Monero Monitor

Episode 4: Cryptocurrencies and capitalism, a shape-shifting landscape - with Erik Voorhees.

08 May 20170 Comments

In today's show, ShapeShift.io founder Erik Voorhees tells us about his libertarian roots, path to being a Bitcoin entrepreneur, his vision for ShapeShift, and cryptocurrency venture capitalism. How do we fix the global monetary system, how has the ShapeShift's exchange volume evolved over time, and what responsibilities does ShapeShift have in vetting coins added to the platform? Find out with us today!

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Podcast Transcript:

~~ { Introductory Music } ~~

Mike: Hi, everyone. This is Mike. You may know me as bigreddmachine and you’re listening to another episode of the Monero Monitor podcast. And I think we have a great show lined up for everybody today. I am joined by Erik Voorhees, best known for his part in Satoshi Dice and then, now as the founder, and I believe CEO, is that correct, of ShapeShift.io? 

Erik: Correct, yeah. 

Mike: Welcome to the show, Erik. 

Erik: Thank you very much for having me. 

Mike: Of course. It was nice to meet you; I think it’s been about two months now at this point, meeting you in person down at the Denver Bitcoin meetup. I think you’re originally a Colorado native, is that right?

Erik: Yeah, I grew up in Keystone, Colorado, up in the mountains, in the ski areas.

Mike: Very cool, that’s great skiing. So, are you still local to the area? 

Erik: Yeah, I live in Denver.

Mike: Alright. Well, thanks for coming on today. I’d like to talk with you mostly about ShapeShift itself. You know, ShapeShift is one of the oldest and kind of longest-running companies that has supported Monero and since this podcast’s first mission is to look at things in the Monero ecosystem, it seems like an appropriate thing to get you on the show pretty early. But, first, I was thinking maybe we could just talk a little more generally about some different things and maybe some tweets that you’ve made recently and to hear some of your rationale behind that, does that sound good? 

Erik: Yeah, that sounds great. 


QS 01:44 Mike: Cool. So, let’s get started. It seems to me like you’ve been a pretty outspoken critic of maybe just the monetary system in general here in the United States and perhaps abroad. And I would guess that you would identify as part of the libertarian community as well. What made you identify that way and what specifically kind of about that whole monetary system upset you or makes you think that there’s a better way to do this? 

Erik: Yeah, good question. I’ve been a libertarian pretty much all my life since before I really knew what the term was. I just sort of had this strange and exotic belief that people should generally be left alone if they’re not hurting each other. So, you know, I guess today that makes me an extremist, unfortunately. But, it’s always been something I cared deeply about and after college I moved to Dubai and this was right around the time when the financial crisis happened. So, from Dubai, I was really across the ocean, I watched all this stuff unfold with the financial markets in the US and I’ve always been interested in finance generally and the financial crisis was obviously a very traumatic period of time and it was kind of strange watching it from abroad. It was sort of a different feel. And as I observed it, I just started thinking and more and more about what was at the heart of it, what was really the cause, what were the fundamental reasons that it happened…

And I just kept getting back to the way that money and credit are handled and managed. Sort of before, as a libertarian, I generally wanted government to not be involved in those things, but I didn’t really question its involvement in money itself. I guess I just hadn’t thought about, but watching the financial crisis unfold, I started thinking about money and just started thinking why in the world is the government involved in money anyway, and not even involved, but controlling it, centrally planning it. I started thinking there is this horrible irony in a country that considers itself a market-based economy and the most important product or good in that economy, the dollar, which is money, the most important product was centrally planned – something that would be appropriate maybe to Soviet Russia, but not to a market economy. Ultimately, I just came to the conclusion that you can’t have a proper or true, legitimate market economy if its most important good, money itself is centrally planned and controlled. 

So, that realization was sort of sitting there with me and… A couple of years later, during that time I got really interested in gold and its place as money. Gold has been money much longer than any fiat and if you want to understand money, it’s really about understanding why gold became money and when you start understanding that, a bunch of things start becoming very clear. But, gold has this problem, which is that it’s heavy and awkward. In a modern economy where most things are done at distance, like ordering something on Amazon, gold is really impractical for that. So, to have a gold-based money, you essentially need to warehouse it with someone, trust them with the gold and then have some kind of like certificate or token of that gold. 

And of course, that can’t get very far because the government doesn’t want there to be competing money and it can just shut down any company that tries to warehouse gold and let people use tokens representing it. So, what that meant, sadly, was that there is no way to break the monopoly of money; governments were going to be in control of it. Fast forward a couple of years and Bitcoin happens. And when I learned about it, I just pretty much fell out of my chair and realized, that, wow, now there’s actually a form of private money that can’t be stopped by a central government and is as convenient to use or more than credit cards or anything else people are used to. So, that’s how I really got interested in this ecosystem in the first place. 


QS 06:29 Mike: Okay, cool. So, you describe it like you read the whitepaper or you saw some news article or something and just immediately fell in love. Was it really that sudden or did you go through kind of a phase of doubting the actual viability of the project?

Erik: I went through a phase of doubt, but it was only about 30 minutes. So, I read an article, and I was like, “This is so stupid.” I read another one and I was like, “Okay.” And then after a couple of them, when I really grasped the concept that no one was in charge of it which meant that it could not be stopped and that that made it fundamentally different from anything that had come before… that just really struck a chord with me and so it didn’t take long to just go from skepticism to complete adoration, and I’ve been in that mode ever since.

QS 07:20 Mike: Very cool. So, then at what point did you decided to not just maybe invest in some Bitcoins or start mining or whatever, but actually get involved as an entrepreneur in this space?

Erik: The two things sort of went hand in hand. At the time, I had moved back from Dubai, I was living in New Hampshire. And I was just sort of doing some freelance branding and marketing work for various companies, unrelated to Bitcoin. And then, when Bitcoin came along, it was very much just a hobby, it was something that fascinated me, that I was spending all my free time on. And then, I just started networking with the other people that were involved and this is back in April or May of 2011. And so, kind of through that summer, I chatted with lots of people online and met some of the people that were starting projects and just I’ve always been entrepreneurial myself and just kind of got into it at the same time and I then one day woke up and realized that my hobby was already my job and I found that quite exciting. I’ve never really had a real job since then. 

QS 08:36 Mike: Very cool. Yeah, it’s always nice when you can do something that you really enjoy and then doing something in a field like this that is very cutting-edge and evolving at a faster pace than anything else in the world just about has got to be something that you want to wake up every day and keep doing. 

Erik: Yeah. And one thing I realized was, many people at some point in their life sort of have to make this choice. Do they want to pursue a career where they can perhaps be very successful financially and make a lot of money, which is something most people want to do. Or do they do something where they feel a lot of meaning in it, where they feel it’s doing something really good for the world, and that’s often a sort of the one or the other thing. And Bitcoin was a project where I didn’t have to make that decision, I could do both. It was this amazing capitalist’s dream where huge riches are being created and at the same time it’s doing something extremely important for the entire world, which is fundamentally changing the foundational layer of finance. And so, those two things together, I mean that’s got to be a once-in-a-lifetime opportunity. 


QS 09:55 Mike: Yeah. Based on what you’ve said so far, it seems like you would say that the whole financial system needs a radical reboot, but what would you say in general about the role of the government? Do you think that it still has an important role to play in any part of our society?

Erik: I think most, if not all that governments do are better done by markets. And I’m not quite an anarchist because I don’t have faith that a society without any government at all could function well. Maybe it could, I’m open to that. But I feel like you could get rid of the 99% of the government, still have it do most of the things that most people want and have a much better world. So, I’m working on advocating for the removal of that 99%. And if we ever get there, and we want to talk about the remaining 1%, I think that would be a great thing to do, but got to take the first steps.

Mike: Sure, that makes sense. I think with each percent that you try to get rid off, the next percent becomes harder. But okay, I might not necessarily totally agree with that political opinion, but I can at least appreciate where you’re coming from, so we’ll leave it with that for now. 

Erik: Well, you’re definitely in the majority because they’re a very few people that think like me on the topic. 

Mike: Yeah, sure. And I’m not saying I totally disagree either. I think that that would require maybe a three-hour conversation for us to have and so maybe it’s a little bit beyond the scope of today’s call.


QS 11:35 Mike: Okay, so you got into Bitcoin, I know that you were very successful with Satoshi Dice and then you sold that. And then somewhere along the way, I imagined you just wanted to get your feet wet again. Was there anything that came before ShapeShift, kind of in-between that maybe you tried, or just ideas that you tried and then maybe abandoned or you know, other things that kind of tickled your fancy for a little while?

Erik: Yeah. There have been four big projects I was directly involved in and a number of things I’ve either been an investor in or just helped out as a contributor in some way or another. But the four big ones were BitInstant which was in New York. That was sort of the first way people could move money to exchanges quickly. So, I was the third employee there, Charlie hired me to be the head of marketing for BitInstant. So, that was a wild ride and then Satoshi Dice sort of overlapped it. Satoshi Dice started as a side-project of my own and grew into a crazy phenomenon itself. And then, after both of those were done, I moved to Panama and was part of Coinapult. So, I was one of the investors and co-founders of Coinapult. And then, Coinapult I left about a year after, and started ShapeShift. So, the idea for ShapeShift was roughly February or March of 2014 and the product was live by late July 2014, so about two and a half years old. 

Mike: Yeah, I was just kind of getting into the whole space. I’ve read a little bit about Bitcoin in 2013, but didn’t really start following it until maybe January of 2014. So, right about the time I started following it, I had that first-hand experience of anything that you wanted to do with an altcoin, it was just very difficult to do and I remember when ShapeShift first came out and just thinking like, “Man, this is an interesting project that’s sort of amazing nobody had thought of it before.”

Erik: Yeah, the idea just came out because I wanted to buy some other coin and do it easily. I had plenty of Bitcoins, but it was gonna take me a whole afternoon to acquire something else and I just thought that was ridiculous. And so one of the things people realize when they get into crypto is that there is all these amazing things that could be done that just haven’t been there, it’s a whole new world of infrastructure, most of which is not built yet. So, I sort of naively thought that ShapeShift might be a small side-project as well and I got the prototype built and it very quickly started growing as well too. At this point, it’s a pretty big business. We just raised the series A, we processed over 94 million dollars of orders in March alone. It’s been growing at about 50% per month on a cumulative basis ever since it launched. And you know, I can’t take credit and say that’s all because I’m amazing, a lot of it is just because crypto itself has been this ballooning industry that’s moving in all sorts of different directions. When ShapeShift was created, I thought there is probably gonna be a world of lots of different tokens, but it was sort of theoretical. Ethereum was just kind of being whispered about, very unproven still. Bitcoin was 99% of everything at that point.

Mike: Yeah. Even at that point, things like multisig weren’t even like typically all that common to be used, so even Bitcoin was still kind of in its early stages I would argue.

Erik: Yeah, and everyone was talking about Bitcoin as money. And I think we’ve come to see that blockchains and tokens can do all sorts of amazing things outside of money. Money is a really important product. Money is the most important thing that blockchains are currently doing, but it’s not the only thing and there’s a lot of tokens that try to compete with Bitcoin as money and I think that’s healthy and there’s a lot of tokens that don’t try to compete with it at all, they’re just fundamentally different. They try to provide a different service, different utility to people. 

And so I don’t try to pretend that I’ll know what all these use cases would be, I just assume that there will be many use cases of digital assets. And so, ShapeShift is meant to be the central point where any of those digital assets can immediately convert into any other, and as seamlessly as possible. 


QS 16:29 Mike: Yeah, okay, so I actually have a couple of follow-up questions that are sort of the varying topics of what you just said, so maybe we can build off of some of that. But let me start with, at what point, it sounds like you were saying early 2014 you were trying to switch into an altcoin, but at what point did you actually start to consider altcoins as something that were viable and not just some distraction from Bitcoin?

Erik: The first non-Bitcoin asset that I really got excited about was Ethereum. And that, when I started understanding what it was doing and that was something that Bitcoin could not do currently, it theoretically could do it in future with some changes, but currently was not doing, I realized that there could be these two really big assets both of which can be beneficial to each other. I think Bitcoin and Ethereum both make each other stronger. So, that was the first what I really got excited about. And then, I’ve long said that most digital assets are stupid, most of them will go to zero over time, but that’s true in any new industry, that’s true of any group of start-up companies, that’s true of any set of new ideas. Most things fail, and that’s okay, it doesn’t mean that the whole asset class is a failure, it means that people are experimenting and experiments usually result in failure. 


QS 18:00 Mike: Sure. And kind of building on that then, I think you tweeted, I don’t know if it was in the last couple of weeks or so, but that alt-to-alt trading, so trades on ShapeShift that don’t involve Bitcoin at all, have increased to over 25% of your whole volume, which you said is something 90 million, so 25% of that is going to give us like 22 million dollars or something like that. So, what does that tell you then?

Erik: Yeah, that’s a huge phenomenon. That’s been really interesting for us to see. The first two years and a couple of months of ShapeShift, roughly half the volume was Bitcoin into an Alt and the other half was an Alt into Bitcoin. And then maybe 1% or 2% of everything was one Alt into another Alt, and so it was just this very tiny little sliver of our volume. But, now, it’s about 25% and that all happened since maybe January. So, December it was maybe 3 or 4%, and since then, it’s just grown to 25. I think that represents a really fundamental change in the whole market. And largely, this is because Ethereum has become really big itself. Alright, so there are a lot of people moving from Ethereum into some other asset and just bypassing Bitcoin entirely.

Mike: So, of that 25% is a large chunk of it something to Ethereum or Ethereum to something then?

Erik: Yeah. I mean, I would guess that 90% of that 25% has Ethereum on one side or another of the trade, but the same pattern I think is going to continue. So, like a year from now, whatever percent is Alt to Alt, maybe less than half of that will be in or out of Ethereum because everything is getting just more and more diverse. 


QS 19:56 Mike: Yeah. Now, do you think some of this is kind of… I guess the question then would be, do you think this traffic is trading-based, so people using your platform to make quick trades for maybe the 1% fee that you end up paying on ShapeShift or do you think it’s actual, real use-cases where people might be holding, I don’t know, we’ll say Monero since that’s this podcast, but they want to do something with Ethereum and so they shift it into Ethereum and actually use it? 

Erik: Most purchase of any digital asset are speculative right now. And people expect that to be the case for a while. It’s still the case with Bitcoin, most of the reason people have Bitcoin is for speculative purposes. However, that ratio falls over time. So, when I got involved in Bitcoin, probably 99.9% of the reason that someone might buy it was purely for speculation, purely for the potential of the use cases that come in the future. And fast-forward to today, a lot of people are actually using Bitcoin for actual things. So, some of that potential that we dreamed about in 2011 is coming true. So, what proportion of Bitcoin purchases are done today for purely speculation? It’s still a majority, but it’s probably you know, 60 to 80% instead of 99%. 

And that same pattern I think is going to play out in most digital assets where on day one, it’s all fantastic speculation, it’s just an idea, what would this thing be in the future, what we could use it for in  the future as it gets adopted, as it gets built out. And then over time, it either starts to achieve that and it actually starts getting some users and the potential becomes realized or it doesn’t and then all the speculation at the start was unjustified and that means the price is gonna start falling. 

QS 21:52 Mike: Okay. I think I can follow along with that and I think I would agree with kind of the general logic there. So, then, where do you see ShapeShift’s place in this? Do you just think that ShapeShift doesn’t even really need to care what the particular reason people are buying it is and then kind of building on that, is there any kind of responsibility for ShapeShift to only incorporate projects that might have a future or can you afford to be more agnostic about what you’re looking at?

Erik: Yeah, we don’t want to be in the business of predicting the future, that’s generally a fool’s errand. We add coins that the market seems to be excited about. Now, often the market will get excited about something that’s worthless, and that will become apparent later, but is very hard to predict ahead of time which things will become widespread and popular. So, we don’t try to do that, I don’t think we would have any special expertise more than anyone else in doing that. We just say, “Okay, what is the market getting excited about, what asset is seeing significant volume?” And then we’ll add it. I mean, we try to avoid something that’s like a blatant scam, something like OneCoin. You know, I don’t care what volume numbers they report, that’s a scam, so we would never add that no matter what. But other than things that are clearly a scam, we try to just pretty much be agnostic. 

Mike: Okay, I think that’s fair, especially when you’re talking about something that’s really just an exchange and it’s supposed to kind of provide more liquidity to this whole thing. I feel like maybe you can sleep at night with that in mind, knowing that probably somewhere along the way, you will have a scam on your exchange and will have to kind of deal with that at some point. 

Erik: Yeah, and this industry is so rife with everyone calling everything a scam, Bitcoin, most of all, Bitcoin has been called a scam by the entire world ever since I first got involved. So, I, on some level I’m skeptical of everything, I’m skeptical of every project and I’m also skeptical of all the people that say that project is a scam, just skeptical of everything.

And you know, when it comes to figuring out which assets are valuable, we could try to decide that or we could let the market try to decide that, which is a decentralized, emergent order that we’re never going to be able to figure out ahead of time. So, we let that process happen, we let the trading process happen, we let markets rise and fall. We don’t try to control those things, we just let them be, and we offer a tool to move between any asset into any other. We feel like in general that helps the entire ecosystem be more fluid, more liquid, more efficient and more interesting.


QS 24:52 Mike: Yeah, okay, that’s fair. I’m not gonna ask you about which coins do you think are or are not valuable right now, I don’t really want to get into that. But I would be curious about is how do you… Once you’ve added a coin, let’s say you’ve added something, how do you go about deciding, is it a daily evaluation of should we keep this coin or do you do a quarterly thing? Because I imagine there’s got to be coins that you see volume on for a while, and then basically they just disappear off of your charts. 

Erik: Yeah, totally. Basically, all the cost to us in adding a coin, there is very little cost in keeping it there. So, we don’t have a huge incentive to look every day or every week and say, “Do we still want this, do we still want this?” When a coin has died, it becomes obvious and once in a while we’re just like, “Alright, we’re not doing any volume in this coin, the whole market isn’t seeing any volume either.. Maybe we only have a few hundred dollars of its value left, let’s just remove it.” So, we probably removed maybe 10 coins in our history and we’ve added probably 60 in total. So, whenever something is clearly dead, we remove it, but we don’t try to predict that ahead of time or remove things because we think they may be dead in the future. We wait until it’s an obvious choice. 

QS 26:25 Mike: Yeah, I imagine some of the metrics there would be like what type of exchange are available and stuff like that. Kind of on that topic then, let’s say you choose to add a coin, so you add Colorado Coin or something like that, how do you go about deciding what exchanges you want to use in order to fill the orders because I imagine you have to use exchanges in order to keep your balances in balance and do you have partnerships that you’ve developed with certain exchanges or are these things that you are doing just kind of independent of those exchanges and their infrastructure itself?

Erik: Integrating our system with an exchange is a fairly involved process and I think we’ve integrated with six exchanges and we ended up removing one of them, and we have really good relationships with all of those exchanges. It’s very much a partnership. We’re doing a lot of volume with them, so they like us, and having them helps our liquidity, so we like them. It’s just a very mutually-beneficial relationship. I think a lot of people might feel ShapeShift would be a competitor with these exchanges, but we’re really more partners and when it comes to finance, liquidity is really important. Anything that grows liquidity or expands the market by some degree helps everyone and I think especially in the whole Bitcoin ecosystem, the companies realize that competitors are not the other companies in this space. They are the outside financial world that the whole blockchain infrastructure is coming to replace. So, 99.999% of all of the financial activity in the world is not in the blockchain ecosystem yet, so that’s what everyone is going after. 


QS 28:23 Mike: Yeah, fair enough. Okay. So, again, let’s say you want to add Colorado Coin… I guess when you’re going about doing that, you’re adding coins and you’ve now done this I think you said 60 or 70 of them, have you come across certain coin clients or certain developer teams or things like that that you would say are like particularly noteworthy because they are just either a really clean integration or because the development team is helpful or anything like that? Have there been noticeable differences between these different communities?

Erik: Totally. And between the different softwares. And one of our biggest challenges is just keeping these damn nodes running. It is not easy to manage 30 or 40 or 50 different nodes at the scale that we have. A lot of this stuff is really beta software and a lot of it, to the extent it’s been tested, has been tested by small teams doing small test amounts of transactions. We do between 5 and 10 thousand orders every day. So, very few nodes, very few node software by the time we’ve gotten hold of it has ever been tested at that level in any real world environment. It’s just all this stuff is too new. 

So, yeah, it’s rough. Different coins are more problematic than others. We have really enjoyed the fact that a lot of tokens are now being built on top of pre-existing chains. So, an Ethereum token is a lot easier, like an Ethereum ERC20 token is easier to add than a brand new blockchain. Just because it’s essentially just an Ethereum node that’s sending out a token on top of it. 

And then it goes in waves, right. Sometimes a coin will be really stable for a while, and then an update comes out that breaks a whole bunch of things that the developers didn’t foresee or it will be really bad for a while and an update comes out that fixes it. It’s just this constantly-moving thing that’s always creating fires and creating headaches for us. A large part of what we do is just keeping all that stuff running.

Mike: So, then are you a lot of times then kind of almost like a first client debugging for their software teams? You know, in touch with the development team and helping debug problems?

Erik: Yeah, unfortunately we are. And some developers are very open and they are interested in our feedback and they want to improve things, and others have designed things in the way that they want and they either don’t care or don’t want to deal with the feedback from the actual users of it which I think is a really dangerous and foolish mindset for any project team to be in. 

Mike: Sure.

Erik: But yeah, that’s problematic sometimes.


QS 31:25 Mike: Okay. Now, I just have a real quick question. I would imagine that there are a number of different risks associated with a business like yours, risk from theft, risk from computer failures and all kinds of other stuff, but one that would maybe seem to jump out to me and one that I don’t know how you solve it, is how do you deal with worrying about clean versus dirty coins? I imagine some people try and use ShapeShift to clean Bitcoins that maybe they have gotten from the Dark Market or something like that. Do you have checks in place for any of that?

Erik: It would be really stupid to use ShapeShift to clean coins because it doesn’t. And what I mean by that is we make all the transactions public, on the home page, via the API. You can see the coins that are going in and the coins that are going out. 

Mike: Yeah, so you can tie the two transactions together then I would guess. 

Erik: Yes, only the most foolish person would try to use ShapeShift as a cleaning or a mixer in other words. Other than just keeping everything in the light, we don’t care where a coin comes from just as a bakery doesn’t care where the dollar bill that it uses came from. That’s not their business, they make bread, we convert digital assets. It’s not what we do. 


QS 32:47 Mike: Okay, I think that’s a perfectly acceptable answer there. Okay, so this brings us back full circle to something you mentioned way at the beginning, back at the end of March, ShapeShift closed a 10 million plus funding round. Can you just real quickly tell us what it’s like to go through trying to raise money like that, and then what’s the plan for using that amount of money to grow ShapeShift?

Erik: Yeah, the 10 million number… it was 8.3 million in money and it was 2 million in convertible notes that we raised about a year ago. So, those converted in this. And we also did a seed round a couple of years ago for 1.6 million. So, this was absolutely the biggest and the most serious round that I’ve put together. I’ve never done anything like that before. It took me roughly from the start of October into mid-March to do it. So, about six or seven months of work, about two-thirds of that is trying to put a round together and one-third of that is when you have the round, just negotiating all the details and working out all the things, all the paper work and so many lawyers are involved and so many parties and so many little nuanced things, it’s rough. It took up about 70 or 80% of my time through that whole period.

So, yeah, it’s hard, I’m glad I’m done with it. The capital partners we got are fantastic. We had two leading VCs out of Germany that participated. And I’m just really happy with how it came together, but it was a lot of work and really hard. So, what we’ll do with that money, we have quite a few people now on staff, people are expensive, but we’re also releasing two new projects this year. Fully new exchange products that the world has not yet seen or been exposed to, and each of them I think will be quite a phenomenon. 

And plus, we run CoinCap, so basically, by the end of this year, we’ll have four full-production products that we’re building, supporting, maintaining, and that is just a big thing to do. It’s hard enough to do with one successfully, and we’re trying to keep a very successful ShapeShift growing and evolving while building these three other things. So, all that takes a lot of money, we use that capital in our own trading to do various types of arbitrage and things that we do on the back end because essentially we’re a trading company, we trade with the users and then we have all these orders that we need to trade profitably because we make revenue if we can trade at a better rate than what we give to the user. And usually we can, but not always, so there’s a lot of balancing and tweaking that we have to do with that regard and more capital always helps. 

Mike: Okay, very cool. I have to say, it sounds like when we met back at that Bitcoin meetup, that was still right in the middle of kind of closing out that round and I couldn’t tell that you were terribly stressed, so at least you seemed to have handled it pretty well. 

Erik: Yeah, I went into it knowing it was a big mountain to climb, so I wasn’t blindsided by it. On some level it has to hard because especially when you’re raising millions of dollars, the people with the millions of dollars didn’t make that money by being careless. So, there’s just a lot of, sort of, diligence that goes into it, a lot of caution. It’s one of those things that can’t really be rushed.


QS 36:48 Mike: Yeah. Okay, well, if you don’t mind, I just want to ask one more question.

Erik: Sure.

Mike: And this kind of goes back again to that meetup, I’ve seen your name tied with a bunch of start-ups in this space and you’ve sort of alluded to this as either an advisor or in some capacity being a part of like a planning group or something like that, and including one of those is just right here in Denver. But when you’re looking to get involved in the project, I imagine lots of people approach you, but then how do you decide and what types of things are you looking for, for something you’re going to actually get involved in versus turn down?

Erik: First thing I consider is how I want to be managing my own capital. And one of the things that people in the Bitcoin industry always have to deal with is, if you’re holding your wealth in Bitcoin, to the extent that Bitcoin is going to grow, that’s going to appreciate, and so any investment is going to probably not appreciate as much as the Bitcoin. And there’s sort of an irony in that, it’s rare that any specific investment in any Bitcoin company will ever outpace just an investment in the coins themselves. 

This is almost always true, and yet, at the same time, if everyone just held the coins and didn’t invest in any of the companies, the ecosystem wouldn’t grow, the Bitcoin utility wouldn’t come to fruition and then the coins themselves wouldn’t grow in value. There’s a weird balance to that, but I usually look for projects that I would want to use, that have a clear revenue model, that have a good team behind them. You know, it’s often people that I know because that gets through a lot of vetting.

And it’s really just a case-by-case thing. There’s not really a set rule or template, you kind of just got to feel it out and it’s really not a science. As much as VCEs and professional investors would like to pretend that it’s all objective and scientific, and analytical, it’s really about gut feelings, it’s more of an art. You could make all the right decisions about a business and it will fail, or you could just throw money at a stupid project and somehow it will succeed and be huge. Markets are very good at making fools of predictions and that’s true in the traditional financial world and it’s true in crypto. 


QS 39:24 Mike: Yeah. It seems like from talking with you, we could probably just continue to go on for hours about all kinds of different things. So, I appreciate just the time you’ve spent here talking about this and just to hear some of these insights that you’re giving. It’s nice to hear somebody sort of admit that you don’t always know what you’re getting into and whether it will work, but that sometimes it’s a little bit about a leap of faith.

Erik: It’s not even that you don’t always know, it’s that you never know. 

Mike: Yeah, fair enough. I think I can agree with you on that. Okay, well, I don’t want to keep you any longer. But yeah, it’s been quite a pleasure talking with you, so thanks for coming on the show.

Erik: Yeah, thanks so much for having me. 

Mike: Would you like to tell people how they could reach out to you if they had questions or just wanted to get in touch?

Erik: Sure, people can email me, [email protected], Erik is E-R-I-K. You can also find me on Twitter, E-R-I-K V-O-O-R-H-E-E-S, @ErikVoorhees. And yeah, I’m always around the industry and happy to chat with people. 

Mike: Very cool, and thank you. And if anybody who’s listening to this show wants to find out more about the show or listen to old episodes, you can finds those on our website as well as bunch of other places, but our website is just moneromonitor.com. And for anybody who was listening to the show and wanted to hear more about Monero… maybe next time. Maybe we’ll get Erik back on the show and hear his specific thoughts about that sometime down the road. But for now, I am on Twitter @MoneroMonitor, and you can get me on reddit as bigreddmachine. And so with that, so long everybody.

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