Introducing ShapeShift DAO | Erik Voorhees (SotN 7/21)

ShapeShift recently announced its plans to evolve into a community-owned, decentralized platform. In addition, they held the largest airdrop in crypto history with over 1 million eligible addresses. We bring on (former?) CEO Erik Voorhees to discuss the transition, and how it could be paving the way for all legacy corporations. The Future is DAO. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 🎖 CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🍵 MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha 🔐 LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger 🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ------ 📣 SMARTCON | Register for Smart Contract Summit 2021! https://bankless.cc/SmartCon ------ Topics Covered: 0:00 Intro 8:00 Erik Voorhees & ShapeShift 11:54 The History of ShapeShift 21:04 DAO-ifying 27:10 The Model for Shape-Shifting 32:53 How to DAO 41:06 The FOX Token 47:25 The DAO Launch 52:35 The Regulation Threat 58:40 The Industry Overview 1:05:35 What Erik’s Excited About 1:08:10 A Word for First Cyclers 1:10:34 Closing & Disclaimers ------ Resources: Erik on Twitter: https://twitter.com/ErikVoorhees?s=20 FOX Airdrop: https://fox.shapeshift.com/airdrop ShapeShift Discord: https://discordapp.com/invite/dVVkMhb ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:07Ryan Sean Adams?

  Hey Bankless Nation, welcome to another State of the Nation episode. We've got a hot episode today with Erik Voorhees, who is the CEO of Shapeshift. Shapeshift is now Dao-fying. That's the story here, David. Great conversation with Eric lined up. I know we've already had this conversation with Eric. We're pre-recording it because you are in France right now. What were some of your takeaways?

• 0:30David Hoffman?

  My gosh, Eric just knows what's up in this industry. And I think one of the reasons why Eric has always been so successful is his skill is that he can really separate what is signal from noise. And what gets me really excited is that Eric really thinks that the DAO is the logical next step for the progression of his own company, Shapeshift LLC. He thinks that it should become Shapeshift DAO. And the fact that he has ownership and is the leader behind this LLC and he still thinks that he wants to give it to the community, the fact that he still thinks that I think is phenomenal and is really illustrative of the power that lies in DAOs. And Erik Voorhees wants to tap into that power and that's what we talked about today.

• 1:16Ryan Sean Adams?

  Yeah, super cool. I know you're using the term LLC because we often do. It's like a Swiss corporation, same difference though, like from nation-state thing, MeetSpaceOrg to CryptoNativeOrg, that's the transition here. I just have a ton of respect for Eric, like his ability to pivot, but while staying so true to the core values that shape this industry, as you said, no wonder why he's been so successful in this space. And my favorite was probably near the end, we talked about lots of DAO-type things, but then he gives some advice for people. It's their first cycle and he has some words for those that

• 1:57Ryan Sean Adams?

  are worried about this recent crypto price drop that I think are pretty timeless. So super cool. Anyway, guys, stay tuned for that. Want to talk about what is new in the Bankless Nation. David, you are at ETHCC. This is an Ethereum conference. I know, I think you're going, are you going into day two? Is it day three by now?

• 2:16David Hoffman?

  This is day one.

• 2:17Ryan Sean Adams?

  Day one, okay.

• 2:18David Hoffman?

  Yeah, and tomorrow will be day two. So yeah, and end of day one is my evening time, your morning time right now. And the reason why we aren't live streaming this is that my Airbnb doesn't have the capacity to live stream this, so we're just pre-recording it and releasing it. And man, I am just, the energy in France and energy at ECC is absolutely insane. I've, I've heard just a ton of people on crypto Twitter who aren't at ECC talk about all of the FOMO that they're having. And let me tell you-

• 2:44Ryan Sean Adams?

  Yeah, I've got a bit of FOMO, David. Yeah.

• 2:45David Hoffman?

  It's completely justified. Absolutely should be.

• 2:48Ryan Sean Adams?

  You are genuinely missing out.

• 2:50David Hoffman?

  Yeah, you are absolutely missing out. Yeah, I've, I've seen so many different people here, and I'm doing actually a podcast at ECC. So doing like 10 to 15 minute quick interviews with all the big names that you know and love. Did a quick interview with Ayamayaguchi of the EF. I'm doing one with Vitalik, tomorrow, and Kane as well, and Stani from Ave. And so if you are feeling the FOMO from ECC, you totally should. And then you should listen to the podcast that comes out this following Monday, which is going to be the ETH CC experience, allowing you to feel the vibes and feel the energy of what it was like to be at ECC. I'm, I hope I can deliver that to the Bankless Nation, and hopefully I can do a good job conveying the vibe around ECC, because the vibe is hot.

• 3:34Ryan Sean Adams?

  David, I can't, I can't wait, man. Like, I want to, I'm really looking forward to listening to that. Not only are you dropping the FOMO on us, but you're also dropping the antidote to that FOMO. So appreciate that.

• 3:44David Hoffman?

  Poisoning you and then giving you the cure.

• 3:46Ryan Sean Adams?

  It's perfect. Thank you. Guys, if you're feeling the FOMO for missing out on ETH CC, here is a conference you can attend. This is the Chainlink Smart Contract Summit. It's coming up August 5th through the 7th. David, you and I will be there. We're doing an EIP 1559 panel, which I'm super stoked about. But this is like a fantastic, almost like a DeFi conference meetup. They're going to be talking about Oracles, of course, but they're also going to be talking about automated market makers in Layer 2 and MEV problems. So if you want to get up to speed on the cutting edge of DeFi, come check this out. There's going to be like 200 plus or so DeFi projects.

• 4:25Ryan Sean Adams?

  Projects and leaders from those projects speaking jam packed event I attended last year was a blast lot of fun this is free did I mention that my God I didn't mention that it's free and it's virtual so if you are looking to level up on DeFi Check this out no excuses make some time for this and and and and learn about everything you can with this free information All right David before we get into today's conversation got to ask you the question what's the state of the nation today

• 4:54David Hoffman?

  The state of the nation is shapeshifting and Eric actually got to this joke before I was able to but I had I did have it line up for the right for the record I did have this joke lined up but Shapeshift is Eric's company and it has progressed and evolved and shapeshift its form into many different things into the future And that's really I what I see a lot of DeFi apps doing and and Ethereum at large you know Ethereum is going through a shapeshift with EIP 1559 and then proof of stake You know we have Uniswap V1 V2 V3 we had Balancer V1 V2 we got Maker single collateral die shapeshifting into multi collateral die

• 5:29David Hoffman?

  But now we are seeing it with an LLC shapeshifting into a DAO and so the state of the nation today Ryan is that we are we shapeshift as an industry and shapeshift is shapeshifting

• 5:42Ryan Sean Adams?

  Very good David I let you look that's great man and Evolver die I think that's that's the idea behind this podcast And this is the next evolution for shapeshift and it's super cool to see super cool to see an established company entering the DAO space too because As we said in the podcast we're all learning how to DAO together the more of us on that journey the faster the tools will get built out the infrastructure will will get built out and the learning lessons Will come about and we'll all get better together so super excited to have shapeshift on that journey So before we get to the conversation with Eric we want to thank the sponsors that made this episode possible

• 6:18David Hoffman?

  Living a bankless life requires taking control of your own private keys. Not your keys, not your crypto. That's why so many in the bankless nation already have their Ledger hardware wallets, which makes proper private key management a breeze. But the Ledger ecosystem is more than just a secure hardware wallet. Ledger is the combination of the Ledger hardware wallet and the Ledger Live app. And if you're used to seeing all of your crypto services and favorite D apps all in one place, Ledger is where you want to be. Not only does Ledger let you buy crypto assets straight from the app, but it also hooks into decentralized exchange aggregators like Paraswap, which makes sure that you are getting the best prices on your trades without your assets ever leaving your control. DeFi never stops growing, and the Ledger Live app grows alongside with it. So click the link in the show notes

• 7:03David Hoffman?

  to see all the DeFi apps that Ledger Live has. And stay tuned as more and more apps come online. And if you don't have a Ledger hardware wallet, what are you even waiting for? Go to ledger.com, grab your Ledger, download Ledger Live, and get all of your D apps all in one place. Arbitrum is an Ethereum scaling solution that is going to completely change how we use DeFi. If you've been using Ethereum for the past 12 months, you've probably noticed the high gas fees and the slow confirmation times that have been plaguing DeFi. Too many people want to use Ethereum, and it doesn't have enough capacity for all of us. That's where Arbitrum comes in. Arbitrum is a Layer 2 to Ethereum, which means Arbitrum can increase Ethereum's throughput by orders of magnitude at a fraction of the cost of what we are used to paying. When interacting with Arbitrum,

• 7:48David Hoffman?

  you can get the performance of a centralized exchange while tapping into Ethereum's level of security and decentralization. This is why people are calling this Ethereum's broadband moment, where we get to add performance onto decentralization and security. If you're a developer and you want to save on gas costs and make an overall better experience for your users, go to developer offchainlabs.com to get started building on Arbitrum. If you're a user, keep an eye out for your favorite DeFi apps building on Arbitrum. Arbitrum has been working with over 300 teams, including Ethereum's top infrastructure projects, and will be opening up to all users shortly. There are so many apps coming online to Arbitrum, so you may want to pack your bags in preparation for the great migration to the Arbitrum Layer 2. To keep up to speed with Arbitrum,

• 8:33David Hoffman?

  follow them on Twitter @Arbitrum and join their Discord.

• 8:37Ryan Sean Adams?

  All right, Bankless Nation, super excited to have with us for the third time, Erik Voorhees. Eric is one of the earliest pioneers of this industry, one of the earliest to go west, to go bankless. He believed in Bitcoin before it was cool, before our industry was an actual industry. What I love about Eric is he is known for being a huge Bitcoin believer, but he's also totally bullish on DeFi and the non-Bitcoin parts of the crypto industry, which is why we like him so much. Welcome back, Erik Voorhees, to Bankless for the third time. It's great to have you.

• 9:11Speaker 02

  Thanks, guys. Super glad to be here.

• 9:14Ryan Sean Adams?

  David, I don't know, we called Nick Carter recently our favorite Bitcoiner, but I might be doing Eric some disjustice here because I feel like Eric is one of my favorite Bitcoiners, anyway.

• 9:24Speaker 02

  You just call whoever's on the show your favorite Bitcoiner.

• 9:27Ryan Sean Adams?

  We don't. We have more integrity than that here on Bankless. But you really are, I think, you know, you stand up very well for the values of this space and always have. And that's why it's really exciting to talk about this next chapter of what you're doing with Shapeshift. Maybe we could start with kind of like what's happening and I'll give Bankless listeners the TLDR in case they haven't heard and then Eric will get into kind of the discussion here. But Shapeshift is an on-chain exchange that you founded, 6 billion in lifetime volume, 150,000 monthly users, 500 K wallets, 2.5 billion in associated assets.

• 10:11Ryan Sean Adams?

  And if you're to run this by fintech measures, right, something like Revolut, where they value things at 2K per user, Shapeshift would be worth about $1 billion right now. So like by any measure, a successful organization, a successful company, and yet, the company is choosing to dissolve. You are launching tokens to your users, employees and founders. You are becoming a DAO. Let's start with this question. Why?

• 10:39Speaker 02

  Yeah. Well, so yeah, we are decentralizing. We're converting Shapeshift from a normal VC-backed shareholder company with a board and an executive team to a DAO where the governance and the value accrual ends up revolving around the token instead of the shares. Why?

• 11:03Speaker 02

  We are ultimately trying to build an open source, multi-chain self-custody crypto platform for the whole world. And to do that, we have to be decentralized. We have to uproot the the shackles that keep us tethered to, you know, the normal corporate world.

• 11:25Speaker 02

  We can't violate regulations, so we have to not do anything that is regulated. And corporations by their existence are regulated. And so one way to avoid that is to no longer be a corporation.

• 11:39Speaker 02

  Ultimately, this is about aligning Shapeshift with the ethos of crypto generally, which is open, immutable, and borderless. We believe that best happens if we ourselves are decentralized. So we are starting on that process.

• 11:54David Hoffman?

  Eric, the story of Shapeshift has been one of evolution. It has gone through a number of different phases in its lifespan. It's really a story of both keeping up with the industry, but also trying to be a product that maintains its resonance with the ethos of the industry at large. Maybe just for the listeners who aren't as familiar with the Shapeshift as you or we are, could you just walk us through the history of Shapeshift as it got started in 2014 and the various pivots that it's made up until its most recent pivot in turning into a DAO?

• 12:28Speaker 02

  Yeah, certainly the name Shapeshift has become very apropos for what we are.

• 12:34David Hoffman?

  You guys have shapeshifted.

• 12:36Speaker 02

  Yeah, I wish I could take credit for having planned that all out from the start, but no. So yeah, we started in early 2014 in the wake of the Mt. Gox catastrophe. And I saw two things that I thought were important. One was I didn't want the world to have to use centralized custodial exchanges because of all the danger of that, you know. Mt. Gox almost destroyed the whole industry back then. And two, I saw a burgeoning ecosystem of digital assets. You know, this was pre-ethereum, but the trend was pretty clear that people were creating new digital assets for different use cases and with different technology.

• 13:18Speaker 02

  And so I wanted to fuse these two things and basically create an easy way for people to convert one digital asset into another with as little friction as possible. And without us ever taking control of user funds or having deposits of customers. So that was the

• 13:33David Hoffman?

  Just to cut in there, I actually find that the early version of Shapeshift extremely resonant with Uniswap. Where Uniswap is just you input one token, get out another token, there's no centralized exchange, there's no custody. And it was really Uniswap before there was DeFi. It was really the earliest version of Uniswap possible.

• 13:51Speaker 02

  Yeah, and you know, that's, this is a little later in the story, but when I first used Uniswap, I had this feeling like, holy crap, they, they've rebuilt Shapeshift and they've done it better than us. Using tools that didn't exist back when we started. I must learn how they've done this and we should potentially go down this path. So Uniswap was absolutely an inspiration to us. And if any degree of us inspired Uniswap, you know, that'd be kind of poetic.

• 14:20David Hoffman?

  And also, just to cut in here again, just to end illustration for, for the users is Shapeshift, you would go there. And if you wanted to trade, you know, Bitcoin for Ether, you would be presented with a Bitcoin address or a Bitcoin QR code. And then you would also give Shapeshift your Ethereum address. And you would send Bitcoins and then Shapeshift would Shapeshift it into Ether. And you could do this for many, many pairs, right? So you would send them Bitcoins, receive Monero, send them Monero, receive Bitcoin Cash. Uh, and so it was, it was a centralized exchange, but it felt atomic, right? You just input one token and then receive the other and Shapeshift did all the magic in the background.

• 14:58Speaker 02

  Exactly. Yeah, and it worked across chains, which is really key. So to provide that service, which was cross-chain, we ultimately had to be the counterparty to the trade with users. So when someone sent us the Bitcoin, we received that into our own hot wallet. We had an inventory of Ether and we would send that out to that user. So that made for a great user experience. It was very fast and simple. But by the time we got into 2018, we had grown fairly large. We were 100 people, making lots of money. Everyone loved the service. You know, it was all great. And we had invested a lot of money into the regulatory investigation, basically like,

• 15:42Speaker 02

  to what degree are various global financial regulations going to apply to us? And we came to the very depressing conclusion that we would potentially be treated like a financial institution, which meant we would have to impose KYC and accounts and all the various financial surveillance apparatus on to Shapeshift customers. Before that, we had no user accounts. We had no KYC. It was, you know, a service for users to trade assets easily and we, we felt like it was important to protect them by not taking their private information. So that was mid 2018. Very depressing for me, for the whole company, all the staff.

• 16:27Speaker 02

  Our users hated it. They called us a bunch of sellouts and, you know, just so mad at us for violating our principles. And this was, this was pretty awful. I mean, we, we ended up losing like 99% of our business. Most of the customers just went off to other competitors that were not.

• 16:50Speaker 02

  Not taking the US regulatory environment as seriously as we were at the time. And I can't blame those users, right? I mean, they they wanted a service. They didn't want to be spied on. So um I get it. And for the next couple of years, um we really struggled and we reinvented the product to be not just an exchange, but really like a an integrated wallet where people could use their hardware wallet or software wallet.

• 17:19Speaker 02

  See all their assets in a self custody way and and trade them when they wanted. Um, that didn't get a ton of traction again because we had all this KYC and people just didn't like it. Meanwhile, in parallel, and this is where the story starts getting fun. You have Ethereum, which had been created and spawned this whole DeFi ecosystem. And in, you know, twenty nineteen, it was it was getting started and by early twenty twenty, it had gotten large. And Uniswap in particular started seeing days where it was rivaling Coinbase in its volume. And when I came across Uniswap and tried it, I was like, yes, this is it. This is they they've done it, but it only worked for Ethereum assets.

• 18:02Speaker 02

  And Ethereum is great, but it is only a piece of the ecosystem and it does not include the most important asset of all, which is Bitcoin. Um, by market cap and liquidity. So I was I was like, all right, well, Uniswap is awesome, but like, how do you do this across chain? And I didn't have a night. I didn't have an answer to that. So later in the year in twenty twenty, we decided we would integrate Uniswap. Um, and in particular, the zero X aggregator, which uh allowed like twelve different DEXs into Shapeshift. So we decided to just rip out our guts as a business, like our trading engine and our ability to interact with customers as a trader. And just replace them, outsource them with these decentralized protocols. So we took the regulated activity,

• 18:46Speaker 02

  which had gotten us like caught in all this barbed wire. And we outsourced it to a decentralized immutable protocol.

• 18:54Speaker 02

  That was the start of us understanding the power of this decentralized technology. We then went on to discover Thorchain, which allows, which is like Uniswap, but it allows trades across chains. Um, super cool technology. And so we integrated that in April. And since then, in April, we have not had KYC any longer. Uh, we are not an intermediary at any step of the process. And Shapeshift is back to being, you know, this like frictionless uh place where people can trade without uh worrying about being surveilled on. And we're using the technology in DeFi to do it.

• 19:30David Hoffman?

  And so the, the regulators that you uh, or excuse me, the, the legal counsel that you guys had at Shapeshift, the ones that originally informed you that it was probably not going to work out to not take KYC and all, and AML and all the other uh requirements and, and then ultimately forced, uh, you know, Shapeshift into doing that. Were they, you also consulted with them saying, hey, what if we replaced all of our backend with, you know, Uniswap, ZeroX and, and Thorchain? Are you, would you guys then be okay with us not taking KYC, AML information? And they said, yes?

• 20:03Speaker 02

  Um, it's interesting to hear you compress it into one sentence like that. Uh, the reality is this is, this is like a three-year struggle through every nuance of global financial regulation. Millions of dollars, countless hours of discussion with internal and external counsel, trying to figure out what, where the sensitivities were and where we could maneuver. Um, and ultimately came to the decision that like, if you're providing regulated services, you will be regulated. Right? That's a fair statement. So stop providing regulated services. And that's what we did. We stopped providing regulated services.

• 20:40Speaker 02

  Uh, users are interacting with DeFi protocols directly. We are not in the middle of that. We don't even add fees to that. It's just a direct service, but through our software interface. So, um, you know, laws can always change and we have to watch these things carefully. But under the current laws, Shapeshift is not an intermediary and therefore is not responsible for the financial regulation that an intermediary would be.

• 21:05Ryan Sean Adams?

  Eric, there's a lot more to talk about here. In fact, I want to get back to kind of the the laws might change conversation at some point during our discussion because we're, you know, I think the crypto world is wondering how laws might change in DeFi circles. You know, there's a lot of talk about stable coins these days in Congress and other, you know, legislative body, but we'll get back to that. I guess the meat of where you've gotten so far is you've gotten to a point where Shapeshift is truly a non-custodial, bankless exchange, right? And so that's, that's one portion of the regulatory infrastructure and the trust

• 21:46Ryan Sean Adams?

  infrastructure that you've essentially outsourced on-chain to Ethereum, Thorchain and other protocols, right? But you still have this other part of regulatory infrastructure, which is you guys are a LLC, a corporation, some sort of legal apparatus, operating in meat space, right? And so you have shareholder agreements and you have traditional bank accounts. Why? Because you have to have those in order to function in some nation-state jurisdiction, right? So you've got part of this that has been outsourced on-chain and another part that is still in the, the traditional like legal apparatus. Is that where the DAO idea

• 22:27Ryan Sean Adams?

  starts to, to come about and the execution of that idea? So, so pick up the story there with that second half.

• 22:34Speaker 02

  Yeah. So a year ago, I was not thinking about becoming a DAO. We had had very casual talks about letting users of Shapeshift govern parts of what we were doing with the FOX token. So like some of these primitives were starting to seep into our discussions.

• 22:52Speaker 02

  But if someone told me like, hey, you should decentralize Shapeshift, I would have kind of dismissed that as like a little silly. But after we saw the reception of the Uniswap integration and after we started learning about these DeFi protocols and the DAOs and the tooling that has been built for DAOs today. And after we realized that our platform is going to be most competitive if it is open source and all other protocols can build onto it instead of having to fight for bandwidth from our own small development team. The number of reasons to be a central entity just started falling down. And you know, the last one is really.

• 23:34Speaker 02

  Okay, fine. You want to be a decentralized organization. You have an obligation to shareholders. You have an obligation to your employees. You can't just like drop the ball on those people and chase this fanciful idea of decentralization. How do you? How do you navigate this such that those stakeholders are better off through that process of decentralization? As we figured that out, it became obvious that we must do this. And so I would say our executive team had decided to do it back in late April. And our employees learned about it in May. And then it all became public just last week on July fourteenth, which is coincidentally the Steel Day, which has some fun symbolism.

• 24:15Ryan Sean Adams?

  That that is incredible. It's awesome. I want to actually read a quote that that you made in your in your personal post, I think, announcing this. You said this, just as it made sense for every company to utilize the cloud to avoid infrastructure friction in the two thousands, so too will it make sense to utilize DeFi to avoid political and economic friction going forward. Buzzwords both and yet revolutionary using DeFi to avoid political and economic friction going forward. That seems very much the path that you've taken all along this this timeline, going from the sort of

• 24:56Ryan Sean Adams?

  you know, more centralized exchange to completely non custodial now foregoing the political and economic friction of a nation state corporation or a legal entity. Do you think that this is going to be a trend that is going to like be as big as the cloud? I mean, there was a time where where no one used cloud computing. Right? Now everyone does. Now that that is the norm. Is this move to DAOify an organization, something that is is going to be as big as the cloud? How many others are going to follow in these footsteps? What's that going to be like?

• 25:35Speaker 02

  The cloud is pretty big, so could it be bigger than that? I don't know. But the economics are the same. So the cloud became popular because it reduced the cost of holding and running infrastructure and reduced it not by like 10%, but reduced it by like 95%.

• 25:56Speaker 02

  There is so much cost and friction in running regulated financial services. People do not see this because it just gets passed on to the end user and all the banks are these zombie organizations that have zero interest in innovating. They do not complain about regulations because they are just a tentacle of the state themselves. So you get that you have an environment in which financial regulations cost society tens, hundreds of billions of dollars per year. And the, the, uh, all of society simply bears that cost today because there isn't an alternative. DeFi comes along and you get these financial primitives and protocols which do many of

• 26:37Speaker 02

  these financial services without any middlemen, without any intermediaries, without any staff, without any taxes, without any compliance obligations. They are just open immutable code running in cyberspace, in Ethereum or other blockchains as they develop. That is incredibly powerful. And so all we are doing here is recognizing that that is a better service to provide to our users than trying to run through it ourselves as a friction laden organization. I have to imagine that other organizations will come to that same conclusion.

• 27:11David Hoffman?

  Eric, I see this story of Shapeshift as a company that first used crypto blockchain DeFi to protocolize its products. And now it's using DeFi and crypto and DAOs to take the actual legal structure and turn that into code as well. So, you know, first products and now company. And so I want to ask you a little bit about the logistics of that. Uh, what is the model for the path towards turning Shapeshift into a DAO? I'm assuming it's not just like a black and white. It's like, oh, we're a DAO now. It's a little bit more of a progression.

• 27:44Speaker 02

  Yeah.

• 27:44David Hoffman?

  So, so tell us about that story. Is it something maybe like the Maker Foundation model or is something else in this ecosystem? Tell us about the progression of the Shapeshift LLC turning into Shapeshift DAO.

• 27:56Speaker 02

  Yeah, that's really the. If you get away from all the fanciful fun poetic stuff, like, how do you actually do this? So we are, we are not decentralized today. We are 100% centralized.

• 28:10Speaker 02

  We have two basic themes that we need to work on. On the product side, we have to open source all of the shapeshift code. That will happen over the coming months. That will allow the community to build on this product and to have, um, you know, a stake in where that goes. Uh, we had to distribute the FOX token to all those people so that they have an economic incentive to care and to participate. Economics incentives are everything. And so our airdrop, which was the largest in history, went to all of our past customers and over 100,000 members of other DeFi communities that we have been inspired by. So all those people now have a stake in the decentralized shapeshift.

• 28:54Speaker 02

  So that's sort of on the product and token side. Then there is the legacy entity. So shapeshift is a Swiss corporation with several subsidiaries in different jurisdictions. Ultimately, all that stuff has to get wound down. Our balance sheet has to get liquidated out to our shareholders. All of our contracts have to be wound down and ended. We have various investments in different companies. Those have to get liquidated. Um, all of those kinds of things to wind down that entity will happen also over the coming months. And, uh, these things are kind of two parallel tracks that we have to, uh, have to work on.

• 29:30David Hoffman?

  So what about the employees of shapeshift DAO? What's the, the long-term future for them? Because, you know, you, you, with an LLC, you actually have an employment contract where, you know, they actually have to show up for work. But with DAOs, like, they don't have to do anything. Like, it's a DAO. Like, what, what's the story of the employees of shapeshift?

• 29:49Speaker 02

  Yeah, interestingly, employment contracts don't make someone show up to work. And anyone who's ever, anyone who's ever run a business, you know, knows like the challenge of HR generally and having to have an entire department just to manage the logistics of incoming and outgoing staff with payroll and there's a whole world of regulation just around that. Right? So we, we endure a ton of costs just handling the regulation of the people that we're trying to voluntarily work with. So right now, today, Shapeshift has about sixty-five employees. And all of these employees will no longer be employees by the end of this year.

• 30:31Speaker 02

  So there are three waves, you know, roughly a third of the employees are in each of these waves. They all have very generous severance, but more importantly, they all got very considerable grants of FOX tokens, which unlock over the coming three years. Depending on where the price goes, this grant for many of them will be more valuable than the salary that they were making as W2 employees. So that is now their option on how they wish to engage with the Dow. Some of them, we expect, you know, want to be conservative and will want to go find some new W2 role at some company somewhere and we wish them luck. Others will probably value the freedom that they have and they'll work on Shapeshift part-time however they wish.

• 31:14Speaker 02

  And others are very committed to, you know, continuing full-time work for Shapeshift, but not in an official capacity, just as a economically incentivized member and someone who cares about our vision. So I expect employees will fall into all three of those buckets. And, you know, certainly the range of responses among our employees was, was as diverse as the employees. Some of them thought this was the coolest thing in the world. Others were like, this is really scary. What the hell are you doing? And everything in between that. So yeah, we-

• 31:45David Hoffman?

  Where do you fall on that spectrum?

• 31:47Speaker 02

  I mean, obviously the former.

• 31:53Speaker 02

  Well, I am- I've been scared for 10 years trying to build things in crypto, right? So like that's kind of, I've gotten used to that and I'm willing to take that risk, but um lots of people aren't and that's, that's okay too.

• 32:07Ryan Sean Adams?

  So where do you, where do you see your position with Shapeshift Dow over the long term as the figurehead and for former CEO of Shapeshift? Where will you be in relationship to the Dow?

• 32:19Speaker 02

  Yeah. So I won't be CEO of anything anymore, you know, after this year. Um, I will remain simply an influential member of the community. Um, you know, I, I will still be very much involved. I am very heavily economically incentivized to make sure it is a success. Uh, and I am more excited about Shapeshift in a decentralized model than I was in a centralized corporate model. So for me, it's been very reinvigorating. And seeing the community response after our announcement last week was, was really fun.

• 32:53Ryan Sean Adams?

  So Eric, you've been on, on the side of, of kind of running a traditional organization for a while, but a traditional organization in crypto. I think some are still skeptical of the Dow model in, in general, right? And I know all, look, all of us are early on in the Dow model, like at, at some level, the entire community, the entire crypto industry, we're all learning how to Dow together. Um, but because you took this action, you must have been um optimistic, I guess, about the organizational model of a Dow, but, but skeptics will, will come and look at this thing and be like, there's no CEO, there's no employees, there's no employment agreement. How does anything get done in this structure?

• 33:34Ryan Sean Adams?

  What, what's your answer to that? How do you anticipate things are going to get done in the Shapeshift Dow structure?

• 33:42Speaker 02

  Great question. Yeah, I remain skeptical about Dow's as organizations too. You know, just because we're doing this doesn't mean I think they're a panacea or that we have all the answers to this. We're, we are, as you say, figuring out how to Dow. Um, I think it is a new form of, of organ, of economic organization for the 21st century. And it was impossible before the advent of tokens. Tokens provide.

• 34:09Speaker 02

  An almost unlimited design space for economic incentives. And you coordinate people around the economic incentives of a token. Instead of coordinating people around the much more rigid incentive structure of salaries and equity ownership. So it's a model in which people are far more free, you know, they can come and they can go as they please. There is no employment contract. People may show up and work for a day, or they may be committed for 10 years and it's on them. It is something that is far more appropriate for work-life balance. Because every person can figure out for themselves what they want to do. They can work at night, they can work one hour a day.

• 34:52Speaker 02

  You know, they can travel around the world with their family and work, you know, occasionally in the afternoon. Whatever they want to to do for their life, this model permits that. And and that is a net benefit to all of the participants of that system. The the question in the test is, okay, cool, that sounds all great. Can you actually align around one goal and produce a product, an application? That is revenue generating in some sense. And revenue generating may only mean that the token value appreciates over time. But some kind of economic activity has to be going on. More and more people around the world have to be finding it valuable and it has to have a sense of of growth. So, um, yeah, that's the experiment and we will see.

• 35:38Ryan Sean Adams?

  Well, one thing I think you guys will find is that.

• 35:43Ryan Sean Adams?

  You you may have a whole new workforce, a different type of workforce. That begins to work within Shapeshift, right? Because the DAO structure very much is is permissionless, right? So now you're not limited to the people inside of your contractor or employment agreements. Anybody can come, enter your Discord and start DAOing with Shapeshift. You might have some really interesting discoveries there. So that's that's some of the benefit.

• 36:08Speaker 02

  Yeah, we've already, we've already seen this. You know, there are people from other DeFi community projects that have come into our Discord and our forum. And started proposing things that are kind of interesting ideas. And this never would have happened in our closed, kind of, you know, corporate state.

• 36:22Ryan Sean Adams?

  Yeah, it's incredible, the amount of innovation and excitement you see in a DAO. And it also generates, in our experience, too, a lot more noise. They have to find new ways to sort of filter through. One other critique, I'm just going to keep my critic hat on, because I know you're thinking about this, too, is, I think a critic might say, "Yeah, Eric, so now we have tokens and now they're on-chain." Well, those sound a lot like shares in the equity world. And this whole thing is just going to collapse back to shareholder governance, corporate structures, boards of directors. This is why we have the structures we have around shares and equity today. And so DAOs are not fundamentally any different than those things.

• 37:06Ryan Sean Adams?

  It'll just collapse to a corporate structure once again. What do you think about that?

• 37:14Speaker 02

  I think the mere fact that a person can buy one token and sell one token, globally 24/7 at a liquid price, demonstrates how different this is than any kind of normal corporate equity situation. When there is a startup, someone in some random country around the world can't go buy $10 of that project and participate just by being involved in the forum, right? Like, that is something wholly new, and I feel like is far more appropriate for the internet age than the traditional equity structure. So there are certainly overlaps and similarities between equity shares and tokens. You know, the governance of Shapeshift will revolve around those tokens,

• 37:59Speaker 02

  just as the governance of corporate Shapeshift revolves ultimately around the shareholders and the board of directors that are brought in by them. So there's certainly parallels and overlaps. And it's not like everything in a normal corporation is bad. You know, there are some very good practices about organization among humans that have developed in the corporate world. I think a lot of those same principles will emerge in the token based world, but what we, what you will get rid of is a lot of the corporate bureaucratic cruft. That is not necessary and is not productive for a digital global project in the 21st century.

• 38:35Ryan Sean Adams?

  You know, it blew my mind is uh when David had the, the guys behind a, a Dow infrastructure tool, Dow payment co- tool called coordinate on Bankless and Meet the Nation. And this, this tool, yeah, and it, okay, but this thing blew my mind, Eric, because it's basically like. Um, the Dow allots a certain amount of tokens and then opens it up to our, all Dow members to essentially allocate. Um, these tokens to their peers and reward their peers for contribution in the Dow. So the cool thing about that is it gives the people who are in the trenches, the ability to like.

• 39:16Ryan Sean Adams?

  Reward their nearest neighbor, reward the person on their project who's contributing that they see doing something in the Dow with some additional tokens. And that blew my mind.

• 39:24David Hoffman?

  It's like if employees were able to choose their local environment of other employees as to who they think should be rewarded the most.

• 39:33Ryan Sean Adams?

  Exactly. And this blew my mind because like so many times in the corporate world, when I used to like li- live in that, it's like. We all know who the big contributors are and we all know who the freeloaders are essentially. And the people who most know that aren't the bosses. It, it, it's those that are in the trenches actually working with these individuals. Imagine if employees had the ability to vote. For who gets a bigger salary and that's what this protocol enables. So there's so much of that.

• 39:59Speaker 02

  I love that. I love that. And like just to, you know, to use ourselves as an example here. Shapeshift was never a large corporation. You know, we were 65 people, you know, a little over a hundred at most. And even at that level, there is a degree of bureaucracy that is. I would say counterproductive. So in, in our case as a company. If someone in the trenches, as you say, wanted their peer to get a bonus. That has to get raised through like at least one or two levels of managers. There has to be a couple of meetings about it. Oh, it doesn't comply with the company's like bonus policy. And there's a bonus policy review meeting coming up in a month and we can discuss it there, right?

• 40:43Speaker 02

  Good ideas die in that environment. And we're a fairly radical company. We're not the kind, we're not, you know, like a bunch of suits building um process everywhere. But a lot of those processes form in the corporate structure, and I don't think they need to form in the decentralized token-based structure. That is the experiment that we're going to try to to see.

• 41:07David Hoffman?

  Eric, I'd like to get into the logistics of the Fox token and the airdrop and the overall distribution of it. Because now Fox token is the power of Shapeshift out and the Fox token had a massive airdrop. Uh so what were the logistics of the airdrop? Who got how many Fox tokens and why were those decisions made?

• 41:27Speaker 02

  Yeah, so it was the it was the massivist airdrop.

• 41:31Speaker 02

  We airdropped, was it roughly three hundred and forty million tokens, which is about a third of all of this, all of the billion tokens out to

• 41:44Speaker 02

  roughly a million past Shapeshift customers. And a hundred and twenty thousand members of um a bunch of DeFi and Ethereum-based protocols, including Uniswap, Gitcoin, Urn, Aave, a bunch of others. Thorchain, don't want to forget them. So that's how we we we wanted it to be a large amount, both in like number of recipients and in a just a huge chunk of the aggregate supply of these things. Decentralization is a process, and if we only distributed, you know, a tiny minority of these tokens out to the community, then it's kind of going to be stillborn. We tried to look at a lot of the other airdrops and projects that have done this successfully and built good communities around it.

• 42:30Speaker 02

  One of the most important themes and lessons is that the advantage has to live with the outsiders instead of the insiders. Right? The insiders definitely deserve something, but they have to be at the disadvantage relative to the community. And you don't have to be altruistic to make that decision, because ultimately it is in all of the insiders benefit at Shapeshift for this to be a success long term as a open community. So um there was a lot of people who totally got that internally. And when when they're like, well, why, you know, why is why are strangers getting so many of these tokens? They understood that it's because you have to foster and cultivate this this decentralized model.

• 43:09Speaker 02

  Um, so yeah, it it ranged from two hundred Fox tokens at the smallest to several thousand Fox tokens at the high end. Um, based on how many times that address had traded with shapeshift. Or based on, you know, if if that person had registered a keep key, we gave them some extra bonuses. Um, you know, anyone in the forching community, we gave some extra bonuses because we just are in love with them. So a lot of it was just like discretionary and it's it's always fun and easy to just dish out money to people and everyone feels good about that. Um, so yeah, we we tried to model it after some of the other projects that we'd seen to do a good job with it.

• 43:47Ryan Sean Adams?

  Uh, Eric, I I just actually checked while we were talking and one of my addresses, one of my test addresses. I've got some Fox tokens coming my way. It's pretty.

• 43:56Speaker 02

  Congratulations.

• 43:57Ryan Sean Adams?

  Yeah.

• 43:57Speaker 02

  Congratulations.

• 43:58Ryan Sean Adams?

  So how can how can people see if they're if they're eligible and um, like, what's the best way to view that? Because part part of what you probably want to do right now is just get the word out so that everyone who is eligible knows they're eligible and where to where to check.

• 44:12Speaker 02

  Yeah, so again, it's the largest airdrop in history in terms of recipients. And so I would recommend everyone just check it out. Um, fox.shapeshift.com slash airdrop. And you can check addresses there. Um, you can actually claim your airdrop for an address that you can't connect here. So let's say you'd use shapeshift in the past with um, a wallet that is not like a web three wallet, not MetaMask or something. You can go to this site, um, check that address. It'll tell you that it's eligible. And then you can pay the gas fee to claim that with a different wallet. So you could pay that gas fee with a MetaMask. And then the Fox tokens will be sent to that address that was eligible.

• 44:54Speaker 02

  Um, the window here is ninety days from last Wednesday, from the fourteenth of July. So people have some time to claim it, but after that, anything that's unclaimed will be dumped into the Dow Treasury. Uh, to the benefit of all the current Fox token holders.

• 45:11Ryan Sean Adams?

  And that's very much the the Uniswap model as well, right? Like Uniswap, everyone, a lot of people got the uni tokens. And almost anyone could claim any of the the uni tokens. And as a user user experience, that kind of model I thought was was the best of all the airdrops that I've seen out there. Um, there's also liquidity mining coming for Fox tokens. Can you go into details around that?

• 45:32Speaker 02

  Yeah, so that started forty eight, forty eight hours after launch. Um, we felt it was a best practice to not start that right at launch because those early yields are just so atrociously large, like give everyone a chance to get on the starting line.

• 45:46Ryan Sean Adams?

  Um, emotions at that point in time, too.

• 45:50Speaker 02

  Exactly. Um, so that started Friday of last week and it's a three month program where we have just committed millions of tokens to be dumped into the uh, Uniswap V2 Fox ETH liquidity pool. And so the yields even right now, the pools have gotten pretty deep, but the yields are still in the four hundred to five hundred percent APR range. Those yields will fall to the degree that the pools increase. So our goal here was to build liquidity for the Fox token. So we wanted to incentivize people that got their airdrop to put that into the liquidity pool because then you get liquidity in the token and that benefits everyone. So that has been working fantastically well.

• 46:31Speaker 02

  And um, the liquidity pool is just hovering under around ten million uh, dollars in Fox tokens.

• 46:36Ryan Sean Adams?

  Are you guys going to be doing anything with uh, Uniswap V3 too, Eric?

• 46:40Speaker 02

  Yeah, so we, we struggled with this because V3 is awesome. Um, we were trying to use contracts which had been vetted by other airdrops and liquidity mining. And which had been audited. So we didn't want to be writing a bunch of new stuff uh, and putting it all out there just to get into the V3 version of Uniswap. So we made the decision to stick with the tried and true contracts that were available for Uniswap V2.

• 47:05Ryan Sean Adams?

  That is awesome. Guys, we are going to be back with Erik Voorhees. There's so much more to talk about the nation state and DeFi, the DAO experience uh, so far, crypto in twenty twenty one and some broader topics like that. So stay tuned. Before we do, we want to thank the sponsors that made this episode possible.

• 47:25David Hoffman?

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• 48:09David Hoffman?

  so you can set and forget your DeFi trades, and they will go through automatically while you're away. New to Matcha is an integrated fiat on-ramp, so you can purchase crypto directly with your credit or debit card and have that fiat be instantly traded for any token that has liquidity. When you're making a trade, head over to matcha.xyz/banklist and connect your wallet to start getting the best prices and most liquidity when you trade your crypto assets. Banklist is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries,

• 48:53David Hoffman?

  just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand-new in the Uniswap ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while, and we'll say it again. DAOs have money, and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap. Just look at the size of the Uniswap Treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a Uni-grant at unigrants.org. Help steer Uniswap in the direction that you think it should go.

• 49:37David Hoffman?

  That's exactly what we did to get Uniswap to be a sponsor for Bankless and you can do the same for your project. Thank you, Uniswap, for sponsoring Bankless. All right, Bankless Nation, we are back with Erik Voorhees and the brand new Shapeshift DAO. And Eric, it has been seven long days since the launch of Shapeshift DAO. What's happened? Anything happened in the last seven days? I know the earliest, like first days after a token airdrop and a DAO launcher are some of the most chaotic and most hectic. What are your takeaways after the last seven days?

• 50:09Speaker 02

  Yeah, so we were very excited to see the community response. We thought it would be very good and it was. So that was really confirming.

• 50:21Speaker 02

  We got a lot of people pouring into the Discord and asking lots of good questions, you know? And there's always the people that are like, well, why wasn't I included in the airdrop? You know, so that's going to be inevitable.

• 50:31David Hoffman?

  It's inevitable for sure.

• 50:32Speaker 02

  Yeah, you know, one thing that I really wanted to see was the media picking up on not just that this is just like a shapeshift story of what it is doing, but that this process of DAO-ifying a centralized company is potentially the start of an important new trend in business and in organizational development. And they absolutely caught on to that theme. So I was excited to see that. And, you know, I don't, I don't really want to talk a lot about the Fox token price, but I was glad to see that it ended far above where it started the day. I thought that was a great sign. It was not nearly as volatile as I thought it would be. It kind of just shot up and has been hovering Forex over where it was before.

• 51:18Speaker 02

  So that was, that was good. The liquidity pool is filled up and we've been getting lots of, you know, great ideas coming into the forums and people are like just signing up for these governance tools. So that, that process of building that DAO community, which is ultimately what any DAO has to rely on, all that's going really well, you know? And we're, we're learning as we go here. So we don't really have anything to compare this to, but so far so good.

• 51:43David Hoffman?

  What are kind of your expectations for, for like the next six months? Like if the DAO achieves everything you hope it will, where will we be by the start of, you know, January 2022?

• 51:54Speaker 02

  So by the start of January 2022, if things go well, most of Shapeshift's code will have been opened up. Maybe not everything. We will have had a number of successful governance vote on important topics. And the Shapeshift entity will have been mostly wound down. Although the entity itself may not be closed until we can file like our last tax return. So I don't know when that will happen. But that's where I hope things will be by January. The DAO doesn't need to do anything magical or huge by then. It just needs to start forming its base and its community and start getting that muscle of governance going.

• 52:36Ryan Sean Adams?

  Eric, I think you're going to have a unique perspective on this next question and topic. Because you know, you've been around and around with regulators in the past and seen them sort of increase their maybe enforcement or presence in crypto as the years have gone by. I think a lot of us are curious about DeFi, right? So you've outsourced some of these regulatory functions to the chain, custody for one. And now also like the, I guess, almost the operating agreement, the guts of a token to on-chain too.

• 53:15Ryan Sean Adams?

  But from a regulator's perspective, if you're an aggressive, I guess, top-down, you want the nation state in all of this finance stuff and money stuff. And there's some of those that sit in Congress in the US. I know that doesn't surprise you. And you're a crypto skeptic. I mean, recently they've been talking about turning all the stablecoin issuers basically into banks, making them have chartered bank licenses. And they, from their perspective, they feel like they're kind of playing whack-a-mole, right? So I chased Shapeshift and Voorhees into a Dex model. And now he's protecting himself and he's DAO-fying. And so now I'm going to chase him into DeFi. What do you think the threat for DeFi is?

• 54:00Ryan Sean Adams?

  Maybe the existential threat or the concern that DeFi should have with respect to regulators? Do you think that they're going to come after this industry in an aggressive way?

• 54:14Speaker 02

  Yeah, well, this is a key question.

• 54:18Speaker 02

  In in this topic, it's always important to understand that regulators are varied. Right? There are many different countries in the world and different jurisdictions within those countries. And among regulators, you have differences of opinion. So it's not like they're just this one homogenous crowd. That said, you certainly have an entire industry of financial institutional regulators. Who believe their purpose on earth is to surveil financial transactions of all people. That's their current job. They believe that that's important. They believe that it helps society. Um, I'll give them the benefit of the doubt that they have good intentions.

• 55:01Speaker 02

  And yet now has emerged a set of technologies which are financial in nature and which cannot be stopped. They cannot be changed by any central party. They can be regulated in name only, but they will keep on functioning as the rules of the immutable code declare they will. So you get all these regulators who only want to regulate financial transactions and then these financial systems that are unregulatable, at least on the base layer. This clash is the story of the rise of the cryptocurrency industry. None of us know how it will unfold. And it will be something that takes place over many years and with many battlefields and unfortunately with many casualties.

• 55:47Speaker 02

  My hope is that a lot of these regulators recognize that this financial technology brings about a degree of soundness and transparency transparency and honestness. And gives the entire world a level of access to financial services. Which their prior status quo financial system has never been able to do. And that they will see that as virtuous, even if they realize that some of the things about it they don't like. I I would hope that they don't see it as a pure enemy to them, even though it will clash with many of their objectives.

• 56:21Ryan Sean Adams?

  This has kind of always been my hope. We've had many in the podcast, including like people like Ben Hunt, who are like, hey, you'll never get this crypto thing to work is because governments don't want, they want to control the money system, right? And my, my, my hope and my response to, to, to that, um, you know, critique or that idea is basically like, you know what we're going to do in crypto? So we're going to make this industry and these tools so damn useful that regulators will have to embrace it, that their population will like rebel against them if, if, if governments try to, to, to quash this industry and quell it, like the internet, right? I mean, I'm sure in the early days of the internet, there were those who were of the mindset that like, you know,

• 57:04Ryan Sean Adams?

  look, uh, this communication technology is, is, is too powerful for everyday citizens to have, right?

• 57:11Speaker 02

  Yeah, well, crypto, strong cryptography.

• 57:13Ryan Sean Adams?

  Exactly. Strong cryptography, another example. You share that hope. What do you think?

• 57:18Speaker 02

  Yeah. So for those who don't know, uh, strong cryptography was illegal to normal usage. It was considered a munition and could not be like exported out of the United States. And there was a whole series of regulatory battles about this in the nineties. It became so damn useful that the entire world had to let it be open and available to everyone, even though it allows all people to hide messages from surveillance. I think that parallel is really important when it comes to financial technology. In the same way that you should allow all people to hide messages from government surveillance, the same thing is true for financial transactions. There is no reason that, that finance is less deserving of privacy than communication and ideas generally.

• 58:04Speaker 02

  And just as it is legal today to go encrypt your email in a strong way that not even the NSA can, uh, interpret, so too should it be legal to have private privacy in your finances. This is not a popular concept, right? Most people seem to support the status quo where the government surveils all financial transactions of all people. It's incredibly Orwellian and creepy and unethical. And I would hope that especially as the younger generations grow up in a world in which they have the option of financial privacy, many more of them will start to care passionately about that as an important social cause.

• 58:41David Hoffman?

  Eric, since you have been in this industry for as long as you have been, and I want to get your reflections as to where you find us in 2021. Have we exceeded your expectations as to where you thought we would be back in the early days of Bitcoin in 2012, 2013? Or are there parts of this industry that you wish or is perhaps falling behind what you wish we were at by this time now? Well, just what are your reflections on the state of crypto in 2021?

• 59:09Speaker 02

  Yeah, it's it's done so incredibly well.

• 59:14Speaker 02

  And it's so much more diverse than when it first started as Bitcoin. So my naive hopes and dreams in 2011 as a Bitcoiner was that Bitcoin becomes the dominant form of money on earth and that it over it outcompetes fiat and fiat goes away and governments are restricted in their ability to debase currencies. That was my ultimate hope. Bitcoin is absolutely on that trajectory. And though it is taking longer than I would prefer, it's it's absolutely getting there. And the chances of that happening today are far greater than they were back in 2011.

• 59:49Speaker 02

  But beyond that, you have Ethereum and these smart contracts and all of this immutable financial tooling, which I certainly couldn't have conceived of back then. And it is accelerating so fast and in so many directions. You can't help but be inspired and almost a little scared by the power of this technology and how quickly it is growing. So I would say that it has more than lived up to my expectations. And it is really transforming the world in a very visible way right now. So I'm just, I'm just so happy to be part of it. And I'm in awe of all these brilliant people that have flowed into this industry and are helping to build it.

• 1:00:30David Hoffman?

  What about this industry has actually disappointed you? What have we not met your expectations with?

• 1:00:38Speaker 02

  That's easy, the maximalism.

• 1:00:41Speaker 02

  That's that. Poison is really what makes me the most depressed, particularly about Bitcoin. Um, there are certainly Ethereum maximalists, but they're relatively few. Um, most maximalists are Bitcoin maximalists and the degree of toxicity, negativity, anti-innovation, anti-open-mindedness, um, tribalism, relig- religious dogmatism to an orange coin, rather than the principles on which that orange coin was built, has been frankly really disgusting to me. And I've been very sad to see it. Um, it is still a minority of Bitcoiners that are like that.

• 1:01:22Speaker 02

  So I take, you know, I take heart in that and certainly the Maxies are like the loudest ones on Twitter. So on some degree, they're kind of irrelevant and can be dismissed and forgotten about. But they, they bother me because I feel like that is my tribe. And I do not like seeing people that I associate and agree with on 99% of things, act like total assholes and degrade the wonderful quality of work and innovation that's happening elsewhere.

• 1:01:50Ryan Sean Adams?

  Do you know, Eric, uh, at Bitcoin Miami, anyway, there was a, I, I think there was a, a session, um, talking about the virtues of maximalism, talking about max-

• 1:01:58Speaker 02

  Toxic maximalism.

• 1:01:59Ryan Sean Adams?

  Yeah, toxic maximalism, saying that it actually strengthened Bitcoin, that, that further Bitcoin needed it. Maybe even further that if you weren't toxic maximalist, like you were, you know,

• 1:02:10Speaker 02

  Against freedom.

• 1:02:11Ryan Sean Adams?

  Bitcoin, you're against freedom. That's the exact quote. So, I mean, uh, what about that argument that, hey, Bitcoin does need some toxic maximalists that are going to hold the line no matter what? Do you subscribe to that?

• 1:02:26Speaker 02

  No, and I was backstage when that comment was made. I was getting ready to go up and, and moderate the next panel. Um, I was like horrified to hear that. Uh, yeah, if, if you're not, if you're not a supportive of toxic maximalism, you were against Bitcoin and you were against freedom. That was like just such obnoxious propaganda that I would expect from like, like a government agency in the Cold War, but not from Bitcoiners, right? Not from, not from people who, who have built this open source, open immutable protocol for the world to benefit from. To the maximalist credit, they do have some good arguments and they do do some important things.

• 1:03:10Speaker 02

  It is understandable that they rail against all these altcoins and shitcoins, as they call them, because there are so many shitcoins. There are so many nonsense assets that are stupid, pointless, and many that are just downright scams. That's all very true. But there's a big difference in highlighting that there are many scams and need to be skeptical and careful. And saying that everything other than Bitcoin by default is a shitcoin, is worthless, is a scam. Nothing other than Bitcoin can be decentralized and everything working on everyone, on anything else is a bad actor. So I hope that the toxic maximalism will like recede at some point. I don't see that happening. It seems to be growing. And being at that conference, that was the first time I was at a Bitcoin conference where I was embarrassed

• 1:03:56Speaker 02

  about calling myself a Bitcoiner. I have never felt that feeling before, but I was embarrassed hearing that. And it really made me just feel awful. As I left that, as I left that stage, I had made a comment about that toxic maximalist thing. I said that was bullshit. It was just my opening line. It got some laughs. And it got a bunch of boos in the audience. And as I was leaving the auditorium, I was getting heckled by people who were calling me this like shitcoiner and just like yelling out insults.

• 1:04:30Speaker 02

  That has never, that has never been a thing at Bitcoin conferences. Like, so there was a cultural change that I sensed that was really disheartening. And again, most Bitcoiners are not at all like that, so I don't want to convey that at all, but.

• 1:04:45David Hoffman?

  It's just sad that the ones that are like that are also really loud.

• 1:04:49Speaker 02

  Yeah, yeah. I think it comes down to a lot of insecurity about Bitcoin. A lot of these people got into Bitcoin far later than I did, even though they had heard of it.

• 1:05:01Speaker 02

  What were they doing in 2011, 2012, 2013? Why weren't they supporting Bitcoin then? I think it's because they did not have the open-mindedness, the creativity and the foresight to realize why Bitcoin was actually valuable in the first place. And by the time they got involved, it was because it was socially acceptable enough that they felt comfortable stepping into it after a thousand pioneers had already done it. Those are the very type of people that don't understand why Bitcoin is valuable in the first place. And so it's no wonder that they lash out against other projects because they're insecure about their own justification for being in it.

• 1:05:32Ryan Sean Adams?

  Erik Voorhees, maximalist slayer, my friend. Let's uh, let's talk about something that is um, is more exciting, right? So you know, some of the negatives, maximalism, but what about the current state of crypto really excites you? Like what makes you most optimistic? Is it, is it this DAO thing that you're doing? Is it DeFi, is it NFTs, is it Layer 2, is it Thor Chain, is it something else?

• 1:05:56Speaker 02

  So it's not NFTs, NFTs are cool. I think they're real. I think they'll be around. I think they will change society in some really fun ways.

• 1:06:05Speaker 02

  I'm not personally passionate about them.

• 1:06:09Speaker 02

  DAOs are really cool, but very unproven and very untested. I think what is most exciting for me right now is, is the DeFi stuff. And I don't care what chain it's on. It is these decentralized immutable protocols, which can do financial transactions without any intermediary, which are more powerful than I believe their creators realize.

• 1:06:33Speaker 02

  I see things like Aave, where you can put up some crypto and get a loan backed by Aave or, or Liquidity, where you can put up crypto and get like a zero interest loan backed by that with no middleman involved whatsoever. And you can do the whole thing in five seconds from anywhere on the world on a phone.

• 1:06:50Speaker 02

  And I have to just be in awe at how destroyed the banking system is going to get as this tidal wave approaches. They are so far behind the curve. And as the world becomes comfortable with using things like MetaMask, um, which is not that hard, right? It's not that hard. As the world gets comfortable with using those tools, what the hell are banks going to be doing? Like, why, why in the world would you ever use a bank? I mean, the, the last reason to use a bank for a crypto person was to get the stability of fiat when you wanted to exit the volatility of crypto. That's been solved with stablecoins. Right? So the, the path into this stuff is a path that you don't emerge from.

• 1:07:32Speaker 02

  You do not go back to banks and they are set up in such a way that they cannot be innovative enough to ever catch up to this stuff. Ever. So the, the banks that people are going to use in the future are just these open source interfaces. And the functions and the services that people access are just going to be these open source protocols. I think it's going to bring a great deal of wealth generation to the entire world. Regardless of who you are or where you are, it's going to be a great equalizer. And I think it's going to make the world a far better place. So that's what excites me right now.

• 1:08:02Ryan Sean Adams?

  You, you, you are speaking the bankless language, my friend. Uh, it's fantastic. Could not agree more. Um, want, want to end with this question because you, you've been in crypto for almost a decade, Eric. And like, we, we don't have guests like that on bankless. There, there are very few of you, uh, out there. Um, but there are a lot of people listening where this, this crypto cycle is kind of their, their first cycle, their first foray into crypto. Right? And we've had this, this bull run up and now it's down a little bit. People are wondering if, if the bear is back, bull or bear, whatever. What advice do you have for people in their first crypto cycle right now? What would you tell them they, they should be doing?

• 1:08:42Speaker 02

  Well, I'll tell them about my first crypto cycle. My first crypto cycle Bitcoin was $5. By the time I could get some, it was $7. Uh, it rallied over the next couple of months to $31. And I was like, yes, the revolution is upon us. It's happening. Everything I thought about Bitcoin was correct. It's going to take over the world. I'm so smart. That bubble popped and for the next nine to 12 months, it miserably decayed down to $2. And everyone in the world made fun of it, dismissed all of us who believed in it. And frankly, the scoreboard was in their favor. They could point to the bubble clearly and say, that was a bubble. You know, congratulations for buying a bunch of stupid digital beanie babies, you idiot.

• 1:09:26Speaker 02

  And that was like a 95% decline, right? In an asset which had never come back from a bubble because it had never happened before.

• 1:09:35Speaker 02

  This pullback from $60,000 Bitcoin to $30,000 Bitcoin, I don't care if it goes down to $10,000. It's just part of the process. You do not have an exponential asset rise to global domination without insane volatility in its ascent. So for those who it's their first time in such a bubble, zoom out and chill. It's all going to be okay. Don't put in more money than you can lose. Assume it'll all go to zero. And if it does, are you going to be okay? If not, take some money off the table. And for the rest of it, just chill. Like it's all working. It's building and growing. The ecosystem is better than ever. So don't worry too much about it. And I say that even though I worry about it, right? I get stressed out. I didn't like seeing it fall below 30K last night. That's not fun.

• 1:10:20Speaker 02

  But you got to separate that from like your cognitive ability to recognize where the stuff's all going.

• 1:10:26Ryan Sean Adams?

  Zoom out and chill is going to be a line that I'm going to repeat a number of times over the course of my history in crypto. Eric, this has been a lot of fun. Fantastic advice, my friend. Congrats with everything in Shapeshift. The Bankless community will be looking at Shapeshift and looking for ways to plug in. Thanks so much for joining us today.

• 1:10:47Speaker 02

  Great conversation. Thank you, guys.

• 1:10:49Ryan Sean Adams?

  Guys, risks and disclaimers. Of course, none of this was financial advice. Bitcoin, ETH, they're all risky. So is DeFi. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:11:05David Hoffman?

  I hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other fantastic content.

• 1:11:51David Hoffman?

  Thanks everyone for watching and being on the journey as we build out the Bankless nation.