees had a very strong aversion to fiat money and government control of money, because as a proponent of the market economy, he believed that no government should determine the price or distribution of a good. Money was in fact the most important commodity of all, so the most important thing is that it not be centrally planned. Even in a so-called capitalist economy, he says.

A capitalist economy with a government-run monetary system seemed totally unethical to me, but I had no other answer or solution than to return to the gold standard, which seemed somewhat anachronistic to me.

After two years abroad, Voorhees returned to Colorado and soon moved to New Hampshire to join the Free State Project, an organized political migration he describes as a multi-day effort to bring 20,000 radical libertarians to a small jurisdiction [New Hampshire] to exert, he hopes, undue influence on the political structure. It was there that Voorhees, along with other radical libertarian political activists, stumbled upon Bitcoin in 2011.

At that point I was completely sold and a year later I left New Hampshire and moved to New York to join Charlie Shrem at BitInstant. He’s taking over the marketing department there as employee number three.

Around the same time, Charlie Shrem, Roger Wehr and Eric Voorhees – all of whom would go on to become cryptography greats – raised their money to set up a Bitcoin booth at the Money 2020 conference in Las Vegas. We needed to be near the PayPal booth to show the world our financial system, Schrem explains. Vorhees says they were unable to convert anyone to Bitcoin at the conference, despite their best efforts.

Belief in false profit

Vorhees admits he was a Bitcoin maximalist, a proponent of the one true currency who rejected all fake coins. I was a maximalist. When I got into Bitcoin, that was obviously the only room, he says.

When the other pieces came out, I rejected them, made fun of them, and generally hated them because I felt they were a distraction from an important project.

Although he tried to focus on Satoshi’s vision, new projects began to bother him, and he realized that many of them were doing things that Bitcoin didn’t or couldn’t do. By mid-2014, the transformation was in full swing.

My whole state of mind began to change. One of the most important aspects of Bitcoin is that it is decentralized. And that seemed to me the antithesis of a decentralized digital economy where there’s just one chain – you know, one code base, one chain, one set of economic rules. It seemed very appropriate that you get multiple different digital assets, and that was actually part of the decentralization, part of the merit of Bitcoin was that Bitcoin was not the only thing that existed.

He mitigates this by adding the usual warnings – most tokens are rubbish, many are scams, most will fail. Only a minority is interesting, but a minority is much more than one.

People at ETH… …are trying to keep these Bitcoin Maxis for Ethereum out of Binanka.

– Eric Voorhees (@ErikVoorhees) February 19, 2021

He still feels sympathy for his short-sighted maximalist colleagues, whom he sees as victims of the human tendency towards tribalism, which manifests itself in various ways: Of course, it manifests itself in religion. And it has expressed itself through cryptography, and some of the people – their conscience – has been warped into a complete endorsement of one flag and a complete mockery of all others.

It’s a group psychology phenomenon, and I don’t know how it will stop, but I think it’s really detrimental to the growth of decentralized digital finance in general.

Satoshi Dice Set

Just one year after his discovery of Bitcoin, Voorhees launched the Bitcoin-based game site SatoshiDice in 2012, which has taken the young cryptophile community by storm.

On Reddit, this guy wrote that he had created a mechanism similar to that of a casino where dice are rolled and the user picks up or loses their coins according to the result of the dice. I tried it and there was magic in it right away… so I started working on it.

It was revolutionary because it allowed anyone in the world to place a bet by sending a Bitcoin transaction, no matter where they were from or how their local laws regulated online gambling.

Moreover, the player didn’t have to trust SatoshiDice because it was clearly fair, meaning it worked as a transparent machine where all the odds and inner workings were there for all to see. Governments around the world have various gaming regulatory and oversight bodies, but the SatoshiDice feature can make these bodies redundant, impotent, or both.

SatoshiDice has shown you what the odds are. It was transparent and you could prove that the rules were right.

The simple, reliable and flawless nature of SatoshiDice has made this platform a great success. A few months after its launch, the game was responsible for nearly half of Bitcoin transactions.

SatoshiDice conducted an unofficial IPO on the MPEx, a type of Bitcoin exchange where unlisted Bitcoin companies offered shares and paid dividends in BTC. They ushered in the ICO boom a few years later and drew similar attention from regulators for securities law violations.

While the casino was winning tons of money, it was also losing momentum because Voorhees felt that his job as head of the world’s largest Bitcoin casino was distracting him from his great calling, which was to preach the good word of Satoshi. Despite continued growth, he reluctantly sold the company in 2013 for 126,315 BTC, then worth $12 million. That would be a nice $6.25 billion today.

Mr. Voorhees’ peace of mind did not last long, as the SEC soon sought him out for a public offering of unregistered securities. Voorhees thought this was unfair after seeing his investors make exponential profits. He eventually got in the saddle for $50,000.

They’ve been miserable for nine months. If I didn’t already despise the government, I do so even more after this event. That was real nonsense.

Its fundamental value is that people should be free to communicate with each other voluntarily, and that no government agency has the right to interfere. In his worldview, institutions and governments exist only to limit people’s power over money, whereas cryptography gives people full economic power to conduct transactions any way they want, and no one can stop it. According to Voorhees, these two forces will inevitably collide.

Voorhees’ company, Shapeshift, allows users to exchange cryptocurrencies without identity verification. That hasn’t always been the case – in 2018, Voorhees says his company is subject to the same rules as traditional banks and has therefore had to implement identity verification (Know Your Customer, or KYC) procedures, making anonymous transactions impossible. It was absolutely pathetic. Our customers didn’t like it. I hated it.

But by 2020, decentralized exchanges (DEX), which allow users to trade without depositing their money with a third party, will gain ground, allowing Shapeshift to refocus its activities on its libertarian values. All KYCs were abolished and the platform became a gateway that allowed users to trade on different DEXs. With Satoshi Dice, I learned that economic relationships require nothing more than a public key to send a transaction, and that everything else can be based on that, he says.

Voorhees says his opposition to KYC is not about ideology, but about protecting users from things like identity theft.

Identity theft is a $30 billion to $40 billion a year problem in the United States alone. It is more expensive than all forms of theft combined. It’s a big problem, and cryptography is the answer.
But to what extent is he bound by this principle? It would classify as theft the government’s access to user data to tax financial transactions not reported by customers. Yes, it’s true. Taxes are absolute theft, he answers unequivocally.

WSJ examined.

The spirit of ShapeShift has proven controversial among advocates of the rules and regulations surrounding traditional funding. An investigation by the Wall Street Journal found that users of Shapeshift laundered $9 million through the platform. However, an analysis by a third intelligence firm, CipherBlade, found that the investigation was flawed because it suggested that the funds were illegal, even after they passed through four different hands, resulting in an inflated $9 million. Understandably, Voorhees, who is normally calm and composed, was deeply affected by this situation.

Here’s the Wall Street Journal calling us money launderers, even though according to their own figures we would be much better [at fighting money laundering] than all those big banks they keep writing about.

There is a noticeable tremor in his voice. The struggle is personal.

We spend our last moments comparing attitudes towards money in different societies. In the Scandinavian countries, for example, all taxes are public. Voorhees finds this troubling, adding that many people feel guilty about having money, when ethically he believes wealth creation is a good thing for society.

I want people who become very rich to be able to be proud of that above all else, provided they do so ethically and use those resources as they see fit. I think that’s the way the economy develops, and I don’t think there’s anything wrong with that.

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