You’re watching The Weekly Wednesday Show on Dash, digital cash I’m your host Amanda B

Johnson, thanks for joining me I’m very happy to be joined today by Erik Voorhees, as I’ve sometimes called him chuckling to myself, Erik Veerhoos, and he really needs very little introduction You, I’m sure, know him from his current venture, ShapeShift but what I want to talk a bit about today is both where Erik is going forward with a new venture called Prism exchange, and there where he was before ShapeShift I know a bit about where you were before ShapeShift Erik but not that much So first of all, thank you for coming on my show

How are you today? Thanks a lot for having me I am doing very well Excellent Well now, before I get into asking you what I really want to talk to you today about, which is Prism, and may I admit by the way, that I actually lost a little bit of sleep last night Thinking about it

Trying to figure out how it works I just really like, “Wow!” and I’m really excited to ask you about that but before I do, would you mind sharing with us all a bit about how you came into cryptocurrency? I know a bit about Satoshi Dice, right? Like you were one of the first movers in just, the Bitcoin business space in general, but how did it start for you? So I’ve been in this crazy rabbit hole since 2011, back when Bitcoin was $5 And very few people in the world had heard about it, and almost everyone who had thought it was a joke, or a scam, or a Ponzi scheme, or something And I just got involved A Facebook friend posted something on Facebook and I saw it and I dove in

After the first 30 minutes I was very cynical about it and I thought it was really stupid And then about 30 minutes after that I was completely captivated And I have been down the rabbit hole ever since So, I’ve seen the industry really grow into an industry When I got involved it was not an industry

It was, you know, a few thousand people on the internet that were all kind of interested in this weird technology, and there were a couple little start-ups getting going, there was zero investment There had never been any, even, angel investment to a cryptocurrency company That had not happened yet And now it is a multi-billion dollar industry, and every financial firm in the world is looking into this stuff, every government is well aware of it, millions of people have used it, and is is growing month over month, at a rate that is very exciting So it’s a dream come true in one sense to see this actually happening

And so Erik, before BItcoin, and before cryptocurrencies, were you an entrepreneur before, as well? Or did this bring that out in you? Um, I’ve always been an entrepreneur, I had never been a successful entrepreneur before crypto And in my pre-Bitcoin life I lived in New Hampshire and Dubai before that And worked often in sort of freelance branding and marketing work And I always had a few projects that I was working on and none of them really — none of them really inspired me on a fundamental level But before Bitcoin I didn’t really know what that meant So I didn’t know what to compare it against

But once I, once I found the fertile ground of Bitcoin it was just, you know, everything’s been built on that It’s hard to remember a time before it Wow So then, let’s sketch out your timeline then, since 2011 Did it go Satoshi Dice and then — will you sketch that out for us? All of 2011 it was just, Bitcoin was a hobby

And I did a little freelance branding for some companies I went to the first Bitcoin conference in 2011 The first one in the world, it was in New York City in 2011 in August There were 50 people there And we all thought that was a ton of people because we only knew each other online

So 50 people in real-life was like a big deal And then in 2012 I joined BitInstant at the beginning of the year So I was kind of the third employee of BitInstant, hired by Charlie to be the head of marketing and branding So that was really my first job in Bitcoin, and that was very exciting That was a fast-growing project in its own right

And while I was there I started Satoshi Dice as a side project, and it just went out of control in popularity, and became half of the Bitcoin network It was more than half of all the Bitcoin transactions in all of 2012 And — so that kind of caught me off-guard And at that point I was becoming fairly well-known in the Bitcoin world and realized that I couldn’t at the same time be an outspoken proponent of Bitcoin and all the political ramifications that it would entail, and also be running the world’s largest Bitcoin casino Just for PR reasons, that was not great

And I didn’t want to get — I didn’t want the attention of the casino in the eyes of the government to be what caused them to come after me So I realized I could do one or the other I could kind of go underground and go run this big Bitcoin casino, or I could sell it and just go back to being, you know, non-casino Erik And so I chose the latter because I felt that it was important to be able to keep speaking out about Bitcoin and to not have to censor myself Hmmm

Ok, so now, so this was up until 2012 or 2013 Now tell us about ShapeShift I remember, back when I was writing for CoinTelegraph actually, I don’t, it may have even been a ShapeShift ad that like, popped-up on CoinTelegraph as I was a writer there and I’m like, looking through our homepage And I was like, “What’s that?” What a clever-looking little fox What a cool looking — and so I clicked on it

Oh you actually clicked a banner on the internet? Yeah I clicked your banner Tell me about ShapeShift And why did you think — and I’m going to ask you this about Prism too — but why did you think there was a space for an accountless exchange? Yeah, good question So I’ve been running ShapeShift since early 2014 So a little over — almost three years I guess

And basically I just built it because I realized that if you have a digital currency you should be able to have any digital currency instantly Having one should allow you to have another almost as effortless as just thinking it You should be able to just — just like an email, if you just think you want to contact someone, or a text, you can Right? You think it, a couple of letters later, the message is with them No friction

Anywhere in the world, between any two people And cryptocurrency brings that power to money and finance And it was just one of those eureka moments where I was like, “Well this is obvious” Right? Like you should obviously be able to move between any two digital assets instantly So, started building it

And it too started as a side project and very quickly I realized it was going to require a — like a full-time commitment, and it was going to become a big thing And this was back when, you know, it was pretty much Bitcoin and Litecoin and Dogecoin And that was the world of cryptocurrency And Bitcoin was 999% of everything

So why did you think that it would be profitable? Um, I didn’t necessarily think it would be profitable, but that’s sort of why it started as a side project So I just — I knew it would be useful to some group of people I didn’t know how big that would be And I also thought that digital assets were probably going to get more diverse, not less That there would be more digital assets and that they’d be more valuable in the future

So had you already given up “Bitcoin Maximalism” at this point, just to say, “Hey, I want to serve this market and hence” — or were you still a maximalist and you just thought, “I’ll ride this altcoin train ’til it dies” I — good question — I was a maximalist And I think I was still a maximalist when I started ShapeShift By building ShapeShift I started to learn a lot more about the different assets And I — about the people involved

About what they were And as I saw more and more digital assets for more and more use cases I started realizing that I was simply wrong That Bitcoin may be the best form of money, but money is not the only thing that blockchain assets will be used for So even if you think that Bitcoin will be the only cryptocurrency used, a lot of digital assets are not cryptocurrencies They are, they are tokens that can be used for all sorts of things

And I think at this point, someone has to be extremely ignorant, and narrow-minded, and myopic to believe that the only digital asset in the future will be this one thing called Bitcoin It would be similar to saying that, you know, the first big website is going to be the only website that everyone uses and that website will offer all services for everyone That would, you know, that would be very foolish I think now with the rise of Ethereum and all the cool projects that are getting built on top of that, the theory that other digital assets would become useful is now true It’s not theory anymore

Well now that moves me right into Prism So, Prism is — and I’m not going to be able to pitch it as well as you can because, like I said, I was up last week thinking about it So tell me if I’m correct It is a smart contact on Ethereum in which someone says, “Hey, I want to put $10 worth of Ether into this smart contact and sub-divide it into different cryptocurrencies that I want exposure to” In your sample video, you used something like Bitcoin, Ethereum, Dash, Golum, something else — and then, from that point, do I understand correctly that ShapeShift, like you and your people, put up a matching amount of collateral of those assets that they chose — and then at that point, the value rises and falls depending on the market prices of those assets that you put up and then the other person can unlock it at any time? You, you got it about 85% right

Help me So yes, a user comes to Prism to create a portfolio of assets, they put whatever tokens they want in it Importantly, these are not just Ethereum tokens but anything, on any blockchain And they decide how much — what proportion they want They decide how big they want the portfolio to be

And then they put up Ethereum as the collateral So that’s where you’re all correct So once they do that, ShapeShift puts up an equal amount of collateral, in Ethereum, into the contract as well So both sides are putting up the full collateral value into the contract And at that point, once that’s done, the thing just kind of lives on its own

It is a smart contact governed by the rules of its code And it tracks the prices of the assets that are in the portfolio, and if the portfolio rises by 20% a week later, you can cash it out and you get 20% more Ethereum back than you put in So you never take deliver of the components, but you get exposure to the components So what that allows you to do is, very easily, get any kind of portfolio of crypto assets that you would want, and crucially, not have to leave that money at an exchange, which all too many people do right now Ok

So let’s talk about what’s happening behind the scenes in the case of like a profit or a loss for the person’s Prism So, like you said, if the prices of the assets that they chose go up 20% and they choose to unlock their Prism at that point, is that 20% that they gain covered by ShapeShift’s side of the collateral? Yep, exactly Ok And then the other way around — if they lost 20% and they choose to unlock their Prism at that point, 20% of their collateral goes back to you all Yep, exactly

So that’s what makes it fully collateralized And that’s what makes it trustless, in that you do not have to trust that ShapeShift will perform, or that it will be able to pay you the amount that you’re owed It is defined in the code and it can’t be violated So it works — and that model works for the Prism that goes down to zero For the Prism that looses all value

And it works up to 100% gain And so, if it goes beyond that, the Prism will automatically close because it wouldn’t be fully collateralized anymore Got it We have a number of ways that we could allow greater than 100% growth in the future but, there’s a lot of things we’ll do in the future For now we’re just keeping it simple

Right And now tell me how those prices are fed to the smart contact Yeah they come in through an oracle So we’ve written our own oracle to feed in prices that basically watches the exchanges where those assets trade It takes any extreme outliers and removes them and then averages the rest and that basically gives you a reasonably secure price feed

Prism, as a concept, works with any kind of oracle that would feed prices in So, as oracles become more common in the industry, Prism will probably work with multiple different kinds of oracles, or maybe we’ll let users choose the oracle they want, but for now it’s the one that comes from us Interesting So you host the oracle on your own servers? Well the oracle is a smart contact itself And it’s receiving prices

And then the Prism smart contacts are talking to the oracle smart contact So yeah, we’re feeding in those prices To the extent that someone is worried that we’re able to manipulate those prices, we hash those and make a record of them so that there’s a sort of an auditable trail of the prices that we’re feeding into the Prism But longterm, it’s obviously a better product if people can use any kind of oracle source… Any sort of like mutually-agreed upon oracle I suppose? Yeah Yeah I think in the future Prism will have sort of a drop-down of five or ten different oracles that are well-known and can be trusted and the user can choose which they’re most comfortable with

Uh-huh And now tell me about the fee structure There are several fees that are relevant One is a one percent per month capital cost And that is charged on a monthly basis at one percent

And this was the fee that we got the most push-back on, when we announced it And we may tweak it It was sort of a round number that we picked to start But, the reason there will always be a fee on the capital — whether it’s one percent or not, we can figure out — is that capital’s not free, right? So there’s a cost to use capital And when Ethereum is used a capital it has a price at which someone can borrow it in the market

So the fee on Prism’s monthly capital cost will approach the cost that the market has for borrowing Ethereum And that’s not yet a well-developed market but over time it will be So that’s one fee — one percent a month Then when you close a Prism there’s a 24% plus a

05 ETH fee The 05 ETH part of that basically covers all the roundtrip gas costs that are required to set-up the Prism And then the 24% closing fee is essentially where we make our revenue

So that’s our revenue model — is the 24% And then there’s a half a percent fee when you rebalance And what’s a “rebalance”? Basically if you have 50% Bitcoin, 50% Litecoin and then a week later you’re like, “Oh god, I need more Doge” And then you change the allocation to get more Dogecoin, that’s a rebalance

Oh Ok So you can change the portfolio makeup, which means you don’t have to dismantle the Prism and recreate a new one You can just change the allocation Got it

So now, let’s shift gears a little bit With the sorts — do you have in mind that Prism is going to tap a sort of new market of people who were unwilling to leave their capital on centralized servers before — like on these exchanges basically? Or do you foresee it competing directly with you know, the Poloniex’s, the Bitrex’s, the Bitfinex’s? Um, it’s some of both Some of both So whenever you make something easier, more of it will happen Sort of like, whenever you make something cheaper, more of it will happen

So I think Prism will allow exchange volume that wouldn’t have otherwise existed to come into being So in that way, it improves the efficiency of the entire market, which is nice Certainly a lot of people buy assets at an exchange and leave them there because that’s the easiest way to do it And everyone knows that that’s really dangerous and not a good idea but everyone does it And now that Prism exists, we’re hoping that some portion of those people, will prefer instead, to use a much safer, and even easier alternative, which is Prism

Prism will definitely not overshadow or replace most trade volume on exchanges — it’s just, it’s going to be a slightly different market Prism is not for high frequency traders It’s not for day traders It doesn’t work well for those types of people But it works well for anyone who’s in the short and medium term trying to get exposure to a basket of digital assets, which we think is quite a big market

Yeah As a final question, I was thinking the other day like, if someone asked me to sum up like Erik Voorhees and like what he does, I was thinking to myself, I think I would sum him up as like, The guy who’s two steps ahead of the whole cryptosphere At all times Like if anyone ever said, “Hey Amanda, do you know where Erik is?” I’d be like, “Look two steps ahead That’s where you’ll find him

” And so, just with me having you online here right now, I wanted to get your opinion on Dash in particular Yeah So first of all that’s very flattering, thank you Certainly when I started ShapeShift a lot of people thought I went off the deep end, because they’re like, “Why are you spending all your time making an easy way “for people to buy Dogecoin? Like that sounds kind of stupid” And a lot of people just — they didn’t see where this industry was going, which is toward this theme of tokenization

And certainly this week, this last week at Consensus I think validated a lot of the ideas and philosophy that we had two or three years ago But, Dash to the extent, Dash has been one of the really exciting assets that has just like truly grown rapidly And I think, along with the other couple coins that are you know, privacy-focused, it’s going to be a really important asset I think that privacy angle, which has been, which is one of the original lures of Bitcoin — and which people came to realize is not well provided by Bitcoin — that’s something that people intrinsically want That’s something that a lot of people will always want

And so, to the extent that it’s pushing that forward is great I also think Dash has done an amazing job with this sort of governance model and the incentivization of nodes I think that help instruct a lot of cryptocurrencies and blockchain projects Is to like, see that new model and see that it’s working And I know people that run supernodes and they love it

They just have this feeling like they’re not only participating but that they’re actually earning money for doing so And it really helps, just like Bitcoin paid miners and did that well to bootstrap the whole thing, Dash paying these nodes I think was a good iteration on that idea So, I’ve been really happy with it As far as technically, Dash is one of the least problematic coins that we have at ShapeShift So a lot of coins, they’re always exploding

Causing problems They have weird — it’s kind of like raising a bunch of farm animals All the software is sort of beta software at this point and some of it is pretty challenging to work with So, when we’re rounding up all the hogs, Dash has been one of the more cooperative ones that gives us the least headaches So, to the Dash engineers out there, thank you for building something that’s been reasonably stable

Very good Thank you cooperative Dash hogs That’s excellent Well Erik, I want to make sure that people know that Prism exchange has its own social accounts so I’ll post them on the screen now, and I thank you very much for your time Thanks for having me

Prism exchange is currently in a private beta stage, meaning you can request an invitation to begin using the exchange by visiting their website In addition, please welcome two new businesses to the Dash economy First is Danny Lee Golf Instruction, based for 15 years in southern California, and now accepting Dash in exchange for golf lessons And secondly is Lady Shop Online, which is a women’s apparel retailer, based in The Netherlands, and now accepting Dash for payment