Cryptocurrency: Some Early Days

[grarpamp]

Brief of some days, for the many who weren't present...


https://cointelegraph.com/magazine/2021/03/03/the-reformed-bitcoin-maxi-who-saw-the-light-erik-voorhees

           The reformed Bitcoin Maxi who saw the light: Erik Voorhees

“It seemed to me antithetical to have a decentralized digital economy where
there is only one chain.”

   Elias Ahonen by Elias Ahonen
   March 3, 2021
   in Columns, Journeys

   “We felt like we were doing God's work,” explains cryptocurrency
   payments pioneer Erik Voorhees as he recalls trying to convert the
   unbelievers in the early days of Bitcoin.

   The man whose gambling platform SatoshiDice was once responsible for half
   of all Bitcoin transactions, is now an elder statesman of crypto and the
   CEO of the ShapeShift exchange.

   He remembers Bitcoin being written off as a joke at the Money 2020
   conference in Las Vegas back in 2012. At the time he was working for
   BitInstant, one of the first Bitcoin exchanges, and they had a booth right
   next door to PayPal.

   “I remember the PayPal people nearby kind of snickering at us. A couple
   of them had maybe heard of Bitcoin. If they'd even heard about it, it was
   a total joke — a stupid scam on the internet, or something. It was a
   totally unproductive conference.”

   History has not been kind to the snickerers and scam-sayers, many of whom
   have since been converted. In 2020, eight years after the conference,
   Paypal finally joined the fray, enabling users to buy and sell crypto, and
   it will soon add it as a method of payment at 29 million merchants.

   Voorhees spread the gospel of Satoshi at the conference alongside Charlie
   Shrem and Roger Ver. Shrem was the founder of BitInstant, viewed by some
   as a martyr to the cause after serving two years in prison on a case
   related to an exchange user reselling Bitcoin on the darknet marketplace
   Silk Road. Ver was perhaps the biggest believer of all, earning the
   nickname ‘Bitcoin Jesus’ for his charismatic promotion of the
   currency.

   “In terms of proselytizing, Roger was the absolute best. He was a total
   maniac about it” Voorhees recounts with a chuckle.

     “Even for Charlie and I, who were very much supportive of the general
     sentiment, It was pretty overwhelming and just incessant.”

   “Everyone that works at a startup feels a little bit like they're
   changing the world, that they have this huge mission, and certainly every
   company tries to amplify that,” he says, being a CEO himself. But for
   Bitcoiners, Voorhees clarifies, “it is really a ‘change the world’
   kind of thing, and to change the world on a fundamental level. It's to
   change the institution of money itself — that is a profoundly tall
   order.”

   Vorhees explains that he sees Bitcoin as nothing less than revolutionary:

   “It's not just a better user-interface for the money that people had
   before. It’s a different type of money that changes government, changes
   culture, changes social and economic relationships on a very very deep
   deep level. That's why it's taken so long to to catch on, to get
   recognized, because it is trying to move into such an entrenched
   institution.”



     It's 2012. @ErikVoorhees @rogerkver and I decided to pool our money
     together for the first #Money2020 event. We told them we wanted the best
     booth we could afford, but we needed to be next to the @PayPal booth so
     we can show the world OUR financial system!

     Welcome, Paypal! pic.twitter.com/5BzvQDfvFb

     -- Charlie Shrem (@CharlieShrem) October 21, 2020



    Libertarian roots

   Now 35, Voorhees spent his early ‘90’s childhood in the mountains of
   Colorado before moving to the University of Puget Sound near Seattle in
   2003. He studied international economics and business but doesn’t really
   feel like he learnt either.

   “In the entire major of economics, though I had courses in the history
   of economic thought, I never learned about the Austrians,” he says,
   referring to the Austrian School of economics. Often ignored by mainstream
   Keynesian economists, Austrians are obsessed with things like hard money
   and decry unbacked fiat currencies so they have been embraced by gold-bugs
   and the Bitcoin community, which is after all, often called ‘digital
   gold’.

   A freshly minted graduate in 2008, Voorhees left to pursue adventure in
   Dubai where “anyone with a college degree could immediately get a job,
   because they were growing so fast.”

   Working as a marketer for a real estate agency, he watched from a distance
   as the world he thought he knew began to buckle under the weight of the
   unfolding Global Financial Crisis. Dubai did not feel its effects until
   half a year later, he recounts, describing the intervening time as “this
   very weird period where Dubai was going through this massive economic
   boom, and the rest of the Western world was falling apart.”

   From this desert oasis spared from the global drought, the business and
   economics graduate “started really understanding money on what I felt
   was a very fundamental level.” For Voorhees, the story of money is a
   simple one: “money emerges as the good that is bartered for most
   frequently.” That used to be gold and is currently fiat money, but it
   could just as well be something else, if a more useful and efficient money
   was embraced.

   Upon this realization, Voorhees took on a “very strong aversion to fiat
   currency and to government control of money” because as a believer in a
   market economy, he felt that no government should control the price or
   distribution of any goods. “Money was actually the most important good
   of all, and thus most important to not be centrally planned. And yet it
   was even in, you know, allegedly capitalist economies,” he says.

     “A capitalist economy that has a government-managed money system
     seemed completely antithetical, but I didn't have any answers or
     solutions to that other than some kind of return to the gold standard,
     which seemed somewhat anachronistic.”

   Voorhees returned to Colorado after two years abroad, soon moving to New
   Hampshire to join The Free State Project, an organized political migration
   which he describes as “a multi-decade initiative to move 20,000 radical
   libertarians to one small jurisdiction [New Hampshire] to hopefully have
   an outsized influence on the political structure.” It was there, in the
   company of fellow radical libertarian political activists, that Voorhees
   encountered Bitcoin in 2011.

   “At that point I got completely hooked, and a year later ended up
   leaving New Hampshire and moving to New York to join Charlie Shrem at
   BitInstant.” There, he took the reins of marketing as employee number
   three.

   It was around that time that Charlie Shrem, Roger Ver, and Erik Voorhees
   — each of whom would go on to become crypto-luminaries in their own
   right — pooled their money together to set up a Bitcoin booth at the
   Money 2020 conference in Las Vegas. “We needed to be next to the PayPal
   booth so we can show the world OUR financial system,” Shrem recounted.
   Vorhees says they failed to convert anyone to Bitcoin at the conference
   despite their best efforts.

    Belief in false profits

   Vorhees admits he used to be a Bitcoin Maximalist, a believer in the one
   true coin who rejected all false currencies. “I used to be a maximalist.
   Obviously when I got into Bitcoin, it was kind of the only coin,” he
   says.

     “As other coins came out I dismissed them, scoffed at them, and
     generally didn't like them because I felt like they were a distraction
     from the important project.”

   Though he tried to focus on Satoshi’s vision, the new projects started
   gnawing at him and he realized that many of them “were doing things that
   Bitcoin wouldn't do or couldn't do.” By mid 2014, his conversion was in
   full swing.

   “My whole mindset began changing. One of the most important things about
   Bitcoin is that it is decentralised. And it seemed to me antithetical to
   have a decentralized digital economy where there is only one chain — you
   know, one code base, one chain, one set of economic rules. It seemed very
   appropriate that you would get multiple different digital assets, and that
   was actually part of the decentralization, part of the virtue of Bitcoin
   was that Bitcoin isn't the only thing there.”

   He tempers this by adding the usual provisos — most tokens are garbage,
   many are scams, a majority will fail. “It's only a minority of them that
   are interesting, but a minority is a lot more than one.”



     ETH Folks... try not to become to Binancechain what the Bitcoin Maxis
     are to Ethereum <U+1F64F>

     -- Erik Voorhees (@ErikVoorhees) February 19, 2021



   He still has empathy for his “shortsighted” maximalist peers, who he
   sees as victims of human nature’s tendency toward tribalism, which
   expresses itself in lots of ways, “Certainly it expresses itself in
   religion. And it has expressed itself in crypto, and some portion of
   people- their mind twists itself into complete advocacy of one flag and
   complete derision of all others.”

     “[It’s] a group psychological phenomena and I don't know how that
     stops, but I do think it is really harmful for the growth of
     decentralized digital finance generally.”

    Gambling with Satoshi's dice

   Only a year after learning about Bitcoin, Voorhees launched Bitcoin-based
   gambling site SatoshiDice in 2012, which took the young crypto community
   by storm.

   “On Reddit, this guy posted that he had created this casino-like
   mechanism where there'd be this dice roll, and based on the dice roll, a
   user would either get their coins sent back or lose them. I tried it, and
   there was magic in it immediately […] So I started working with him.”

   This was groundbreaking because “it allowed any person in the world to
   place a bet by sending a Bitcoin transaction” no matter where they were
   from or how their local laws governed online gambling.

   What's more, the player did not need to trust SatoshiDice, because “it
   was provably fair,” meaning that it worked like a transparent machine
   where all odds and inner workings were open for anyone to inspect.
   Governments around the world have various commissions to regulate and
   audit gambling operations, but SatoshiDice’s function potentially made
   such organizations obsolete, powerless, or both.

     “SatoshiDice showed you what the odds were. It was transparent with
     the odds, and you could prove that the rules were fair.”

   The simple, trusted, and permissionless nature of SatoshiDice brought huge
   success to the platform. Within months of launch, the game was responsible
   for as much as half of all Bitcoin transactions.

   SatoshiDice had an unofficial IPO on the MPEx exchange, a sort of Bitcoin
   stock market where unregistered Bitcoin companies offered shares and paid
   dividends denominated in BTC. These were the forerunner of the ICO boom
   several years later, and attracted similar attention from authorities for
   breaking securities laws.

   Though the casino was “making a tonne of money,” it was also
   overwhelming as Voorhees felt his job of “running the world's biggest
   Bitcoin casino” was distracting him from his greater calling of
   preaching the good word of Satoshi. Despite ongoing growth, he reluctantly
   sold the business in 2013 for 126,315 BTC which was then worth $12
   million. That would be a cool $6.25 billion today.

  Fighting the system

   Voorhees did not enjoy calm for long, as the US Securities and Exchange
   Commission (SEC) soon came after him for making a public offering of
   unregistered securities. Voorhees considered this unfair, seeing that his
   investors had made exponential returns. He ended up settling for $50,000.

     “That was nine months of total misery, dealing with them. If I didn't
     despise the government before, I certainly did it after that. It was
     such bullshit.”

   A core value of his is that people should be free to transact with each
   other voluntarily, and that no government agency has the right to come in
   between them. In his worldview, “institutions and government exist
   purely to curtail people's power over money,” whereas “crypto gives
   people total economic power to make transactions in any way they wish, and
   no one can stop it.” As Voorhees sees it, these two forces will
   inevitably clash.

   Voorhees’ company Shapeshift allows users to trade cryptocurrencies
   without identity verification. Things were not always that way — in 2018
   Voorhees says his company fell under the same rules as traditional banks
   and therefore had to implement Know Your Customer, or KYC, identity
   verification procedures, making anonymous transactions impossible. “That
   was absolutely miserable. Our customers hated it. I hated it.”

   But by 2020, decentralized exchanges (DEX’s) which allow users to trade
   without depositing their funds with a third party were gaining ground and
   made it possible for Shapeshift to reorient its business and re-align with
   its libertarian values. All KYC was abandoned, and the platform became a
   gateway for users to trade on various DEX’s. “I had learned with
   Satoshi Dice that an economic relationship didn't need anything other than
   a public key to send in a transaction, and anything else could be based
   around that,” he says.

   Voorhees says that his opposition to KYC is not down to ideology but his
   desire to protect users against things like identity theft.

   “Identity theft in the US alone is something like a $30B to $40 billion
   a year problem. It is more costly than all forms of property theft
   combined. It's this massive thing, and crypto comes along and solves that
   problem.”
   But how committed is he to this principle? Would he class it as theft if a
   government accessed user data to tax a client’s unreported financial
   transactions. “Yeah, exactly. Taxation is absolutely theft,” he
   responds with blunt matter-of-factness.

    The WSJ investigates

   ShapeShift’s ethos has proven controversial among adherents to the rules
   and regulations around traditional finance. An investigation by the Wall
   Street Journal alleged Shapeshift users had laundered $9 million via the
   platform. However a third-party analysis by blockchain intelligence firm
   CipherBlade suggested the investigation was flawed in assuming that funds
   were illicit even after passing through four different hands, causing the
   $9 million figure to be inflated by a factor of four. It is clear that
   Voorhees, who is normally calm and composed, was deeply affected by this.

     “Here’s The Wall Street Journal coming after us, calling us the
     money launderer, when their own inflated number would put us as far
     better [at combating money laundering] than any of the major banks that
     they write about all the time.”

   There's a noticeable quaver in his voice. The battle is personal.

   We spend the last minutes comparing attitudes toward money in different
   societies. In the Nordic countries for example, all taxes are a matter of
   public record. Voorhees finds this disturbing, adding that “a lot of
   people with money feel guilty about it” whereas creating wealth in an
   ethical way he believes is a good thing for society.

   “I would like to see people who become very wealthy, first of all be
   proud of that, so long as they did it in an ethical way, and to use those
   resources in whatever way they think is best. I think that's how that's
   how economies grow and I think there's nothing wrong with that.”



  Elias Ahonen

   Elias Ahonen is a Finnish-Canadian author based in Dubai who has worked
   around the world operating a small blockchain consultancy after buying his
   first Bitcoins in 2013. His book ‘Blockland' (link below) tells the
   story of the industry. He holds an MA in International & Comparative Law
   whose thesis deals with NFT & metaverse regulation.


https://arstechnica.com/information-technology/2013/08/firm-says-online-gambling-accounts-for-almost-half-of-all-bitcoin-transactions/
https://cointelegraph.com/news/wsj-claim-of-9-mln-laundered-via-shapeshift-based-on-flawed-investigation-analysts-say
https://www.cnbc.com/2017/12/08/what-bitcoin-millionaire-charlie-shrem-learned-from-going-to-prison.html
https://www.wsj.com/articles/how-dirty-money-disappears-into-the-black-hole-of-cryptocurrency-1538149743
https://www.sec.gov/news/press-release/2014-111
https://en.wikipedia.org/wiki/Free_State_Project
https://en.wikipedia.org/wiki/Gaming_control_board
https://shapeshift.com/
https://twitter.com/CharlieShrem/status/1318904047236153348
https://twitter.com/ErikVoorhees/status/1362781521153720323
https://twitter.com/PayPal
https://twitter.com/hashtag/Money2020
https://twitter.com/rogerkver
https://cointelegraph.com/magazine/author/eliasahonen124
https://cointelegraph.com/magazine/columns/journeys
https://cointelegraph.com/magazine/tag/bitcoin
https://cointelegraph.com/magazine/tag/bitcoin-maxi
https://cointelegraph.com/magazine/tag/bitinstant
https://cointelegraph.com/magazine/tag/charlie-shrem
https://cointelegraph.com/magazine/tag/cryptocurrency
https://cointelegraph.com/magazine/tag/erik-vorhees
https://cointelegraph.com/magazine/tag/paypal
https://cointelegraph.com/magazine/tag/roger-ver
https://cointelegraph.com/magazine/tag/satoshidice
https://cointelegraph.com/magazine/tag/shapeshift