Forecasting the Future of Finance with Erik Vorhees

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Erik Voorhees (LinkedIn | Twitter) is no stranger to the tumultuous world of finance. As one of the leading entrepreneurs stepping out into the world of cryptocurrency, he knew his path wouldn’t be an easy one. He ran a Bitcoin company called Cointapult from 2013 to 2014, and is now the CEO and Founder of Shapeshift, which is “instant exchange for digital assets such as Bitcoin and Ethereum.”

Building a career off of emergent technology is anything but simple. But for Vorhees, prepping to step out into the world of crypto was a call he couldn’t ignore. “ The whole process of learning and getting interested was really kind of a process of checking my own self-doubt and skepticism and trying to move through that, and trying to understand something that I felt was one of the most important inventions that had ever occurred in human history ­– while at the same time, realizing that almost no one knew about it or agreed with me. It’s a weird position to be in because you kind of have to have a bit of an out of context experience. I had never really experienced that before.”

This isn’t about starting a business. This is about changing the world of finance, and how we approach our money – and Erik has some bold ideas about the future of cryptocurrency:

Crypto is going to change a rigged game: According to Vorhees, currency debasement is a very real threat to the stability of our financial landscape, and crypto is going to help fix that. “ I honestly think [currency debasement] is the greatest scam ever perpetrated. The reason it’s a scam is because this is happening intentionally and at the guidance of the people who are in charge of the money supply. So, in the US, and most countries in the world have central banks, the central banks along with their corresponded banks create money out of thin air. They literally just enter it into their computer systems and now they have a billion dollars or a trillion dollars that didn’t exist before, and then that gets sent out or lent out or spent on things. That’s great for those institutions and groups that are close to that money spigot – they get that money before the general price levels throughout the economy have risen. But, by the time normal people get that extra supply of money, eventually it kind of trickles into their wages going up a little bit or into something that they see…but that tends to happen at the tail of that process where they’ve already been paying the higher prices around the economy before they then see a higher price paid on their wage. That’s where the scam is: a group of people are able to create money out of thin air, obtain assets with that new money, and the rest of society, anyone who’s holding that currency, pays little fractions every year for that to continue. Most people would be outraged if every year, one or two or three percent of their bank account was just stolen from them through something called inflation, but that’s exactly what’s happening. But instead of the number in their bank account going down, the things that they can buy with the number in their bank account is going down. So if people would understand it in that way, I think they’d be a lot more open to realizing that maybe there’s a better alternative.”

The decline of the dollar could be stopped (but won’t be): “The federal reserve and the government could… they have the power to stop printing money or to simply keep the money supply stable. They could do that. They never will because their incentives are to do otherwise, but they could do that, and if they did, then the dollar would tend to remain roughly stable. It might gain a percent or lose a percent every year, but it would stay pretty much flat. That would be great. That would end the fiat debasement scam part of things, but there’s still another big problem with fiat currency, which is that because it’s centrally controlled… people don’t really have sovereignty over their own money. When you have money in a bank, you don’t really control that at all. First of all, the money’s not really there. Most people know that. But second of all, it can be taken from you without your consent, without due process. In other countries in the world especially, it can just be stolen right out of your bank account. Your bank account can freeze it, can prevent you from sending payments. You really don’t own or control your money. You just have access to it at the permission of the bank.”

A more fair society isn’t out of reach: One of Vorhees first ventures into crypto was called Satoshi Dice. At its height, it was responsible for half the bitcoin transactions on earth. “The reason it was so cool was twofold: one is people from anywhere in the world could interact with this service – this simple casino game. It didn’t matter what country they were in. It didn’t matter their age. It didn’t matter their gender or national identity or race or anything. The protocol did not care, does not care who you are. I found that to be just very egalitarian and beautiful. Two – Satoshi Dice used something called provable fairness. I’m not a mathematician or a cryptographer, so I can’t tell you the cool ways that this actually happens, but essentially what it can do is you can prove that the odds of a bet are what we said they were. So if we say the odds of you winning are X percent, you can prove mathematically that that’s true. That was really cool because anyone who’s gone to a casino anywhere knows – they rarely ever tell you what the odds are, but even if they did, you wouldn’t really know. If a slot machine told you the odds were a certain amount, you don’t really know. There’s no way to verify that. It’s rife with people misleading each other and being fraudulent. The casino industry has dealt with that for a long time. So Bitcoin and cryptography basically allowed a way to prove odds to a user who was using the service. The person didn’t need to know who I was. They didn’t need to know where I was. They didn’t need to trust me at all. They could just trust in math to make these bets and that they would pay out in the way that they were supposed to do. So both those aspects, the borderless nature of it and the provable fairness were why Satoshi Dice became such a success so quickly. It was just a general example of the potent power of cryptocurrency. It couldn’t have existed without Bitcoin. So it was just a really early good use case and an example of what it could do.”

Bitcoin is an “instrument” that will help in the human struggle to separate money and state. On his blog, Vorhees has several essays in which he lays out his vision for bitcoin. He notes that while separation of church and state is a widely known concept, the idea of separating money from state isn’t as widely talked about: “I find it interesting that when you talk about separating money from state, something that is even more important than religion, is even more intrinsically involved with everyone’s day-to-day lives. Not everyone is religious, but everyone is engaged with money every day … it’s an even more important institution. When you suggest that, people recoil in horror – and they have this kind of binary viewpoint that it was good for church to be separate, but not for money. They don’t really have a good reason for that.”

…and it might even help promote freedom of speech.
“I think one of the main principles here is that if it’s important, right, that people can speak out and defend someone else, if you think Dr. Martin Luther King is a good person and has a good message and you want to support him, at least in the US, it’s pretty fair to say that you have a protection of speaking out and expressing that support, kind of spending your time advocating for him as part of your freedom of speech. I don’t understand why the ability to support someone financially isn’t the same thing. Whether you are dedicating time or words or something written or something financial to another person, those all seem to me to be very much the same family and worthy of protection for the same reason. So just in that sense, I think it’s important to understand freedom of finance to be very similar, if not the same, as freedom of expression.”

Vorhees believes bitcoin is going to fundamentally change the future, and he isn’t content with just forecasting that shift: he plans to be a part of it. “I mean, my goal is that we build ShapeShift into a massive business that helps the world transition from fiat into cryptocurrency. I really think that that will be one of the great narratives and great stories of this generation will be that shift. I want to build a company that has global reach and influence and can help do that over the long-term, and not just become a new bank or a new PayPal that has just taken custody of everyone’s funds once again, but that builds on the principles of decentralization and builds on the principles of self-sovereign finance. So that’s our goal and we’ll keep moving toward it.”

To hear more from Erik, check out our podcast with him here










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